It’s what went right, not wrong

Stuff reports:

The world is watching New Zealand’s housing crash — and asking what went wrong

This headline has it entirely wrong. House prices were unaffordable in New Zealand. They have fallen to more affordable levels. This is not a crash. This is the impact if policy designed to lower prices, so that more people can afford to buy a home.

This is not to say that falling house prices have not had some negative consequences. I suspect that the subdued economic growth is partially because households feel poorer because their house is on paper worth less than three years ago. We don’t take into account that our next house is also cheaper – we just focus on our current house.

But all policies and pros and cons, and the massive increase in house prices wasn’t sustainable. The correction is painful for some people, but still necessary.