Will Auckland follow Sydney and Melbourne Property market?

Australian home prices are likely to fall over the next couple of years, reflecting the impact of tighter lending standards and slowdown in Australian economy. The slowdown in the Australian economy is expected to lead to a drop in demand from investors and homebuyers become more cautious.

It has been said that the Sydney house market may drop as much as 10% this year and Melbourne housing market could be much worse. This appears to be good news for first home buyers (not really because at the same time the banks have made it stricter and harder to borrow. At the same time, if mortgage rates increase from their historical lows, mortgage affordability isn’t going to get any better). Plus as apartment projects keep coming into the market, supply will increase. Met with a decrease in demand, it is no wonder house prices are likely to slow down. This is a similar pattern in Melbourne.

Will Auckland follow Sydney and Melbourne Property market?

For one, it is certain the Auckland market is no longer booming. A talk with your local agents will reveal a slight decrease in house prices and a general flat or negative outlook.

But it’s interesting in NZ. A report comparing the NZ build costs to OECD build costs, reveal that NZ’s construction costs are much higher than the OECD average (perhaps due to inefficiencies and the building consent process). So┬áif house prices drop too much, developers and construction firms will stop building. If supply reduces, it will exacerbate the housing shortage in NZ. And when the next housing boom comes in five years time, the housing market will jump up again.

What this means is that Auckland and NZ’s housing market is likely to plateau and drop slighting in the next 3 years. It will likely recover by 2024.

However, if you are buying apartments (especially those under a long term lease to a hotel management company), you should do your research. Apartments historically go through booms and busts so please dont get caught up in the wrong part of the cycle.

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