Is This Property Market About to Burst?!

In short – NO!

Think about what that actually means for a second. In fact – Think of other bubble bursting scenarios and what lead to that happening, and what was the outcome? The top two that stand out for me are the tech bubble bursting and the US housing bubble bursting. What lead to this? Over-supply! And, what was the outcome? A fast back-peddling of value. Sure – sub-prime mortgages led us into a credit crisis that sparked the housing issues in the States, Australia, and the UK, but what was the underlying economic fact: Supply and Demand!

If you have store selling ‘widgets’, and you have more people than you do widgets – What would you do? I’d put my price up! Would you? Yes!

What am I getting at here? Here are the facts: Statistics NZ are predicting that in the next 30 years, Auckland will attract another one million new residents. The Auckland Council in their wisdom say that to stem this tide, we need 400K – 500K houses built in Auckland in the next thirty years. Not to sound facetious here, but do you honestly think the council, with their appallingly long wait times on consents, will facilitate this growth here in Auckland? No freakin’ way! There is and will continue to be for the foreseeable future a massive undersupply of housing in Auckland. What will this do to house prices and rents? Push them up of course.

It’s Economics 101 – Supply and Demand basics: If you have more demand than supply, price goes up.

And what of the rest of NZ? Auckland booms first, then this trickles out to the rest of the country, just as big rock being thrown into a pond ripples waves outwards. First it will be the outer-lying suburbs like South Auckland, Ranui, Tuakau, Pukekohe, Pokeno, Gulf Harbour etc etc – Then that tidal wave will gain force and hit cities like Hamilton.

The last time property slowed down and even went slightly backwards, there were key economic indicators as to why this happened. Those indicators are nowhere near where they were in the 2007-8 period.

Here’s the deal – We’re in a cycle my friends. Property booms for about five years, then it dribbles around for a while, maybe drops back a bit, then it booms again. It’s all simple economic market cycles. This is not rocket science. This is simple supply and demand!