As directors of Prendos, a property valuation and building consulting firm, one might think that we have the insight to be ahead of the market, to see opportunities before others and become rich through wise investment.
In fact, our crystal ball is no better than anyone else’s. Sure, we have seen the cycles come and go, can we currently read the effect of unemployment and global recession on the housing market better than others? The answer is: No, we can’t.
Of all the drivers and indicators – such as interest rates, consumer confidence, business confidence, employment etc – the most important one, in my opinion, is population growth. Like any area of commerce, the key drivers are supply and demand.
I can’t recall when, but there was a time many years ago when all of the so-called positive factors lined up like ducks in a row. We enjoyed good jobs, low interest rates, we manufactured successfully, tourists came in numbers, business and consumer confidence were good but our population numbers stayed constant and the housing market stood relatively quiet.
On the other hand, look at the drivers of the recent boom, which caused the greatest increase in house values we have ever seen in New Zealand. The boom was driven particularly by population growth. So the two key factors I will be watching are population growth on one hand, and unemployment on the other.
We all know of lots of ex-pats returning to New Zealand and many Kiwis are postponing their OE. We have yet to see Government statistics on how many New Zealanders are actually returning home. On the other hand, we also all have friends and family experiencing business downturn and the loss of jobs.
I expect to see quite an arm wrestle between population growth and unemployment. I’ll keep watching, and when the job front looks set to improve, it’s time to get the wallet out.
