Dileepa Fonseka writes on business and politics.

OPINION: Many years ago, a builder told me they remembered the exact moment the property market turned during the global financial crisis (GFC) – it was the day their phone stopped ringing.

They even called their provider to check something hadn’t happened to the phone line, but it wasn’t the cabling that was the problem, it was the economy itself.

Veterans of the property industry all have stories like this and the scars of it can be seen in how long it took for the industry to ramp up again after the GFC.

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For the building industry, it reinforced construction and property development as a high-risk, low-trust, high-stress industry where you could find yourself stiffed on a contract at little notice.

But for people who bought those houses, the situation was largely different, provided they could afford to hold on to their home.

The construction industry was scarred from the experience, and took many years to recover while council rules restricted the supply of land, or the efficient use of it through densification.

People often say land is the best investment because no-one is making any more of it, but for many years that was also true for housing, because the construction of new dwellings ground to a halt.

In the years after the GFC, many people took away the lesson that the housing market was different to others. It was not an investment like any other – bringing both risk and reward – but a “risk-free” one, provided you could make the repayments and hold on to your asset long enough.

They weren’t wrong. House prices roared back after the GFC, and it is probably why so many buyers post-pandemic feared they might miss out and leapt into the market with both feet.

They may regret it, depending on how late they jumped in, according to Christina Leung, principal economist at the New Zealand Institute of Economic Research.

“The risk would be most acute for those that have recently taken on mortgages, particularly those that have bought at the peak of the market.”

But leaving aside this group, there are also signs that the vast majority of homeowners can simply afford to hang on and weather it.

Leung points to the Reserve Bank’s statistics on mortgage serviceability – the costs of paying a mortgage as a proportion of household income.

Wages have been rising thanks to low unemployment, but even though interest rates are increasing, actual serviceability costs, as a proportion of income, have decreased a little.

“We believe this reduces the chances of a hard landing for the New Zealand economy, but recognising, of course, that there is that risk.”

The Real Estate Institute’s house price index recorded a 6.2% fall nationwide between November and April.

However, even with such a dramatic fall prices remain above their pre-Covid levels, which is why Leung sees the current property market slump as more of a “partial correction” than a dramatic crash.

So if prices are falling – but not dramatically so – and interest rates rising, but wage increases seem to be keeping pace with higher mortgage costs, then is a “correction” such a bad thing?

Fisher Funds head of fixed interest David McLeish agrees there is an element of “payback” in what is happening in the housing market right now.

However, where the broader economy is concerned, he draws attention to the fact debt levels in our economy are much higher than they have been when the RBNZ raised rates aggressively in the past.

“The last time we went through a hiking cycle, which was 2014, we only managed to hike interest rates 1% from the lows to the highest of that cycle, and we had a slowdown on our hands at that point,” McLeish says.

“The environment is different this time around, and we have to be aware of how sensitive households are to interest rates.”

McLeish says there is a lag of between six and 18 months in how interest rates are felt through the economy, which means we do not yet know how the interest rate increases the RBNZ has already undertaken will affect economic growth.

And he argues that the pain from these rises may prove needless as some global supply constraints ease.

You can see some signs of supply constraints easing in headlines from the United States: Amazon says it has too much warehouse space now, while Walmart​ and Target say their inventory levels are too high.

But the rudest shock may come not from the sudden drop of confidence brought on by the interest rate rises, but what happens when homeowners come out the other side of this downturn.

Sense Partners economist Kirdan Lees notes many regulations that kept the price of housing high are being whittled away.

Which means buyers lured in by the promise of ever-increasing asset prices might well find a different reality on the other side.

This might not be the worst lesson to learn.