When real estate observers talk about market cycles, many are casting their minds back 10, maybe 20 years at most.
But Barfoot & Thompson Managing Director Peter Thompson can pull figures from the firm going back to 1954. That makes him more sanguine than most about what’s been happening to property prices in Auckland and surrounds in the past three years.
“In our history there are only four years when sale prices dropped below the year before – 1963, 1971, 1991 and 2009,” he says.
“Those were years with big world issues – the GFC, oil crisis. Even in 1996 with the Asian financial crisis, or 2000-2001 with dot com bust and September 11 there weren’t those negative figures. More interesting is if you look across the increases in average price since the 1980s you can see a pattern: it starts with a little increase , around six percent, then shoots up, then drops again.”
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Based on these long term cycles, Thompson is calling the current market a return to the traditional market cycle after the peaks of 2012 to 2016. He predicts the next upswing in around 2022.
Thompson also points out that Auckland has always had a seasonal cycle, picking up in September to November, peaking in the summer February to April, dropping away over winter and the Christmas break. Throw in the distorting effect of an election cycle – in 2017 a process that dragged on way longer as the coalition was formed and government changed – and the market is messy.
Thompson’s dig around the figures found that the highest sales period ever in the company was in March 2003, with nearly 1600 sales. That’s nearly double the volume of this May of just over 960, in a market that has more people, more houses and more sales figures. Around the peak in 2015, average monthly sales sat just over 1100.
The broad over view of all parts of Auckland – the company has over 1500 residential and commercial sales people in 77 branches – allows Thompson to spot how trends are playing out across the wider region.
“There’s a balance, sometimes in cycles you find swings happening in some places more than others.
“Right now there are not as many high value properties on the market, as people keep them off the market and won’t sell unless they have to.”
In fact, Thompson says, there’s a shortage of supply in some parts of the market, although he sees more apartment supply coming to market by the end of this year, or early next, as the big construction pipeline started three years ago finally completes. He also expects different generation of buyers who will be interested in the city fringe developments – places such as Millwater, Silverdale are pretty much all sold, the new MIlldale will bring on another 14,000 section. In the south, Flatbush and Ormiston are expecting 5000 new sections.
Thompson applauds the trend that these new suburbs are planned around the new shopping centres and transport hubs, compared to the old days when there were no amenities or master plan. At the other end of the scale, there are more options too with the likes of Wynyard Quarter, development being unlocked around Takapuna by Panuku. Again, Thompson’s long term view sees these as the modern incarnations of the last big push at Auckland’s boundaries, when places like Botany Town Centre and Albany sprouted.
So what are his recommendations for strategies for buyers and sellers in this market?
Pretty conservative: focus on how much you can afford (and that means allowing for today’s very low interest rates to start to climb again), buy in an area you can afford, and include access to transport and time to get to work in those calculations.
“That’s really important for investment properties,” Thompson says. “Tenants won’t travel, they want easy access to transport for work, university, and medical care.
He expects apartment living to grow, especially as the old ‘seven year itch’ of buy, improve, sell is now stymied by astronomical building costs and council restrictions.
Thompson’s final advice: use your agent experience to decide your selling or buying strategy. Of the company’s 1500 agents, over 120 of them have been with the company over 20 years, some 30 to 50 years so they’ve been through a cycle or two.
