Some weeks ago I was at the Gilligan Rowe and Associates Property Leaders event. It was a fantastic event with almost 500 investors attending and an array of outstanding speakers. People like Tony Alexander, Phil Twyford, Ashley Church, Hamish Firth, Matthew Gilligan, Kris Pedersen, Janet Xuccoa and others (even myself) were amongst the speakers. This event happens every six to eight months and is a fantastic way to stay current in the market.

Over the past year, there have been concerns about the property market and where it is at. People were wondering about what was going to happen after the election, with new government policies, the foreign buyers’ situation and so on.

Well, this leaders event gave me high confidence in the future of the market. Of course one should still be careful and have clear goals and plans, but something much more dramatic needs to happen to affect the market and for now, I feel we are safe.

Here are some points I took away from the event:

• There will not be massive gains in the next few years. However, some isolated markets will still have them.
• There are currently still massive opportunities in the property market.
• Be careful about buying at the peak of some smaller markets. I’m not telling younot to buy, but make sure you’ll be OK if there is an adjustment of sorts happening. I want to share key factors of why these experts are confident about the market’s future. This column is supposed to be about strategies, but I have chosen to take a different angle on things this month. Once you’re confident about the market, then you can learn strategies and be confident about implementing them.

Phil Twyford (Housing Minister)

Causes of housing shortage:

• infrastructure shortfall
• council inefficiency
• construction industry challenges
• building supplies overpriced
• tax settings encouraging speculation.

Matthew Gilligan (Chartered Accountant and Property Developer)

• A flat market for up to five years – recovery 2023 (after this housing will start to look affordable again – the new normal).
• Construction costs rising by 10% per annum. Auckland Council about to increase consent/Watercare costs by $10,000 per title further increasing cost to build.
• Portfolio strategy: hold half cashflow assets (boarding houses, rent by room, flat conversions) and hold half a portfolio in developable assets (land bank).

Tony Alexander (BNZ Chief Economist)

Some reasons other than the obvious, for house price inflation:

• Current household consists of two income earners giving households higher purchasing power.
• The cost to build is now far higher. There have not been productivity gains in this field compared to other sectors (cars for example).
• Foreigners have made up a new cohort of buyers in New Zealand.
• Baby boomers look at property investing, as they are unable to get a return on retirement savings from lowrisk investments such as term deposits.
• Changes in migration flows with an increase in the 10-year rolling average over several decades. Auckland’s vibrant and diverse economy with New Zealand youth staying in the country.
• More divorces where one household becomes two putting more pressure on demand.
• An ageing population who are encouraged to remain living at home wherever possible to reduce demand on health services.
• Older Kiwis keeping large homes to accommodate grandchildren during the school holidays, rather than downsizing.
• Leaky buildings are taking stock out of the housing pool.

Tony’s predictions for the property market:

• mild interest rate rise in two to three years and beyond
• a flat market for the next 18-24 months
• migration easing to circa 30,000 over three to four years
• credit supply stays tight
• the economy will continue to do well, job growth
• house consents rising construction industry struggling with labour shortage and materials monopoly
• housing shortage will continue.

Property Ventures is a licensed Real Estate Agency that specialises in Investment property throughout New Zealand. They also have the NZ Property podcast/YouTube series where Mark interviews the property experts from around the country helping hundreds of thousands of investors. He can be contacted at mark@propertyventures.co.nz or 0800 NZPROPERTY (697767) Or watch the Podcast/YouTube video at www.propertyventures.co.nz/podcasts