Let's start with the end of WW2...
So the year is 1945 and a lot of soldiers came home from the war - and what did they do?! They got BUSY making families! So we had a lot of people born after the war, and these were big families….no TV!! This is the start of the Baby Boom.
Around 1950-1952 these babies needed to go to primary school, so more schools were needed, leading to construction of schools.
Then secondary school around 1959, then Universities around 1967.
Eventually this led to more housing required in New Zealand, as these boomers needed a place to live.
The Government introduced measures to help increase the supply of housing stock into the country through capitalisation of the family benefit and 3% loans.
At the same time, New Zealand began to relax its stance to people who chose to move to New Zealand to live, and began to open our borders.
These boomers over their lifetime, started to take note of how much property prices were increasing, and started to purchase investment properties.
The combination of the baby boomers and the migrants to the country, continued to increase New Zealand’s population. See the below graph showing the House Price Index since 1960, and the following graph showing population growth from 1956 until 2006 measured through census.
(The House Price Index measures the price changes of residential housing - it's kinda complex!)
You will see that the population of New Zealand has practically DOUBLED since 1956 - and this graph only measures to 2006. Think of what it will be in the future! This graph is from stats.govt.nz
Here are the main points of observation:
Land price increases over the long term are driven by:
· Population Growth through fertility and migration
· Shortage of housing stock available to house the population and demand for housing
· Low interest rates
What’s happening right now in New Zealand?
· Migration has hit an all- time high of 56,000 people new to the country in the last 12 months. Our average is usually around 11,500 people per year.
· Lots of media attention on foreign buyers
· Fixed interest rates for home loans are at near all -time lows
· Building consents are not keeping up with housing demand
· Wage growth has not kept up with house prices leading to housing being less affordable for families.
· Rents are increasing
· Auckland house and land prices are up 50% from their peak in the last property boom
· House Price activity in regions such as Tauranga and Hamilton are starting to feel a ripple effect from Auckland buyers.