In very simple terms property cycles are controlled by two competing forces. Supply (the number of properties for sale) and demand (the number of people looking / able to buy a property). If demand exceeds supply, property prices will increase. If new supply comes on the market, from developments or property owners and it exceeds demand, prices will drop.
As our population grows, demand also increases for properties – both for renters and home buyers. As people start to buy and rent properties the value of property slowly increases – the simple forces of supply and demand.
There is no exact science when it comes to predicting when a property cycle is going to turn, however there are some factors that can influence the cycle, for example, supply vs demand of our current housing stock, migration, willingness of home loan lenders, local unemployment rates, how much money a buyer can borrow, interests rates, local infrastructure projects and both local and international economic factors. It’s these factors that economists take into consideration when making forecasts.
The Wellington Market Overview:
- Wellington has always been a solid performer within the wider New Zealand property market. Underpinned by our city being the nation’s capital we have a solid employment base of government workers with strong job security, and we enjoy the highest average wage across all New Zealand.
- This factor, coupled with a scarcity of buildable land options and an inability to scale our housing stock quickly like other main centres, means we operate differently in Wellington. Results in our market are less susceptible to big swings during market upturns and downturns, and we can react accordingly.
- It is important that Real Estate professionals understand these cycles and what drives the market at any given time.