In a sense, I was just acknowledging the elephant in the room with regards to Auckland’s economy.

My gee whiz moment last week was seeing the latest figures from QV and realising the nominal falls for Auckland and Wellington are now considerably worse than the GFC slump.

To recap, QV has Auckland prices down 19.7% and Wellington prices down 27.6% from their peak in January 2022.

And, as I pointed out last week, these are nominal figures.

If we looked at the fall in inflation-adjusted terms, the real value loss would be much worse.

A reader wrote asking why I didn’t go for the jugular and include the inflation-adjusted figures.

I had to confess that I ran up against an early deadline and was a little nervous about my ability to work it out.

I’ve since spent a bit more time crunching the numbers (with the help of AI). Based on the QV figures, I get an inflation-adjusted fall of 31% from peak for Auckland.

For Wellington, I get a 37.5% fall.

I’ve seen other charts and estimates that look worse than that, including one that has Auckland’s real prices down 38%.

There are a lot of variables, different time frames and different property market stats, but however you cut it, the numbers are ugly.

A simple way to visualise how inflation-adjusted pricing works is to think about a housing market that is flat, where your nominal house price stays the same.

If annual inflation is running at 2.5% then the real value of the house has gone down by 2.5% that year.

Not only have nominal house prices fallen substantially, but inflation has been a lot worse than 2.5%.

Was it hyperbole to call it one of the worst housing market crashes in New Zealand’s history?

I don’t think so.

It’s clearly much deeper than the GFC slump from 2009 to 2011.

After the GFC, we need to go back to a big housing market slump through the 1970s and early 1980s.

In real inflation-adjusted terms, house prices fell about 40% from a peak in early 1975 to a trough in 1981.

But there are a couple of things that make that less of a crash and more of a painful readjustment.

One is the extended length of time it took to get from peak to trough.

The other is that inflation was even worse than it was post-Covid and stayed elevated for longer.

It averaged 11.5% between 1970 and 1980.

So while real house prices fell sharply, they actually kept rising in nominal terms.

I think that helps mitigate the psychological blow to homeowners that hurts consumer confidence.

That’s not to say that era was a barrel of laughs. In fact, if anything, it stands as a benchmark for how bad the New Zealand economy can get.

One criticism of last week’s column was that I was unduly focused on the negative side of falling house prices and didn’t recognise the opportunity for younger people.

While houses in Auckland are still far from affordable (based on average salaries), they are getting more affordable.

The percentage of first-home buyers in the market is rising.

The latest figures I’ve seen are from Cotality and show the number of first-home buyers rose to 25% of all property purchases nationwide between January and April this year – above the long-term average of 21-22%.

That’s great.

This is all the stuff I’ve written at great length about in the past, most prolifically during the house price booms when it was clear young people were being locked out.

I have young adult children and my mortgage is well under control, so I’m more vested in improved affordability than I am in capital gains for my own house price.

But if I were in my 30s and had bought a home near the price peak in 2021 then I would be feeling a bit different.

It’s worth remembering that you can’t get a mortgage if you don’t have a job.

Auckland’s unemployment rate is 6.1%, above the national rate of 5.2%.

We need something to spark a recovery in Auckland’s economy, and unfortunately, until we engineer some significant structural change, it’s probably going to have to come from the property sector.

I’m not hoping for a sudden surge in house prices and another boom.

That’s just as well, because I don’t think that’s very likely.

Last week Pie Funds chief investment officer Mike Taylor noted just how long it took to recover from previous booms and busts.

“This time it certainly feels like it will take many years to recover back to the 2021 highs in nominal terms, let alone inflation-adjusted prices,” he wrote on LinkedIn.

“After the 1974 bubble, it took over two decades. After the pre-GFC spike, only seven years.”

Both these calculations are based on inflation-adjusted numbers.

In real terms, homeowners didn’t see prices match the mid-70s peak until the mid-1990s.

By my back-of-the-envelope calculations, Auckland’s recovery back to the 2021/22 peak will likely fall somewhere between those two examples.

But that doesn’t mean we can’t see nominal prices rising again this year.

I hope we do see a turn in sentiment soon.

Ideally, it will be a measured one that doesn’t reverse progress on affordability.

Government plans to open up more areas for high-density urban development look likely to address the supply side of the housing equation, even if we see migration numbers rebound.

That’s good news for young people.

We just need something to lift the gloom hanging over our largest city. Here’s hoping we can get the balance right this time.

Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.