Property Musings - The Trilogy - Part 3

What happened in the last Housing Boom?...

The last time housing boomed was from the period starting in 2002-early 2007 where property prices increased nationally by around 120% from their 2001 levels during this period of time.

This started after the 9/11 terrorist attacks in New York which caused major financial market disruption.

Back then central banks slashed mortgage interest rates, including our own, and home borrowers were able to access mortgage interest rates in the low to mid 5% range, and the central banks were slow to start increasing those interest rates again, and left the interest at lower levels than they really should according to some economists.

At the same time, New Zealand experienced 3 years in a row of record migration numbers, and our population grew by approximately 25,000 people per year for a few years.

These factors led to increased housing pressure causing values to rise dramatically due to the favourable investment conditions. This led to inflationary pressures, as people discovered new wealth and they started spending that wealth.

The Reserve Bank of New Zealand had begun a phase of increasing interest rates to try to control inflation, and borrowing rates in 2007 were somewhere around 8%.

It all came to a grinding halt in 2007 when the global financial crisis hit.

Property prices nationally began to decline in value in most regions and stayed flat for a few years.

Based on historical observations there is a property cycle in New Zealand which goes from boom times to bust times and back again, so the lesson here is that investment in Property is a long term investment and you can lose money in property, that can be exaggerated by the high cost of selling a home once Real Estate Agents commission and legal fees are taken into account.

Home owners around New Zealand and also in Tauranga are experiencing huge growth in property. If you want to have a chat with me about any of this, give me a call and we can get together or have a skype session!