Property Investment
2 min read
Author: Andrew Nicol
Founder, 20+ Years' Experience Investing In Property, Author & Host
Ed (our economist) was on Newstalk ZB 2 weeks ago, talking with Heather du Plessis-Allan.
She asked the question on almost every New Zealander’s mind … “How long until house prices recover?”
The honest answer is: it depends on where you live.
So we’ve run the numbers for you.
In Otago and Southland, house prices have already bounced back. In fact, they’re hitting new highs.
Christchurch just got back past its peak in March. It’s having its usual little winter slump now. But house prices there have risen over the last few years.
Then there’s the other end of the scale. Auckland and Wellington are doing it tough. So how many years might you need to wait for house prices to get back up?
Across the whole country, house prices are about 16% below the peak.
Our model reckons:
If we look around the country, the model reckons that it might not take as much time in Nelson and Marlborough.
Though it might take more time for property prices in Auckland, Hawke's Bay, and Wellington to recover.
This table breaks down the numbers for each region in the country.
Wellington was hit hardest. House prices there are 27.7% below the peak.
In a pessimistic scenario, it could take up to 10 years to get back. The coin-flip outcome is closer to 6 years. And there’s only a small chance of prices recovering inside 4 years.
I know that’s hard for Wellingtonians to hear. But I’d rather put the numbers in front of you than pretend.
Why so long? This downturn has been much deeper than the last one. The last one wasn’t anywhere near this severe. When prices fall further, they have more ground to make up. So 10 years is realistic.
On the other hand, Canterbury is a bright spot. Prices are just 0.8% below the peak.
It will probably get back to peak prices within a year. Even in a pessimistic run, it would only take about 2.
These numbers come from a Monte Carlo simulation.
In plain English, we looked at how the property market has moved in the past.
Then we ran 30,000 versions of the future to see how often prices got back to the peak, and how long it took each time.
That way we get a chart like this where we see a range of outcomes and how the house price might change over time.
In this case it’s an Auckland property and there’s a 50% chance that it will take 5 years to get back to its peak price.
One thing matters more than the rest. This is not a forecast.
It’s a projection based on what’s happened before. It assumes house prices behave roughly the way they have in the past. They might not.
So don't treat it as a forecast. But at least it gives you a sense of how long you might be waiting.
If you own in Christchurch, the wait is nearly over. If you own in Wellington, it’s going to take some patience.
Either way, now you’ve got the numbers.
Founder, 20+ Years' Experience Investing In Property, Author & Host
Andrew Nicol, Managing Director at Opes Partners, is a seasoned financial adviser and property investment expert with 20+ years of experience. With 40 investment properties, he hosts the Property Academy Podcast, co-authored 'Wealth Plan' with Ed Mcknight, and has helped 1,894 Kiwis achieve financial security through property investment.
This article is for your general information. It’s not financial advice. See here for details about our Financial Advice Provider Disclosure. So Opes isn’t telling you what to do with your own money.
We’ve made every effort to make sure the information is accurate. But we occasionally get the odd fact wrong. Make sure you do your own research or talk to a financial adviser before making any investment decisions.
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