The magic fix-it figure - 35,000

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There was one big surprise last year in the real estate industry. The price of property kept going higher and higher. And just when you thought the ceiling had been reached, prices smashed through as most of us property watchers looked on open-mouthed.

Foreign money, some of it dirty, played a major part in knocking residents out of the park when it came to bidding at auctions. Too many people had too much cash they wanted squirreled away in a safe haven.

So much cash was sloshing around at one point last year that even some of the banks got humpy as they weren't needed for home loans.

It's an old chestnut, but the housing shortage - that won't be fixed for a generation - also played its part.

But how many homes is the city short of? It depends who you listen to, but I think the economists at Westpac may have it about right with its figure of 35,000.

New homes are being built, of couse, but most prices are not in reach of young people who are often also saddled with student debt totalling tens of thousands of dollars.

Then there are our low interest rates. The OCR is 1.75 per cent and floating mortgage rates are well under 6 per cent (but they are starting to track upwards thanks to the banks).

While low rates have allowed home buyers to borrow more, the rates will one day be back in the 7s and 8s, and unless there is wage growth some unfortunate souls will face some tough times as home loans become unaffordable.

So where does that leave 2017?

Well there are fewer foreign buyers around, investors are looking for cheaper property in the regions - giving Auckland's first home buyers a bit of air - and property prices are showing signs of coming down.

In fact, economic forecaster Infometrics reckons house prices will be down by 12 per cent by 2020 - that's less than three years away.

Of course prices won't drop by 12 per cent on New Year's Eve 2019, they will trickle down over the coming months as interest rates trickle up.

That could mean homes will become cheaper but, because interest rates will be higher, you will have no more money in your pocket as a result and home affordability will likely remain unchanged.

Meanwhile, the window of opportunity for people to cash up their Auckland home and head for the mortgage-free hills, or the coast, is slipping away.

But rest assured, this routine will happen about every eight years or so, come rain or shine.

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