Will property prices drop in 2019?
The question everyone is asking right now: Will Wellington property prices drop in 2019? No one has a crystal ball (that works) of course. If we did, we’d be millionaires. But to help with your decision making, here are our thoughts on the matter, based on decades of combined experience working in property…
Note: We are not qualified financial advisers and strongly suggest you consult with your solicitor or accountant or both before making any significant life choices around real estate ownership.
10 things I think I think about Wellington property prices right now…
1. Interest rates are low right now and show no imminent sign of increasing. This is the no.1 key factor (hence being no.1 in my list). If rates were to increase to 7, 8, or 9% then investors would start selling up real fast. Even that ‘sell-off’ might take a while to kick in though as most property owners have the majority of their mortgage on 1 or 2 year fixed rates.
2. Supply in Wellington is limited. They just aren’t building that many houses and our City is surrounded by water. The only areas with significant development going on are Crofton Downs, Churton Park, Woodridge, and Grenada Village (not including the Hutt or Porirua). Even then, this only adds 2 or 3 houses a week to the supply side of the equation.
3. And that won’t change quickly… Have you tried to build anything lately? It takes forever. If you buy a section right now you won’t be moving into your new home for 12 – 18 months, unless plans have already been approved. The red-tape involved with the building process is immense.
4. Wellington is a great place to live. People want to move here. The job market is active, it’s cheaper (and cooler) than Auckland.
5. We are probably at the top of the property cycle. Traditionally, property cycles work on 8-10 year time frames. It’s been more than 10 years since the peak of the last boom (2007) and there is only so much growth any location can handle in one cycle, so in that sense, we are due for a steadying period of stable values and limited price growth.
6. Our prices didn’t go up as much as Auckland during the last cycle. We aren’t as exposed to potential value drops as our big brother City since we didn’t go up as much in the first place. Agents I regularly speak to in Auckland report 10% price drops in the past 6 months. While historically we normally follow suit, I don’t see Wellington dropping that much.
Price growth: Wellington vs Auckland
7. Offer intensity has reduced but buyers are still active. We aren’t seeing the 30-40+ open home visitors or the 10+ offers we would see on some properties in early 2018. It’s more like 10-15 open home visitors and 3-4 offers on most properties now, but prices appear to be
8. A major overseas event could change everything. In 2008 the Global Financial Crisis took everyone by surprise, creating a near instant change in the market. At worst though, Wellington prices dropped 5-10% during this period and recovered within a few short years. So the moral of the story is: Make sure you are in a position where you could hang on to any property you own for a few years if something big occurs.
9. Before you buy, ask: How long will I stay here? You will generally do fine with any property investment if you are able to hold it for 5-10 years (the length of one property cycle). In our experience, it’s the people that buy a home and then need to sell it 1 or 2 years later that generally end up losing money.
10. Before you sell, ask: Have I got something better to do with the money? Unless you are at retirement age, there probably isn’t any point selling a property just to put the money in the bank (at current term deposit rates, anyway). But if you have dreams of travelling, starting a business, buying a different property, or paying off debt, then good on you! Order a quote online and let’s get started 🙂
We believe there is an 80-90% probability that Wellington house prices will remain roughly where they are right now, or see a slight (+/- 5%) increase or decline over the next 12 months.
The increase would likely be caused by more and more people moving to Wellington (more Labour government jobs), a further reduction in interest rates, or a relaxation of reserve bank lending restrictions
A decrease would be triggered by increased interest rates, loads of investors selling up in response to law changes (thereby flodding the market) or Aussie banks tightening up the purse strings following changes in their real estate market.