The Auckland property market is in an interesting position. While it should be heading into a period of recession, there is one thing stopping that from happening.
Well actually, it is more like 1.04 million things that are stopping this usual recession period from happening.
What is this huge collective force that is modifying property trends?
It is the Baby Boomer population. The effects of the later retirement of the Baby Boomer generation and the impending America’s Cup race are impacting the Auckland property market in an unprecedented way.
So, let’s explore the current state of the market, what history tells us will happen when the America’s Cup takes place, and what that all means for the Auckland property market.
The Current State Of The Auckland Property Market
The Auckland property market tends to operate in 10 year cycles, going through various stages. The decade begins at the end of a recession stage, moves into a recovery period which peaks around the seventh year and then heads into a decline until the new decade begins and it starts all over again. This cycle has been pretty consistent for the last 50 years.
Never before have we seen the current situation. There are 1.04 million Baby Boomers nearing retirement. Always before there has been a natural attrition where the previous generation have retired from their jobs at 60 to 65 years of age and freed up their homes for the next generation within 10 years or so.
But Baby Boomers are different. They are working longer and living longer. That means the same natural attrition is not happening as they are staying in the central Auckland homes for longer. Yet, workers still need to move into the area to take up the available places in the workforce. This is creating a housing shortage and a mini property boom during a time when the market would usually be in decline.
What History Tells Us
The America’s Cup will be here before we know it. After all, it will only be 18 to 24 months before the practice sails will start around our beautiful global city.
Yes, that is right. New Zealand is a global city. In fact, it has been ranked as the 12th best in the world. While house prices have jumped significantly for the New Zealand market in recent years, on a global scale Auckland houses are low priced compared to other global cities.
History shows us that for the last two times New Zealand has hosted the America’s Cup, waterfront properties have become highly sought after. That meant, if you had a home with a water view, even if it was only a keyhole view, the value of your house increased to some degree.
Within a month of winning the last America’s Cup, any properties that went up for sale on Waiheke worth more than $5 million were snapped up immediately. There simply weren’t enough houses available to meet the last demand.
What Does It Mean For Auckland Property?
It is pretty clear to say that the America’s Cup is going to impact the Auckland property market. If the city could not keep up with the demand for housing back in 2013 when the race was lasted hosted here, then what is going to happen this time around? There were not as many retiring Baby Boomers to contend with then.
Auckland’s central suburbs have a growing shortage of properties which currently sits somewhere around the 72,000 mark. Houses are only being built at a rate of 15,000 per year. Yet, migrants will continue to come to Auckland at the rate of 70,000 per year and the Baby Boomers are not freeing up their houses like the generation before them.
We are not creating sufficient land in the inner city and not building enough houses to accommodate all of this. This will result in an upcoming rental boom and property boom. The impact of the America’s Cup will be our first visual sign of this.
So, now is the time to invest the central Auckland suburbs, especially in those areas with a water view. But you have to be savvy with your investment, you have to buy the right kind of property to see a good return.
Here at Ronovationz we can help you find the perfect property for a sound investment that will set you and your family up for the future. Get in touch with us today to find out more.