The Property Clock published in REDnews says the present time is almost the ideal time to sell a property in Auckland and the worst time to buy. However, a strong argument can be made for seeing it as a good time to buy.
Since the beginning of the year Auckland property prices have hovered between being flat to edging down. Where significant change has occurred is a fall in the number of sales and the corresponding increase in listings.
Currently, the number of properties on the market in Auckland is the highest it has been for some years.
It means potential buyers have more time to evaluate options, longer to investigate and inspect properties of interest, and are under less pressure to make decisions.
Potentially, this window of opportunity could last until the general election in September, but after that the uncertainty as to the direction the market will take will disappear.
Regardless of the outcome of the election, and the commitments that will be made by every political party in the run in to the election, there will be no short-term reduction in Auckland's housing shortage.
The reality of the situation is that building 10,000 properties in a 12 month period in Auckland given the current capacity of architects, designers, engineers, builders, tradespeople and the building consent process represents a massive challenge. To push that out to say even 15,000 homes is beyond current capability.
To eat into the shortfall we must first increase our building capacity.
Supercity’s economic growth: 60,000 more jobs added in 2016
Yet at the same time the Auckland economic boom continues. Within the last few days Auckland Council's chief economist talked of the supercity's economic growth hitting 4.4 percent and in the 12 months ending December 2016 adding 60,000 jobs.
While we read of Aucklanders abandoning the City in despair at being unable to afford to buy a property, or because of the long commute times, the reality, again, is that the population is growing at the rate of 36,000 people a year.
People, both from other parts of the country and from overseas, want what Auckland offers in the way of lifestyle and economic opportunity. And are determined to resettle here.
Post the election, a greater sense of certainty will inevitably return. The most likely scenario then is that housing activity will pick up.
While ideally prices will not return to increasing at the same speed as over the past few years, traditionally prices rise when any product is in short supply.
More of a ‘correction’ than a ‘bust’
The debate around whether Auckland house prices will 'collapse' came back into the news in May through a publication by Goldman Sachs which carried a warning that there was a 40% chance of a housing 'bust' in the next two years.
Ignoring the fact that it also meant there was a 60% chance it won't happen, the word 'bust' turned out to mean a fall of as little as 5%, or $44,000 on 2016’s average price or $886,000 or $38,000 on the median price of $755,000.
The respected NZ Herald commentator Fran O'Sullivan correctly pointed out that the right term for a fall of 5% would be a 'correction'.
Based on Barfoot & Thompson sales data, in the past 20 years, year-on-year prices has never declined by 5% or more.
The highest fall was between 2008 and 2007 (at the time of the global financial crisis) when the fall was 4.6%. Within two years prices had regained lost ground.
I leave forecasting to analysts and economists. However, it seems to me that anyone who buys a house at today’s prices, who has a reasonable time horizon of say five years and who has the capability to service a modest increase in their mortgage interest rate has little to fear from a price fall. Time will soon redress the issue.
Managing Director, Barfoot & Thompson