THE LAST WORD
Heart or head? The state of housing today, by John Bayley, of Bayleys Real Estate.
Every week when out attending functions, either on behalf of the company or in a purely personal capacity, I’m asked exactly the same question: “JB, so is now a good time to buy a home?” And my answer, every time, is another question: “Do you mean somewhere to live and raise a family or for investment?” Because there’s a big difference between those two buyer dynamics. Buying a home in which to raise a family is an emotional decision underpinned by the heart. Meanwhile, buying a home as an investment vehicle is – or should be – driven by financial analysis via the head. There’s a huge contrast between the immeasurable value of watching the kids, or grandkids, kicking a football around the back lawn or sharing a barbecue with friends, and forecasting long-term capital growth and yield from rental returns. That’s before we even wander into the realm of discussing where the property is actually located. So the answer to the question about whether “now” is a good time to buy a house is totally dependant on why it’s being asked. The media has been frenzied in its coverage of Auckland’s residential property market over the past year or two, every day writing about how much values have risen and how “unaffordable” housing is for many first-home buyers in the city. However, there is so much more to New Zealand’s real estate scene that flies under the media radar – simply because it doesn’t generate sensational headlines. For example, there is commercial and industrial real estate – every office block, shopping mall, factory, warehouse, corner dairy and hotel, in every city and town. Then there’s the rural sector – dairy farms, sheep farms, pig farms, deer farms, vineyards, forests, orchards and grazing blocks. There are so many pieces to New Zealand’s real estate jigsaw that it’s a pity to focus on just one part of the property market in just one city. Both as a passionate Kiwi with rural heritage roots and as the head of Bayleys, I would much rather see all sectors of the property market rising steadily across regional New Zealand, as that would reflect broader and more sustainable economic growth, along with personal wealth accumulation for all. Which draws me into the other question I’ve been asked a lot lately: “How long can this situation in the Auckland house market last? And is this a property bubble?” The answers? Firstly, the current market phenomenon will last as long as immigrationfuelled demand for housing outstrips supply and the Official Cash Rate remains below 4.5 per cent. Secondly, no, it’s not a bubble. What the City of Sails is experiencing is simply a reflection of Auckland rapidly becoming an international city on the back of one of the biggest global migrations the planet has ever seen – with Chinese and Indian populations relocating themselves and their asset bases around the world, including New Zealand. It would clearly be preferable if some of those new migrants to New Zealand chose to live in the provincial centres rather than Auckland so that the economic prosperity generated through population growth was more widely shared by the country’s greater population.