Auckland House Prices

Shades of 2008. Back then after the banking crisis every economist as now, wrongly predicted a massive price collapse in Auckland house prices. Some such as Bernard Hickey and Shambles put their money where their mouth was, sold up and shifted to Wellington, in the process blowing small fortunes.

Back then the economists were all talking nonsense. I received a call from TV One’s Sarah Bradley, host of the 9-12 morning show on this topic and told her the economists were talking rubbish. This resulted in me doing a weekly half hour stint for a couple of years, until I tired of it.

As I said on television, back then, Auckland was the fastest growing city in Australasia, there was a huge shortage of Auckland houses and prices are set by supply and demand, ergo, far from collapsing they were on the cusp of a boom, all of which duly occurred.

So here we go again. What’s different this time? Well certainly not demand exceeding supply. But we don’t have massive immigration as back then. More pertinent the Reserve Bank has removed the minimum deposit stricture while interest rates are at an all time historic low. It’s a buyer’s dream situation.

The government’s efforts to partly underwrite small business victims of the ill-considered lockdown by partly guaranteeing interest free bank loans has been both a failure and exposed their naivete. That’s because banks are rejecting most overtures, knowing many of the applicants are irretrievably ruined. They naturally don’t want the time-consuming money-losing mopping up mess on their hands.

On the other hand they’re eager to provide house mortgages. I suspect residential agents have a very good year ahead of them. But once balance is restored, without large scale immigration, there will not be the price boom of recent years.

One cautionary note. The unquenched demand is for family homes. On the other hand we’re looking at a glut of apartments in Auckland, developers as is their age-old wont, having hugely over-supplied the market. It is Auckland apartments and not houses which will see a value collapse. Apartment purchasers who are patient and wait 6 months or more will buy well.

Wellington, currently a popular destination for a number of reasons, will not see a house price collapse for similar demand exceeding supply reasons. Its apartment supply and demand position is more balanced than Auckland so similarly a price collapse is also unlikely.

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