It's fairly well known that Mao Zedong's Great Leap Forward (1958–1962) ended in one of history's deadliest famines: tens of millions died, villages emptied by hunger, fields stripped bare. What's less well known is how a war on sparrows helped set the catastrophe in motion. [1]
‘Ed Brown’ by Michael Parekowhai, 2000 - A favourite of Nick’s that hangs on the wall at home.
In 1958, Mao launched the Four Pests Campaign, targeting rats, flies, mosquitoes… and sparrows. The tiny birds, he decreed, were "enemies of the people" for daring to eat the people's grain. [2]
And so, an entire civilisation mobilised against the feathered menace. Schoolchildren banged pots and pans in the streets, peasants drummed on washbasins, and factory sirens screamed for hours to keep the birds in flight until they fell dead from exhaustion. Nests were torn down, eggs smashed, and chicks stomped into the earth.
The results were biblical. In Beijing alone, more than a million sparrows were killed in a matter of weeks. Rural communes competed to see who could pile the highest mountain of avian corpses, a kind of grotesque festival of progress.
But victory, when it came, was short-lived. The sparrows, it turned out, had been eating more insects than grain. Within a year, the skies were empty, and the earth was crawling. Locusts rose like living clouds, devouring fields from horizon to horizon. Peasants watched in horror as the crops disappeared into the mandibles of an unstoppable plague of their own making.
Rather than admit his mistake, Mao doubled down on absurdities. He replaced the sparrows with imported Soviet "science" – the theories of Trofim Lysenko, an agronomist who believed that crops could be re-educated through hard labour. Genetics was bourgeois nonsense, Lysenko said; what mattered was enthusiasm. If you ploughed deeper, planted closer, and shouted revolutionary slogans loudly enough, the harvest would multiply.
So, fields were churned to depths that eviscerated the biome, seedlings were planted shoulder to shoulder until none could breathe, and bureaucrats inflated yields to impossible heights. Mountains of fake grain were reported; much of the real grain was exported to show socialist success.
By 1960, China was starving. Whole provinces were dying in silence. Still, the propaganda blared: "The people's communes are good!"
A survivor later put it simply: "We killed the birds, and then the insects ate everything else."
New Zealand's Sacred Cow
We have our own version of Lysenko's ideology. You've heard it at every barbecue, every family gathering, every pub conversation about money:
"You can't go wrong with bricks and mortar."
"Buy land – God's not making any more of it."
"Rent money is dead money."
"Safe as houses."
"Property always goes up."
For two decades, these mantras proved prophetic. House prices in Auckland rose 500% between 2000 and 2021. Kiwi households saw their home become their retirement plan, their children's inheritance, their ticket to prosperity. Property investment became a religion, complete with its own prophets (real estate agents), its own evangelists (property coaches), and its own scripture (Rich Dad Poor Dad).
The scriptures were simple: leverage to the hilt, buy multiple rentals, negative gear against your income, and watch the capital gains roll in. Interest rates were at historic lows (and surely they'd stay there forever). The government needed house prices to keep rising; from pensioners to banks, the entire economy seemed to float on residential property values.
Alas - ideology, no matter how many believers it has, eventually meets mathematical reality.
When the Locusts Arrived
When the Reserve Bank lifted the Official Cash Rate from 0.25% to 5.5% between 2021 and 2023, the proverbial locusts began to swarm and feast. [3]
Investors who'd stretched to buy rental properties on interest-only loans at 2.5% suddenly faced repayments double what they'd planned for. Those who'd bought at the peak in 2021, with the assumption that prices would continue relentlessly marching upward, now watched their equity disappear into the maw of change.
The median house price in New Zealand has fallen 18% from its 2021 peak according to CoreLogic, with steeper declines in some regions. In Wellington, prices dropped over 20%. [5], [4]
Investors who bought at the top, banking on endless capital gains to compensate for negative cash flow, are now holding properties worth less than their mortgages. Negative equity isn't just an American problem from the 2008 crisis anymore; it's arrived in Epsom and Island Bay, in Christchurch and Hamilton. [5]
Mortgage stress has become a daily reality for thousands of New Zealand families. What was affordable at 2.5% is crushing at 7%. Property gambles that made sense when you could lock in cheap debt for years, now bleed money every month.
The Property Value Fundamentals We Ignored
Like Mao's bureaucrats ignoring the ecology of pest control, New Zealand ignored the fundamentals that underpin property values:
1. Debt serviceability
We convinced ourselves record-low interest rates were the new normal; a pleasantly permanent feature of the economic landscape.
They weren't. They were weather, not climate.
Anyone who'd stress-tested their mortgage at 7% rates had a good idea what this would look like, but most didn't bother. After all, the Reserve Bank had signalled rates would stay low until 2024, hadn't they? (They had. They were wrong.)
2. Yield vs. cost
Rental properties returning 3% gross yield while mortgages cost 7% represents what economist Hyman Minsky termed "Ponzi finance"—where income flows cover neither principal nor interest charges, requiring continuous new debt or capital appreciation to survive [6]. When prices stopped rising, the mathematics became unavoidable. You can't lose money every month and call it investing just because you hope the asset will appreciate.
3. Supply and demand
Yes, God's not making more land. But man is making more zoning laws, more construction, and more high-density housing. Auckland's recent upzoning has added the potential for tens of thousands of new dwellings. National's push for urban intensification is changing the supply equation.
Supply does respond to price eventually. The assumption that demand would endlessly outstrip supply was ideology, not analysis.
4. Demographic and economic shifts
Net migration swings wildly:
We saw massive outflows to Australia when its economy boomed.
Birth rates are falling.
Working from home changed where people want to live, making provincial cities more attractive.
How to Avoid Being the Sparrow Killer
No investment is exempt from fundamental analysis – not even the quarter-acre Kiwi dream. Here’s what you need to do:
Test your assumptions first
Before buying property (or any investment), ask the hard questions: Can I afford this if interest rates hit 8%? What if the property stays vacant for three months? What if it needs a $30,000 roof replacement? What if prices don't rise for a decade—can I still hold on? If your investment only works under best-case scenarios, you're not investing—you're gambling with borrowed money.
Recognise ideology masquerading as wisdom
When someone says "you can't go wrong with property”: ask them about Japan, where house prices fell for fifteen consecutive years after 1991 with Tokyo property losing 60% of its value. Or Ireland, where property crashed 50% in 2008-2012. Or Detroit, where homes now sell for less than second-hand cars. [6]
The phrase "you can't go wrong" is the most dangerous in investing. You absolutely can go wrong with property, shares, bonds, or any other asset – when you pay too much, borrow too heavily, or ignore the fundamentals.
Understand that all assets are priced relative to alternatives
When term deposits paid 0.5%, property's 3% gross yield looked attractive by comparison. At 5.5% risk-free rates from the bank, suddenly that leveraged rental property earning 3% gross (maybe 1% after rates, insurance, maintenance, and management) looks substantially less clever. Capital always flows to its best risk-adjusted return. When safe returns become attractive again, risky assets must reprice.
Seek Wise Counsel
Honest, professional financial advice isn’t just valuable in these situations; it’s essential.
Not the mate at the barbecue repeating what worked in 2015. Not the property spruiker selling $5,000 weekend seminars on wealth creation. Not the Instagram influencer with a Lamborghini, a course to sell, and a P.O. box in the Cayman Islands.
Find an adviser who'll tell you hard truths instead of comfortable lies. Someone who'll stress-test your assumptions, challenge your thinking, and ask the questions you don’t want to acknowledge:
What if you're wrong?
What if rates stay high for five years?
What if prices don't recover for a decade?
What does your portfolio look like if this happens?
The best financial advice often sounds boring. That’s because it is boring: it involves diversification across asset classes, appropriate leverage you can service in bad times, understanding what you own and why, and planning for scenarios you hope won't happen.
It's not a catchy slogan you can repeat at a dinner party. It's certainly not exciting enough to build a social media following around.
Instead, it's mathematics, discipline, humility, and the wisdom to know that "everyone's doing it" has never – not once in the history of markets – been a sound investment strategy. Quite the opposite; when everyone's doing it, that’s usually a good moment to step back and ask why.
Mao surrounded himself with yes-men who told him what he wanted to hear. The sparrows paid the price. Then the insects thrived. Then the people paid the price. The echo chamber produced catastrophe because ideology replaced observation, and enthusiasm replaced analysis.
The Bottom Line for Kiwi Investors
Don't let your financial future be decided by mantras. Don't let social ‘proof’ substitute for due diligence. And crucially, don't assume what has worked for the past twenty years will work for the next twenty.
Instead, seek counsel that respects the complexity of markets, acknowledges uncertainty honestly, understands risk as well as reward, and helps you build wealth on foundations stronger than popular sentiment or revolutionary enthusiasm.
The fundamentals always win. Always. The only question is whether you'll be positioned to weather the fallout, or whether you’ll be left exposed in the fields.
The locusts are always waiting.
Nick Stewart
(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha)
Financial Adviser and CEO at Stewart Group
Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.
The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz
Article no. 432
References
[1] F. Dikötter, *Mao's Great Famine: The History of China's Most Devastating Catastrophe, 1958–-1962*.. London: Bloomsbury Publishing, 2010.
[2] J. Shapiro, *Mao's War Against Nature: Politics and the Environment in Revolutionary China*.. Cambridge: Cambridge University Press, 2001.
[3] Reserve Bank of New Zealand, “Official Cash Rate decisions and historical data,”, 2024. [Online]. Available: https://www.rbnz.govt.nz
[4] Real Estate Institute of New Zealand (REINZ), “Historical house price data and market statistics,”, 2024. [Online]. Available: https://www.reinz.co.nz
[5] CoreLogic New Zealand, “House price indices and market analysis reports,”, 2024. [Online]. Available: https://www.corelogic.co.nz
[6] H. P. Minsky, “The Financial Instability Hypothesis,”, The Jerome Levy Economics Institute Working Paper No. 74, 1992.
