It’s spring 2015 and while the rest of the country wallows in the pool of stagflation, Auckland is partying like it’s 1999. So, what does the homeowner do when the property market is going crazy like this? And what does it mean for the rest of the country?
I've been travelling to Auckland from Wellington for the past year and a half and if you would like to see an example of forlorn misery, talk to a potential first-home buyer anywhere between Pukekohe and Warkworth. If they can rustle up $70k, they may have just enough to purchase a property. If they wait for a month, their purchase price will have increased by $10k.
It's a little better for existing home owners in the 09 area, although they face a problem of a different kind. If they sell their property and liquidate all this new found equity, what are they supposed to do with it? Unless their plans include moving to Napier, they haven't really got the opportunity to improve their situation.
And let me tell you, their plans do include moving to Napier ... or at least Tauranga. Ask them their thoughts on Papamoa and first home buyers get a far-off look in their eyes. They're plotting on how they can find work down there before you've even finished the question.
As a result, I believe Wellington is in for a bit of a boost. Tony Alexander said it most succinctly recently (despite my recent light-hearted article on Tony here, I respect his thoughts a lot):
If you were a first-home buyer in a white collar job, and you desperately wanted to own a home (as most young kiwis do), where would you look to? You have the choice of the smaller towns but your best odds of finding a 9-5 job is in the Capital. [Heavily paraphrased but you certainly the gist of his message.]
The two questions everyone in Auckland should be asking are 1) if we're partying like it's 1999, at what point does the clock hit midnight and the hangover set in? And consequently 2) do we have a box of Nurofen and Panadol big enough to cope with the resulting hangover?
Here is my two cents worth: The party is likely to continue for at least another two years because of supply issues (i.e. not enough houses) and low interest rates. Feel free to unleash the trolls in the comments section below.
Rupert Gough is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.