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AUCKLAND
Property Cycle Clock
Time and Forecasts
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WELCOME MESSAGE
By TellMeTheTime Founder Kieran Trass
As a valued subscriber to TellMeTheTime you have commenced your journey of discovery of the rarely chartered landscape that every property owner must traverse, the property cycle. It can be a perilous landscape but extremely rewarding for those equipped with the required knowledge, understanding and tools to make the most of the journey.
I’m your property cycle guide, educator and mentor. You will benefit from my experience of four decades of personal observation, research and analysis, of no less than 3 entire Auckland property cycles as a property investor, mentor and former financier.
As a TellMeTheTime subscriber you will;
- Discover the status and progression of the Auckland property cycle.
- Discover what’s likely to be just beyond the property event horizon as the cycle progresses based on history, trends and data.
- Deepen your knowledge and understanding of the property cycle so that you can learn to intuitively use it to your advantage.
- Progressively be introduced to an unfolding view and detailed information about the nuances of the cycle.
- Discover valuable cycle insights from analysis of the key drivers and market influencers of the cycle.
- Plus so much more.
Whether you are analytical naturally or not you will gain a rare appreciation of the property cycle and know how to use it to your advantage.
Many former and existing clients as well as my own property investing have greatly benefited as a result of learning to harness the power of the property cycle. You too now have that opportunity.
Viewing the Property Cycle Video Library clips is highly recommended so you can start learning from the insightful 100+ short videos now available for you to view as part of your TellMeTheTime subscription.
I look forward to helping you navigate and take advantage of the benefits the property cycle offers you.
I trust you will enjoy my guidance on your property cycle journey and feel free to reach out and ask any questions using the CONTACT FORM at the bottom of this page.
AUCKLAND PROPERTY CYCLE CLOCK
EXECUTIVE SUMMARY
Kieran Trass – November 2024
The collective key drivers of the property cycle indicate the Auckland property market is STALLED in the beginning of the mid boom phase.
That may surprise you and may be challenging to comprehend however as you grow your knowledge base and understanding of the property cycle you will come to terms with the reality of the overarching property cycle, how it unfolds and why it exists.
One of the most important lessons for you to learn is that there are key drivers that drive the property cycle through each of it’s 3 phases (recovery, boom and slump). These key drivers also drive the cycle from one phase into the next phase. However there are also what I call ‘market influencers’ which do not drive the property cycle from one phase into the next although are regularly misinterpreted in the media as doing so. You will learn the difference between the two, and why it’s so important to understand them, as you progress with me on your property cycle journey.
You may have heard in the news that in 2020 and 2021 the Auckland property market experienced “unprecedented capital growth in property prices”. Whilst factually correct you were not told and may not be aware that traditionally early in the property cycles boom phase a surge of capital growth is always evidenced.
Admittedly in this current cycle which commenced in December 2019 when the property cycle entered the recovery phase that surge was somewhat quicker and slightly higher than usual peaking at 29% for the year ended September 2021.
However that was not significantly above historic peaks evidenced in the previous 3 cycles. Namely those peaks were 24.6% in 2015, 25.9% in 2003 and 24.8% in 1996.
As your knowledge and understanding of the property cycle grows you’ll come to the realisation that sometimes facts, considered without the context of the cyclical nature of the property market, can be misleading at best and perilous to rely upon at worst.
You have probably also heard that the capital growth of 2020-21 was totally unjustified because it was purely based on low interest rates. That is a flawed view which indicates a lack of appropriate research or understanding of the cyclical nature of the property market. That view does not account for the Auckland Unitary Plan’s impact on land prices in Auckland which had not been adjusted up throughout the preceding Slump of 2016-19.
Short term property price trends, as a result of market influencers, can often be misinterpreted as representing phases of the traditional property cycle. Hence there is much confusion about which phase of the property cycle we are experiencing. Confusion like the failure to recognise that property prices can rise even during a slump phase. Equally can fall during the boom phase, like they have between 2022 and 2024.
For example many believe we experienced a boom that lasted just 18 months between 2020 -2021 and that the cycle is now in the Slump phase. First of all a boom has never lasted just 18 months as you will learn from the information below. Second, the key drivers collectively reveal that we remain in the boom phase of the traditional cycle. I am confident that before long we will see evidence of the boom recommencing. We are now on the cusp of that time and I fully expect evidence of the boom reigniting within the next 12 months.
Price trends alone do not define which phase of the cycle we are experiencing but only by looking at the property market through the lens of the property cycle can it be understood that there is a distinct difference between short term price trends and the long term property cycle phases.
TODAY’S AUCKLAND
PROPERTY CYCLE
CLOCK TIME
Historic Auckland Cycles Overview
AUCKLAND PROPERTY CYCLE
CLOCK TIMES
AUCKLAND PROPERTY CYCLE GRAPH
Property Cycle Graph Overview
Observation of historic cycles reveal several recurring patterns such as;
The ‘rainbow effect’ which is the consistent double digit (or therabouts) year-on-year growth of values throughout the boom phase of the cycle. Of course in the current cycle we have the unusual event of a drop in prices during the boom caused by market influencers, namely interest rates and the legislative amendments of monetary policy.
The ‘double dip’ effect during slumps where values either decline or there is very little growth followed by a typical lift in values during the slump and then again another dip before the cycle enters the recovery phase. In the last slump (in Cycle C) the double dip was mild as a direct result of the Unitary plan underpinning property values and suppressing value falls.
The ‘4-6 Year Booms and 3-4 Year Slumps’ whereby historically these phases last for roughly these lengths of time. There is often a misperceoptioin that a boom can be over in a year or two or equally that a slump will last for 5 years or longer. History says otherwise.
AUCKLAND CAPITAL GROWTH
PEAKS and TROUGHS
Peaks / Troughs Graph Overview
It is interesting to consider the length of time that typically passes between highpoints and low points of capital growth rates. As you can see in the graph above traditionally it would take longer for the peak to peak to be reached (8 – 12 years) then it has between 2015 and 2021 (5 years).
We all know why that occurred, in no small part as a result of excessive monetary policy easing and extremely low interest rates. However we can also observe that the time frame from trough to trough usually takes a lot longer too. The time frame from the trough in 2019 at the end of the slump to the trough we are experiencing in 2024 is much shorter than the traditional 7 to 10 year timeframe.
We only have to look at the fact that we have had significant market influencers impacting the property market as a result of Covid. Market influencers such as interest rates and inflation.
Many property commentators confuse market influencers as being key drivers. For example interest rates which we are often told are the main determining factor of property price growth rates and will create a boom or a slump. Historically that has proven not to be the case and history reveals at times we have had strong capital growth rates even in a rising interest rate environment and equally at times when interest rates have been flat for lengthy periods we’ve also had strong capital growth rates.
By understanding the key drivers and market influencers you can see through the confusion in the media about the property market and have a clear view of what lies just beyond the property market event horizon.
Cyclical Growth Comparisons
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AUCKLAND PROPERTY CYCLE
CLOCK TIMES FORECAST
(Subject to change without notice)
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AUCKLAND PROPERTY CYCLE
FORECAST GRAPH
(Subject to change without notice)
AUCKLAND CAPITAL GROWTH FORECAST
EXECUTIVE SUMMARY
Kieran Trass
Based on the traditional historic growth rate of around 80% to 100% during the Recovery and Boom phases of a cycle we can expect to evidence a significant amount of capital growth before this boom is over. Of course many people believe that “it’s different this time” and the entire property market landscape has had a seismic shift and been redefined as a result of legislative amendments and so we will not experience anywhere near the traditional levels of capital growth we have seen in the last three property cycles. That flawed view thinks the property market will never be the same again.
However that view fails to account for the very nature and nuances of property cycles which are in no small part influenced by human behavioural patterns.
The fact is that legislative amendments are market influencers and not key drivers of the property cycle. The current property market landscape has not experienced a permanent seismic shift but instead had a tsunami of market influencers impacting for a time. The very nature of market influencers is that they have a temporary impact (albeit sometimes prolonged like now) on the market before their impact dissipates.
Think about the impact of the extremely low mortgage interest rates and then the impact of the rapidly and significantly hiked mortgage rates.
You can see that the impact either way is only ever temporary and before long becomes the ‘new norm’ for a time. That’s the very nature of market influencers, they can influence the market but they do not permanently redefine it.
Market influncers are subject to what I call “the law of acceptance” which simply means that before long whatever influence they had loses its initial impetus. In contrast the key drivers of the property cycle fundamentally alter the levels of supply and demand based on demographic, financial and emotional inputs and outcomes.
Life goes on and so does the property cycle.
So turning now to the Auckland property cycle clock forecast. I’m fully expecting this boom to last another three years and also expect a significant sharp bounce back in values within the next 12 months. While I doubt this initial bounce back will fully recover the almost 20% value drop since late 2021 it’s likely to go a long way towards that and I expect within the next two years values will be back to the levels they were in late 2021.
I do think that the total amount of capital growth in this cycle, during the recovery and boom phases, will still be quite significantly less than in the previous three cycles during the same time frame. However my analysis indicates we will still experience around 40% capital growth before this boom ends, possibly even more because values always overshoot at the end of a boom and this time is likely to be no different in that respect.
The current market readings above indicate the current market is still weak and I now do not expect that to change until 2025.
In closing we must of course always be aware that another Blackswan event could be just around the corner and again significantly impact on the property market and somewhat disrupt the traditional property cycles pattern. However history implies such events typically only occur about once a decade. Of course such events often deliver golden opportunity times for the well-informed.
CONTACT FORM
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