House price inflation: Ireland v New Zealand
Brian Gaynor wrote a piece in the NZ Herald comparing features of the Irish and New Zealand economies. One area that he focused on was the increase in residential property prices from 1995 – 2015.
Ireland – 199%
New Zealand – 232%
Although New Zealand house prices have been increased by a larger percentage it is interesting to note that they have been relatively steady whereas Irish prices peaked in mid-2007 and then plunged 50% by early 2013. Since then they have recovered 31% but are still 35% below their highs in 2007.
Dublin house prices (average) – 2007 = $730,000 2015 = $485,000
Auckland house prices (average) – 2015 = $771,000
LTV – Loan to Value
Like the RBNZ the Irish central bank has introduced new regulations regarding mortgage lending by regulated financial services providers. These included mortgages of no more than 80 per cent of LTV (loan to value) on the principal private dwelling and no more than 70 per cent LTV on investment properties. Additionally mortgage loans on the principal private dwelling are restricted to 3.5 times gross income in Ireland but this ratio in New Zealand is 6 times although 9 times gross income in Auckland.
The two countries tax policy are interesting when you compare how they impact companies and individuals. The message for the New Zealand economy is that the experience of the Irish economy shows that countries take a long time to recover from the impact of housing collapse.