Tony Alexander Talks ...

One of our esteemed leaders went to hear Tony Alexander talk at Mossgreen-Webb Gallery last night. Here are a summary of his comments last night (thank you for sharing Champak).

It's an insightful read. Enjoy :-)

Key Takeaway...

The Auckland housing market has "slowed" and may even have "plateaued" for the short-medium term but there is nothing in the fundamentals that suggests there will be a short or medium term retraction in prices. The pricing of the Auckland housing market simply reflects a new equilibrium where demand meets supply.

Where does the AKL market sit at the moment?

- broad trend : flattening
- turnover down 12% on average compared to last year
- prices 95% higher compared to Sept 07 (last peak)
- rest of country on average has prices 35% up over the same period
- 27% of current sales in Auckland are to investors
- 13% of sales in Auckland are to first home buyers
- the remainder are existing homeowners moving around
- 80% of new apartments planned for the suburbs

Why are prices at their current levels?

 Not enough houses being built since middle 2000s
- insufficient labour
- consent process too slow
- Auckland gets 60% of NZ's net migration flow
- 3 persons per house on average 
 
Auckland is fast becoming a world class city
- depth in many sectors
- "Mini Lindon"
- price of houses in Auckland now reflects 2 people working per household

Auckland's population is growing rapidly
- migration + retention
- Auckland population CAGR last 3 yrs 2.8%
- Auckland has 34% of NZ pop vs 21% in of NZ's population in 1961

The world has settled into a low inflation environment
- low interest rates
- the search cost of information is almost negligible
- lower interest rate since the 1960s. Investors are looking for yield!

Asians buying
- they have seen a model for wealth creation through buying property ahead of the boom in their home countries

Kiwis buying
- catch up buying
- getting to the FOMO stage

RBNZ
- job is to keep inflation low & ensure lending astute 40% LVR restriction seems to have hit the sweet spot

So will prices drop? In a word: No.

For prices to drop would require:
- interest rates to rise strongly - not a high chance (we are structurally in a low interest environment)
- recession - unlikely as economy underpinned by various sectors (tourism, agriculture, technology, immigration)
- oversupply of houses - no chance of increase in construction rate as shortage of labour, materials & money

​What does the future look like?

- money is in short supply in NZ due to low savings rate
- we will enter a period of credit rationing (like the 70s)
- cannot finance required borrowing organically - have to borrow it from overseas (still have 29% reliance on overseas debt)
- this may lead to a dropping off of demand but to what extent remains unknown


Thanks for reading. I look forward to helping you on your real estate journey - home or investment; just call me to take that first step!