Property analysts have blamed skyrocketing house prices on the Government's unwillingness to do anything that might bring them down and people who own multiple properties taking advantage of cheap lending.
Values rose quickly in 2020 despite the recession and pandemic, defying predictions of a massive slump. New data released Wednesday by CoreLogic shows that trend continued right up until the end of the year, values up another 2.6 percent in December alone.
The 6.1 percent quarterly rise is the biggest since 2004. Annual double-digit percentage rises were seen in most regions - Gisborne led the way, with values up 30.4 percent in 2020, followed by Whanganui (24.9), Palmerston North (20.3) and Rotorua (19.2).
The main centres were no exception, with values up 15.4 percent in Wellington, 13.1 percent in Dunedin, 11.7 percent in Hamilton, 9.1 percent in Auckland and 6.2 percent in Christchurch.
The CoreLogic House Price Index for December points the finger at the Government and the Reserve Bank.
"With consistent messages regarding the need to protect that wealth coming from both the Government and the Reserve Bank (RBNZ)... the risk factor of property investment has, on the face of it, reduced, which only encourages greater investment."
Both Prime Minister Jacinda Ardern and Finance Minister Grant Robertson have said they'd rather prices kept going up than coming down, despite home ownership rates falling for 30 years now thanks to rising unaffordability.
"It is much more sustainable to have those much smaller increases. I think people expect that you see that in the market," Ardern said in December.
"What we also accept is that for most New Zealanders, their house is their most significant asset… A significant crash in the housing market - that impacts people's most significant asset."
RBNZ Governor Adrian Orr in November said the alternative to rising house prices is "recession or depression". New Zealand did experience a recession in 2020, but house prices continued rising regardless. The RBNZ has kept interest rates at record lows to ease the impact of the pandemic on the economy, even though much of the borrowing just gets funnelled into property speculation - economist Shamubeel Eaqub in November calling it a "huge ponzi scheme".
"Without any major policy change regarding property in the works, the long-term affordability of the property market is reliant on significantly increasing supply, which is a slow moving factor," CoreLogic said in its latest report.
"So for now, all indications are that the fervent growth in property values will continue throughout the summer at least."
The report says house price inflation may ease later in 2021, but it's unlikely to be the result of any efforts from the Government.
"Later in 2021 the potential flow-on impact of such strong growth will eventually be outright unaffordability reducing the pool of buyers able to borrow enough to participate in the market. At this point there will need to be an adjustment of expectations from both vendors and buyers, but with a full pipeline of buyers right now, and a lack of attractive wealth generating alternatives out there, this point looks some way off.
"This may lead to greater political pressure on the Government to 'do something' in order to address the excessive demand. An extension to the brightline test is a likely possibility and the RBNZ have asked to have the option of including debt-to-income restrictions (DTIs) in their tool kit for ensuring financial stability so that could happen too."
No region in 2020 saw prices decline. Queenstown came closest, with just 0.3 percent growth - but with an average value of $1.2 million, they might have already hit that "outright unaffordability" ceiling.
Auckland isn't far behind on $1.14 million - but still had 6 percent growth in the December quarter. CoreLogic says this is bring driven by people who already own multiple properties getting new loans.
"Multiple property owners are evidently back at the bank to secure funding for property purchases, with 30 percent of sales to this group so far in Q4. The last time their share was this high in Auckland was in Q3 of 2016 (32 percent) - immediately prior to the nationwide investor deposit requirement increasing to 40 percent.
"Such a large proportion of activity from investors may foreshadow consideration from the RBNZ to return to these limits at some stage in 2021."
CoreLogic's averages are the mean, so are typically higher than found in some other analyses, which use the median.