Will house prices rise or fall?
I find myself being asked this question all the time.
Around 2001 a supersonic housing boom hit Sydney. It was just after the Olympics. Property prices started to fly like athletes out of the starting blocks. And no one wanted to miss the gold on offer. Everyone hopped on board the yummy gravy train. One thing led to another and soon it was a Mexican wave. Feverish, powerful and with undeniable momentum.
By 2005 house prices had pretty much doubled around Sydney, Melbourne, and Perth.
Then followed (as it usually does), talks of doom and gloom. Prices are unsustainable, they said. Totally unaffordable for the new generation, they said. Prices will fall – wait and watch, they said.
All I could say was – we’ll see.
Then the GFC happened and the nay sayers said told you so. And for a while there was a correction in prices. But only for a while. And while many were calling it doom and gloom – savvy investors were calling it a new wave of opportunity. Because thats the thing with real estate – as many investors have said and will say again – there will always be another wave.
Fast-forward and in late 2012 another housing boom hit Sydney. Once again Property Prices shot up. Even Capital Gains Tax and Stamp Duty (tax) couldn’t stop Aussies from digging deep!
And now, after a brief gap, which is the norm, once again the Australian Property market is showing signs of revolt and uprise. It only takes Google search to discover matching trends here back home. Tremendous shifts in wealth, every 10-year property cycles are now a norm.
So back to our question, will house prices rise or fall?
The short term answer is they will do both.
But and this is an important but, as history has shown us – over the long term – house prices always rise.
Let’s test this. Here’s an activity to for you.
Approach an Auckland born senior citizen and ask him or her a simple question – “What was the average house price around your suburb 50 years ago (1970), 40 years ago (1980), 30 years ago (1990), 20 years ago (2000), 10 years ago (2010)?”. The trend is apparent – investments in real estate, if held long term, usually pay off.
Despite periodic highs and lows, calculated and well-chosen real estate investments have been profitable over the years. While past performance is no guarantee of future performance, New Zealand population currently sits at 4.8 million people and is forecast to double in the next 30 years. This will require an extraordinary amount of residential property to be built. What would this mean for NZ property prices?
New suburbs, new motorways, new tunnels, new train networks, new shopping malls, new apartment blocks, new skyscrapers, altogether will look to spread Auckland further out, further wide. Before you know it, it ‘will’ be 2029.
Ask yourself, would you rather look back in 2029 and wish you had bought at 2019 prices?
For a lot of Kiwis this will be the reality. These people who have never invested before, they tend to regard property investing as a form of gambling. And like many things in life – it can be if you don’t know what you are doing. If you are not prepared. But unfortunately for these people, their lack of understanding will keep them from enjoying the financial rewards of judicious property investment which over the long run, has been proven to be profitable. And those same people will be left saying “I could have”, “I should have”, “I would have” “Why on earth didn’t I?!”.
The key to successful property investment is action. The key to making the right actions is preparation. Acknowledge your fear but overcome it with knowledge, preparation, hard work and then action.
Then get excited for 2029 and beyond.
Because history does repeat itself.