The Kiwi dream of homeownership is getting further out of reach and the meteoric rise in house prices is set to continue.
Treasury has done a 180 on house prices - after forecasting a fall, it now says prices will go up for at least the next four years, which has led to an unprecedented call for a house price drop from one of our biggest banks.
The Government unveiled its final financial update of the year on Wednesday showing how the COVID-19 shock is expected to have lasting economic impacts.
"I don't need to tell any of you that 2020 has been a challenging year," Finance Minister Grant Robertson told reporters in Wellington.
The Government books show the economy is in much better shape than expected.
"While things are looking better we are coming back from a very low base of where we thought we might end up," Robertson said.
But there was nothing to bring a smile to the faces of first-home buyers. The drop in prices that was once predicted has turned the other way with Treasury now picking house prices will continue to rise for at least the next four years.
Senior economist and director at Infometrics Brad Olsen told Newshub the Government needs to step in.
"People are now in such a frustrated position that this is becoming a bigger issue than we've ever seen before and if the Government doesn't get serious on this soon we're never going to be able to claw the problem back."
The unprecedented growth in house prices has prompted unprecedented calls from ANZ, with the bank saying homeowners may need to stomach a price drop.
"What we really need to see is either a stabilisation in house prices, or actually a gradual real decline, so that incomes can catch up and we can ultimately see house prices that are more affordable in New Zealand," says ANZ senior economist Liz Kendall.
The Finance Minister disagrees.
"They are the most significant asset that most people hold and significant shocks in terms of drops in house prices would have a major effect on the economy," Robertson said.
Kendall says meaningful change is required from politicians.
"People are going to have to change their expectations and we need to see a real political will from politicians to make the sort of meaningful policy changes that are necessary to see that happen."
It's a shock of a call, but someone had to say it - house prices are rising at break-neck speed and there is no way that wages are keeping pace.
Almost as shocking is that a bank put their neck out to tell Kiwis something no politician has had the guts to say.
