Saturday, 4 May 2013

The Auckland housing market

Snail mail is dying, as are (genuine) landline phone calls - most of the calls we get at home are the phone equivalent of spam, particularly the one that starts with a recording that says, "This is a VERY important message...". I don't know who keeps calling us with this one, as I've been too irritated to let it play out, and I'd hoped there was something down the back of the Telecommunications Act 2001 that would shut it down. I looked up the Act and found what I thought might have addressed it (s112), but it only applies to calls made with "for the purpose of disturbing, annoying, or irritating any person" (my italics), and I suppose their lawyers would argue the purpose was to sell whatever they are peddling. If they can afford lawyers: after alienating so much of their customer base, I doubt they will be rolling in cash.
In any event, about the only genuine calls and letters we have received in recent weeks, apart from intra-family stuff, have been from Auckland real estate agents. They all say the same thing: are we interested in putting our house on the market? And this isn't the normal drum-up-business marketing you get from real estate agents a lot of the time. They're desperate to get listings.
The market, in short, is hot: there isn't a lot of supply (hence the calls and letters), and there's strong demand (ditto).
I've posted before that I think the Reserve Bank's biggest preoccupation right now isn't inflation, or the value of the Kiwi dollar: it's the fevered state of the housing market. And I have to say I have a lot of sympathy for the difficulty of the judgements the Bank has to make: with hindsight, if they fail to squash a housing boom and bust, everyone will say, wasn't it obvious? Were you asleep at the wheel? And I'd say, no, it wasn't obvious, and they weren't asleep. You get strong housing markets for perfectly valid reasons (and as a matter of good economic policy, you shouldn't interfere with them), and you get overspeculative booms. They are very hard to tell apart in real time.
At a personal guess, I'd say there are enough fundamentals at play (strong demand from population movements into Auckland, various constraints on supply) to justify what's happened to date. But it could easily tip over into something malign: as housing markets elsewhere have shown, bubbles get underway first because there are genuine fundamental drivers to get the ball rolling, and second because Musical Chairs starts (yes, yes, I know, I could have said something fancier about extrapolative expectations). I still think we're in the benign phase, but I also have a feeling that the guy with the accordion is already in the taxi.

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