Claiming to know what the future holds is a practice which has been with us for millennia – but it once carried far more serious consequences for error. In the Old Testament, Moses tells us the penalty for getting a prediction wrong – any prediction - was to be put to death. Fortunately, we’re far more forgiving of predictive mistakes in the 21st century.
Biblical standards aside, making predictions about the housing market is a serious business – not the least because there will be people who make important life-changing decisions based on those predictions, which is why it’s something I never do lightly. It’s also why I think that it’s important that those of us who make such predictions should be held to account. If you’re going to claim to know the market, you should be open to retrospective scrutiny of your claims.
I’ve now been making housing market predictions for four years, publishing the most recent of these, covering 2020, just a few weeks ago.
So what was my hit rate? Of the 14 predictions I made for the 2017 and 2018 years, 12 were provably correct, one was a matter of subjective opinion, and one (regarding interest rates) was demonstrably wrong.
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So how did I do in 2019? Judge for yourself:
Prediction 1: There will be no market crash and house prices will stay flat
Towards the end of 2018 and in early 2019 there was a flurry of headlines warning homeowners about an imminent property market crash. I believed such claims were nonsense and that has proved to be accurate - there was no crash. We’ll have to wait a few more weeks for the final sale stats of 2019 to come through to see if the pick up in the Auckland market has any measurable effect on house prices for the city, but year on year growth for Auckland was just 2.7 percent as recently as August. Watch this space.
Prediction 2: There may be some large house price drops in specific locations
Another tick. Examples of large house price drops last year included the 24.4 percent plunge in the West Coast and the 17.4 percent drop in the lower quartile price of Auckland CBD properties in June and July.
Prediction 3: It will take longer to sell a house (particularly in Auckland)
In the year to December 2018, it took an average of 35 days to sell a house in New Zealand and 39 days to sell a house in Auckland (up from 35 days in December 2017). By July 2019 this had increased to 40 days throughout the country and 44 days in Auckland – exactly as predicted.
Prediction 4: There will be no further changes to the Loan-to-Value deposit rules
Despite a well-publicised review and expectations that they would be loosened, the Reserve Bank made no changes to the Loan-to-Value ratio rules in 2019.
Prediction 5: The cost of renting will continue to rise in 2019
There was a further big increase in the average cost of renting a house in 2018 – 4.1 percent nationwide, and 7.2 percent if Auckland is excluded from the figures. These increases are the result of changes to the Tenancy Act, the ring-fencing of tax losses and significant new compliance costs for landlords.
Prediction 6: High levels of immigration will continue to put pressure on housing
According to Statistics New Zealand, there was a net population gain of 55,613 people in the 12 months to the end of October, up 10.8 percent compared to the previous 12 months and the highest it has been for that 12 month period since the last peak in 2016. Given that all of these people need to be housed – and that around 42 percent of Kiwis rent – this increase will put even more pressure on both the housing and rental markets.
Prediction 7: The Government will make big changes to KiwiBuild
At the time that I made this prediction, in January of 2019, there was no hint of any substantial change in KiwiBuild, but just seven months later the entire policy - and arguably the centrepiece of the Government’s platform - was gone in all but name. This was absolutely consistent with my prediction, in January, that “nothing would be off the table” in the review of the policy.
You can be the judge of how closely the outcomes match the predictions – but hopefully I’ve postponed public stoning for another year.
- Ashley Church is the former CEO of the Property Institute of New Zealand and is now a property commentator for OneRoof.co.nz. Email him at ashley@nzemail.com
