COMMENT: One of the more fascinating aspects of the Kiwi property market is the extent to which so much of it plays to a very predictable script. Those of us who have been observing the market for a long time know, from observation and research, that there’s very little that happens in the market which hasn’t happened before and that the same issues that are igniting public hysteria today, have been periodically doing so over the past 40-plus years.
READ MORE: Find out if your suburb is rising or falling
An example of this would be the recent headlines trumpeting an International Monetary Fund warning that the current surge in Kiwi house prices could trigger a "pronounced correction" in those prices. The IMF went on to propose that this risk needed to be tackled with specific measures to dampen speculative demand, particularly demand from investors. Solutions proposed included the introduction of stamp duty and the imposing of a capital gains tax. Sobering stuff, right?
Maybe not. As it turns out, the IMF has been beating that particular drum for quite a long time and predicted a sharp correction in New Zealand house prices as far back as 1998. But as recurring market themes go, the regularly-predicted market correction is by no means on its own in this long-running soap opera. Other recurring storylines include "the housing crisis"; "the housing bubble"; "the coming crash"; and, making its first re-appearance since the late 1970s, "the housing shortage" in 2012.
Start your property search
And, like all good dramas, there is a cast of villains, including property investors and speculators foreign buyers, boomers and ghost homes, all popping up every few years to reprise their roles as the recurring baddies of the market. Of course, no drama would be complete without a chisel-chinned caped hero swooping in. Some swoon to the ”will he or won’t he” escapades of the LVR restrictions; some are fans of the foreign buyers ban; others cheer for the Brightline test. The fact that none of these heroes have actually made a jot of difference to the storyline seems irrelevant.
My purpose is to highlight the extent to which we allow ourselves to be frightened by things that have never happened and probably never will. The property market hasn’t crashed since the 1970s, the so-called “bubble” has actually been a sustained upward trend in house prices going back four decades and the concept of a housing ”crisis” evaporates when you sit down and actually analyse who the real victims of rising house prices actually are.
So it’s with some amusement that I note the recent return of the term "runaway house prices”.
Like the other terms I’ve already highlighted – this one isn’t new. It tends to pop up at the point in the cycle when Auckland house prices start taking off – which, of course, is happening right now – and is always used in a way which implies that these prices have gotten out of control. It was used in the early 2000s when you could easily buy a house in Auckland for a couple of hundred grand, and it was used again in 2011 – 2012 when you could easily buy an Auckland home for under half a million.
It’s an emotive but, ultimately, meaningless term because clearly house prices haven’t "run away" because, if they had, we would no longer be buying those houses.
Despite the plot changes of the past 40 years, the market has self-regulated and has been adept at writing a plot in which the market hasn’t crashed, Kiwis have increased their wealth and the country has prospered. Maybe it’s time we changed the storyline?
