COMMENT: What lies ahead in 2020?

As investors, one of the things many of us do is think about the changing financial environment we invest in and try to pick the market trend for the year coming. I think for 2020 it is an easy pick: the market is looking very buoyant and positive for property.

But property is affected by so many variables that it’s often difficult to see the wood for the trees. Supply, infrastructure projects stimulating demand, population growth, interest rates, money supply conditions, employment rates and business confidence, taxation trends, government change and regulation… All culminate to stimulate or undermine investor and household appetites to borrow and purchase housing.

At a cyclical level, New Zealand peaks every 10 years with Auckland leading the pack on the ‘7’ year. In fact, the last four cyclical peaks were 1987, 1997, 2007 and 2017 (or actually late 2016 to be precise, carrying over similar peak values into 2017).

With Auckland and then the main centres peaking first, we should now be seeing them softening and the regions continuing to play catch up. This is because the more populous areas are typically a couple of years ahead of the regions in growth, leading to a ripple effect as the more expensive main centres shunt population to lower cost housing in the regions.