I predict that 2018 is going to see a crash in property prices and the property market is going to turn to custard. Now that I’ve got your attention, it’s my belief that anyone who is thinking the housing affordability issue is going to be sorted in the next 12 months is dreaming.
Interest rates are at historically low levels and there is a fundamental shortage of supply (or a lack of available housing) in Auckland. People want to move to New Zealand, the doors remain open, and we can’t build enough houses to keep up with the demand. The economy is robust and there is close to full employment.
While these factors remain, I don’t believe that we will see a structural correction to the property market. We are much more likely to see prices plateau, but given the growth that has happened in the last three to four years, many would suggest this is a great thing that will help the stability of the market. It certainly won’t hurt the affordability issues that we are seeing in greater Auckland, but it will be a long time until wage growth catches up.
For the last 12 months, the market has been showing signs of slowing-down after a strong bull-run. Levers were put in place by the Reserve Bank and the trading banks well over a year ago, with changes to the LVR’s (loan-to-value ratios) and credit policies which took a while to bite, but were certainly starting to have an impact by the middle of last year.
The change in government that came in November, 2018 is going to bring some further changes that will undoubtedly have an impact on the property market. The discourse on a capital gains tax has already seen residential investors become much more subdued in their activity.
It will, of course, depend on the particular part of the property market. Lifestyle properties with close proximity to towns and arterial routes into the city will continue to be in demand – the Auckland Unitary Plan has made it hard for many more of these to be created, and a lot of kiwis will always want to live on a hectare or two and enjoy the good life. Quality areas and suburbs will remain just that, quality.
More locally in Rodney, we are going to continue to see a lot of change in our local areas. The Unitary Plan has opened up massive areas of development land in Silverdale and Warkworth, in particular. There will be a real strain on infrastructure as tens of thousands of houses are built in the coming few years. While we’ve seen growth in the last few years, what is ahead of us will make this look somewhat insignificant.
If we think our traffic issues are bad now, then I’d suggest that it is only going to get significantly worse before it gets any better. With fresh zoned land comes development, with development comes service vehicles and tradies to deliver on it. It all adds to the mayhem. It’s very apparent that the planners at Auckland Council haven’t been working hand-in-glove with the planners at Auckland Transport and NZTA. Unfortunately, we are all going to be left dealing with the hangover of this lack of coordination over the years between the various agencies.
We need to be getting our local community groups organised and all singing off the same hymn sheet, and banging the table with the bureaucrats to bring the infrastructure investment forward to be ahead of, rather than behind, the development curve. Roading is one issue, but there are many others that will have a big impact for all of us – parking, fibre roll-out, and school and sports field capacities to name just a few.
The good news is that we live in a beautiful district and people want to live in our part of the world. This will underwrite our property market. The bad news is that the growth that is coming is going to cause us some pain.
It would be great to think that 2018 will be a year where our communities really make progress in sending messages to the bureaucrats in the city about what we want our local areas to be like in the future. You’ll certainly find me with an opinion and doing what I can to help.
Best wishes for 2018.
by Mark Macky,
Director, Bayleys in the North