Property Prices Set to Rise 5,000%

In 1980 my parents bought a property in Mt Eden for about $56,000. No, I didn’t miss a zero off the end. That is what houses were worth back then in central suburbs.

It was a big deal for my parents – 5 kids to house and busting a gut to get into good school zones. But looking back now it is almost hard to comprehend that’s all you had to pay to get a house in Mt Eden, Auckland! Flip it around – if you could go back in time and tell my parents that in 2021 the property would be worth $3m – an increase of over 5,000%, he would think you were unhinged. That is because it’s like me telling you that in 40 years time that property that is worth $3m today will be worth $157m in 2061. That’s right – $157,000,000.

What about the first property I bought for $160k in about 1998? Now worth $1.2m – that is a 650% increase. Push forward another 20 years and it will be worth $6.76m. I am sure you have your own story.

We don’t think about those numbers because attention is being constantly directed to the stellar/scary/concerning/encouraging – price rises. You choose the adjective. We live in the moment – will the recent gains be lost later in the year if we lockdown again, will the RBNZ introduce measures that will stifle price growth for a decade, etc? We are worried about the next 6 – 18 months and the impact that will have on portfolio value. You might say – but this time is different. How different is it? More different to WW2, or the Great Depression, or the 80’s crash, or the GFC? They were all different, but the same.

Rare is the person in western culture that sits back and thinks about the 20 – 40-year time horizon. But if we stopped to think about it – we might ask questions like this:

What will property A versus property B worth in 20 years? If property A grows by 1% more than property B – what will that translate to in $ terms? If I made my deposit go further and bought an extra $500k worth of property, how much more capital growth will that generate in 20 years? If in 20 years Branson or Bezos gets a space plane going commercially and we can fly Auckland to London in a few hours – how much more demand will that put-on NZ property? Or – if pandemics become a regular occurrence will we see more and more wealthy northern hemisphere residents relocating to New Zealand, or at least having an escape pad they can access? Or, the one million Kiwis offshore all decide to move home? And if so, what will that do to New Zealand property prices?

There are 100’s of millions of people on this planet with incomes that range from reasonable to eye watering, living in locations where property is a lot more expensive than New Zealand. What happens if we get a massive influx in visitor numbers at some point? Will none of them get inspired by the staggering beauty of Queenstown and the Milford track, or be attracted to the warm easy going way of Kiwis? 99% of them will fall in love with New Zealand, and some of them will look at our property and scratch their heads and think – wow this is cheap – and I can bring my foreign currency and get great bang for my buck. We think demand for property is strong now…

I passed through Hokitika over the break and took my kids to see a Kiwi bird, it was very dark, and the Kiwi had its head to the ground most of the time. I was glad I was not a Kiwi with my head buried unaware of the exciting world around me. As a Kiwi I am enthusiastic and confident about the future of New Zealand property.

Perhaps it’s time we consider turning off the media feeds on property, think about what the future of New Zealand will look like and what that means for New Zealand property. You just might find yourself caring less about what’s happening in the market right now and wondering whether you should be buying more property.

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