Wow, is it true? Is the Auckland property market just taking time out?
This could be great news if you’re in the market to buy!
Its funny, but when the market is booming and it seems like every man (or woman) and his/her dog are buying houses, the momentum just seems to grow and the property hype snowball just keeps gathering steam as more and more people climb on the train.
Sure you hear the odd naysayer telling you its headed for a crash but the boom just keeps on rolling along with more and more people joining in and adding to the buying frenzy.
Eventually, everything you read in the media is telling you a crash is imminent, and that everything is overheated, and its not a great time to buy property anymore. (There are a fair few savvy investors that base their investments on counter cyclical trends, so when everyone’s saying buy, they sell, and when everyone’s saying sell, they buy)
There certainly can be truths to these media comments, but its basically the fundamentals that will stop the snowball, not the media sensationalism. Once the fundamentals hit a certain point, thats often when you’ll see a market correction. With respect to the Auckland property market (and the rest of the country too) it was the Reserve Bank intervention with the 40% deposit investor LVR that began the process. The Banks also tightened their lending policies, the median house value to income levels reached a point where the median prices couldn’t really keep going much more and the Chinese Government placed significant cash flow restrictions on how much could be taken out of the country. All these fundamentals have had their desired effect on the property market, and that was to slow it down, and stop the house price increases and try to make houses affordable for people.
Has it worked?
Yes and no!
Sure, the market in Auckland has come to a standstill in terms of price increases (for now), but has it changed the fact that we still have massive immigration numbers, a shortage of housing crisis in Auckland with no real capability to build the houses to meet the demand any time soon and still very low interest rates?
Methinks, this is a blip on the radar, a typical slowdown that you’d expect after such a meteoric rise in prices. Demand is still there, albeit substantially lower than before. However, take a look at the typical property cycles over the last 25-50 years and you’ll see consistent patterns.
If you’re a buyer (or you expect to be) in the next 3-6 months, then this will possibly be the best time to buy in the market. Don’t expect to see prices drop through the roof, that is unlikely to happen, but in saying that, prices do appear to have come off the highs probably by as much as 10% in some places. If you’re considering selling and buying in the same market, you’re in a neutral situation as both you and the property you are buying will likely have both had similar price softening. With more sellers coming to the market in Spring, and the number of buyers not likely to match the increase in property availability, there is a strong likelihood that you could pick up some good value property over the next few months.
So people, we may be currently in that counter cyclical opportunity moment, where all the media and doomsayers are telling us the market has had its day, its over and property is no longer a good investment. (Eventually, they’ll start to say this as they always seem to)
This period could go on for several months, maybe even a year or two,
but all this spells is ‘Opportunity’ That’s usually the best time to go on the property accumulation march and buy what you can afford to when everyone else is believing the doom and gloom stories about the property market. Just remember, property is a cyclical market and its been proven historically, that houses (in Auckland) often double in value every ten years or so. There’s a very apt saying with respect to buying property in Auckland that says ‘you can never pay too much for a property, you can only pay it too early and time fixes everything’
Check out a recent article we wrote:
Are You A Buyer Waiting For The Market To Fall?