Property Head allays fears of Property Crash

Property Head allays fears of Property Crash

Property Institute of New Zealand Chief Executive, Ashley Church, has urged Auckland home owners not to panic about the value of their properties.

He was responding to yesterdays warning, by Reserve Bank Governor Graeme Wheeler, of the risk of a ‘sharp correction’ in Auckland property values if prices continue to rise.

However, Mr Church cautioned that Mr Wheelers comments were at odds with the reality of the Auckland market and were not supported by the evidence.

“There are 4 reasons why Aucklanders need to take Mr Wheelers comments with a grain of salt:

1. Auckland’s current property boom is being driven by demand for an additional 39,000 houses and won’t run its course until that demand has been met. On current projections that will take at least 3 more years - and possibly longer.

2. There have only been two ‘sharp corrections’ in the kiwi property market since the 1970s. The first, in the mid 70s, was the result of New Zealand losing access to the British export market and a dramatic increase in oil prices. The second, at the time of the GFC, was the result of a major hit to the world economy – and even then the fall was only around 5% - following a boom in which house prices had more than doubled.

3. History shows that Auckland house prices tend to settle, rather than drop, at the end of each boom – which means this current boom is far more likely to end with a whimper rather than a fall – only to start rising again when the next boom hits 4 or 5 years later.

4. And finally – people need to remember that Mr Wheeler is tasked with keeping inflation under control and that his comments should be understood in that context. His job is always going to be to dampen the market and that’s what he was attempting to do yesterday”.

Mr Church added that, while there can never be guarantees, we know a lot more about how the property market works than we did even a decade ago.

“Short of a major global economic crash we can be reasonably confident”.

Ends

© Scoop Media