COMMENT: Kiwis are a compliant lot when it comes to doing what we’re told by those perceived to be in authority. When a road on which the speed limit has been 100kph for decades drops to 80kph the vast majority of us will comply with the new limit, despite no other material change taking place on that road. When a council decides that its rule requiring a minimum height of 1.2m for a pool fence is wrong – and that a pool fence should now be 1.5m high – we comply. The examples are endless.
Some of this behaviour can be explained by the spectre of the legislative consequences of non-compliance – but not always. We’re just as likely to exhibit the same behaviour when new rules are imposed by a local club or shop. We might grizzle, but most of us quickly fall into line and obey.
It’s also worth noting that our compliance isn’t necessarily based on respect for those making the rules. Despite growing anger at the Government over its response to Covid - best exemplified by protests and rapidly declining support in opinion polls - most Kiwis have complied with the rules – even in situations where no one is policing that compliance. Apparently, we have a love/hate relationship with authority.
As you would expect, we also see this behaviour at play in the housing market, both in respect of the rules governing that market, and in respect of to whom we listen to understand what that market is doing at any given time. The "authority" figures here include the Ministers of Finance and Housing, the Governor of the Reserve Bank, the various bank CEOs, bank chairs and economists, and even some established commentators, yours truly included.
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Ashley Church: "Support should never be given uncritically." Photo / Ted Baghurst
That deference is understandable, to a degree. Authority figures are an accessible source of information and can help us make sense of what the market is doing and how we should respond to it. But that support should never be given uncritically. No authority is infallible, and many readers of this column would be horrified at the extent to which those we look to for guidance on the housing market have just been plain wrong over the past 25 years. Here are some examples:
• In September 2003, the then Governor of the Reserve Bank, Alan Bollard, called investors "unsophisticated", and warned that they should expect deflation in house prices after they’d risen by 14% in the previous year. In April 2006 he told central bankers in Switzerland that New Zealand house prices would start falling by the end of that year. Neither happened.
• In March 2017, the then Governor of the Reserve Bank, Graeme Wheeler, said Auckland house prices were at risk of a "sharp correction". There was no correction.
• During the first Covid lockdown we saw claims, from multiple banks, that house prices would drop by between five and 15% during 2020. We all know how that played out.
• As recently as this year we’ve seen claims by the Finance Minister and Treasury that house price growth would drop to just 0.9% per annum, and from the Governor of the Reserve Bank that house price increases would soon drop to "almost zero". Completely wrong.
There are many other examples of such statements, but these should suffice to make the point, which is this: it’s reasonable to take note of the views of housing market authority figures but they all make mistakes. None of them should be treated as the last word in what the market will do. Sometimes these mistakes are inconsequential; for others, the consequences of listening to them could be financially catastrophic (e.g. any first-home buyer who has been waiting for house prices to fall before buying, based on government and Reserve Banks statements).
For this reason I’m very quick to advise my listeners and readers of when I get something wrong and it would be good to see this practice followed by others with an influential voice – in particular, the Reserve Bank.
If you’re looking to buy or sell, and want to know what’s going to happen in the property market in the months and years ahead, read widely, check the facts behind the claims being made and, most importantly, study the track record of those making such claims.
Despite our natural Kiwi inclination to defer to "authority", your measure of who to listen to shouldn’t be based on "who’s in charge", but rather "who gets it right most consistently" and "what does my own research tell me?".
- Ashley Church is a property commentator for OneRoof.co.nz. Email him at [email protected]
