Matthew Backhouse

Matthew Backhouse is an APNZ journalist based in Auckland.

Property crash 'unlikely' - experts

File photo / NZ Herald
File photo / NZ Herald

An American economist's prediction of a sudden collapse in New Zealand house prices is unlikely to eventuate, local property experts say.

Last week, Harry Dent said New Zealand house prices were in a bubble which would burst in the next few years, hitting property values by between 30 to 50 per cent.

The economist and demographer - who has been in Australia to promote his latest book, The Demographic Cliff, and to speak at seminars - said the bubble was being propped up by baby boomers, immigration and foreign buyers, especially from China.

He predicted a global fall in resource prices and the collapse of China's own real estate bubble would trigger a house price collapse here.

However, property experts in New Zealand are doubtful there will be a sudden collapse in the housing market.

Real Estate Institute chief executive Helen O'Sullivan said predictions like Mr Dent's cropped up from time to time. She said Mr Dent had predicted a fall in Australian property prices in 2011, but that had never eventuated.

Ms O'Sullivan noted he was now predicting another property crash in Australia - of exactly the same amount as he had predicted for New Zealand.

"The key question to me is always, 'What would the trigger be for such a significant drop in property prices?'

"When we've got migration increasing, we've got economic growth increasing, and New Zealand continues to export a significant portion of its produce to developing parts of the world, as opposed to just the industrialised nations, I just don't see what would trigger such a collapse."

Ms O'Sullivan disagreed New Zealand's house prices were in a bubble. Outside of Auckland and Christchurch, prices had been "pretty static" for the past three or four years, she said.

She also questioned the link between China's property bubble and the New Zealand property market. "You can't shift Chinese property to Auckland."

New Zealand Institute of Economic Research (NZIER) principal economist Shamubeel Eaqub said any demographic impact on house prices - such as baby boomers aging - would be slow and gradual, rather than a "sudden shock".

"The thing that creates sharp shocks in house prices tend to be other things, all linked to things like interest rates, economic conditions, availability of credit, those kinds of things."

Mr Eaqub questioned the link between house prices and foreign ownership, pointing to a PropertyIQ analysis that suggested less than 10 per cent of houses were bought by cashed-up foreign buyers.

"So it's unlikely that foreign buyers are the main influence in the New Zealand housing market."

Mr Eaqub said house prices were likely to have been pushed up by baby boomers buying homes and investment properties during the peak earning period of their lives.

But as for whether New Zealand was in a demographic property bubble, Mr Eaqub said most regions, with the exception of Auckland, had seen house price corrections since 2007.

"So even if there is an impact of demographics, that impact would be felt mainly in Auckland."

- APNZ

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