The recent sharp rise in house prices has to date made New Zealand households considerably more wealthy, at least on paper. To illustrate that proposition, the Reserve Bank’s own estimate of the household sector’s net wealth (including the current market value of housing) stood at $ billion (about 3 times annual GDP) at the end of 2003.
In my opinion, the moral of both these stories is similar to the lesson that can be learned from the current financial and sovereign debt crisis: There is no easy way to solve the crisis without tediously disentangling the knot, whether there is a sword or not. Cutting the knot is something different from solving it.