In the share market, we talk about these cycles as being either a bull or a bear market. In recent times it's hard to know what it is and whether it's just changing all the time. But when we have a bull market do we call it a bubble and have a collective panic? Nope.
The same happens with shares in a company. When they get overvalued is there widespread panic? Nope.
The simple thing about markets and prices, whether it's a house or a share, is that there has to be a willing buyer and a willing seller. If someone is prepared to pay a price which others may consider too much, it's no one else's problem.
These are two individuals who have the wherewithal to do the transaction. Likewise a real estate transaction is rarely done without a bank getting involved, and they know a bit about making money and risks.
They aren't going to lend money if they don't think that a) they won't get their money back and b) they won't make some money out of the deal.
And the other thing about the housing market is that it's not just one big, amorphous mass. Each house in each street has different investment characteristics. Just like a house in Western Heights in Rotorua will be different from one in Manurewa.
It's time we popped this bubble talk. It's just babble.
Philip Macalister is the publisher of NZ Property Investor magazine and Landlords.co.nz
