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.

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