It doesn’t surprise me at all that NZ now has twice as many suburbs with houses worth more than $1 million than pre-Covid.

The rapid rise in house prices is the direct effect of the massive increase in money supply. When you massively increase the amount of new money, yet still have the same amount of goods and services, or in the case of Covid lockdowns, less goods and services, the cost of those goods and services goes through the roof!

Inflation is always a monetary phenomenon. First the money goes into financial assets, like shares and housing, then later it gets into the cost of all goods and services, which is why we are seeing so much inflation now.

Don’t believe what you are being told by the politicians and the media:

• Inflation is not being caused by Covid.
• It’s not because of the oil price.
• It’s not because of Russia attacking the Ukraine.

The only reason for inflation in NZ today is government policy.

The petrol price isn’t rising because the oil companies are making more profit, it’s simply because more money is chasing the same number of goods and services.

It’s supply and demand.

Arden’s government increased the money supply like crazy because she is paranoid about Covid – now you are paying the price. Key’s government could have done the same thing after the 2008, or the Christchurch Earthquakes. He could have increased the money supply too, he had valid excuses, he choose not too as he knows you can’t increase the money supply without creating inflation.

Inflation is a stealth tax, a dishonest tax used by politicians to fund their misguided and often unpopular policies.

The poor and middle classes get hurt the most by inflation. The pensioner on a fixed income. Workers on minimum wage. They spend more of their income on food and petrol and rent, the things that rise quickly when the inflation squeeze comes on. The wealthy, and the financially literate will be OK. We invest in assets, assets which rise in value during inflationary periods. In fact, inflation often causes large wealth transfers from the poor to the rich, which is happening in NZ right now.

The gap between the have’s and have-nots in NZ is rising. I don’t like it one bit. I preferred NZ when we were all pretty similar. When we had more freedom and less stuff. Unfortunately those days are gone and the more people ask the government to do more, to control more, to fund more, the more the gap will widen.

The only way back to an egalitarian New Zealand is through a true free market economy and I can’t see that happening anytime soon.

John Kenel
Assured Property

Source: NZ Herald

#assuredproperty #housing #rentals #propertyinvestment