As an outsider (with no retirement village investments) I am going to stick my oar in for a single stroke in the expectation I will be pilloried and chased away by the believers. Since Blue Skies post, Covid-19 has come. LVRs have gone, interest rates have continued to fall and property prices have gone still higher - except in Christchurch where I live. My neighbour's son, who would be early 30s, with a wife and a young child and a good job, is looking to buy his first house in the city. He has found that a new build in Halswell (I mention that because Halswell is a relatively 'handy to the city centre' well thought of suburb - not somewhere out in the styx) significantly cheaper than buying an existing house. And buying new means your house is properly insulated and you can choose the bedroom, bathroom layout to be exactly what you want. And this new house pricing (under $500,000 for 3 bedrooms) has been achieved within all the existing planning rules, shortage of tradespeople and no mention of kit-set houses imported from China to save costs.
I think, relative to average household salaries, Christchurch must be about the cheapest place to live in New Zealand right now. But even then it is not cheap. I realise to an Auckland domiciled worker, and retirement village investor, all this must sound fantastical. Yet even with the Adrian Orr stoked property price bonfire, even with all the price inflation levers pulled with interest rates at all time lows, you still think the average Auckland house will be worth $1m more in ten years time than it is today! And furthermore this 'wealth effect' will continue to ripple through retirement villages. I am here to tell you that the 'Christchurch effect' is coming to your town. The only way I can see your $1m house incremental price rise over the next ten years coming is through massive wage inflation (forget about small businesses grizzling about paying $20 per hour minimum wage, it will have to be $40) which means $12 lattés (starting price) for your morning fix. Before the nationwide (except Christchurch) rising of property prices in 2019 and the subsequent price stoking of 2020 I had hoped a decade of zero to no property price inflation might sort things out. But the reserve bank will not allow 7.5% wage/price inflation every year for ten years, and even Jacinda won't oversee a minimum wage of $40/hour.. So I am afraid the only option to correct things is a property crash. By that I mean a minimum 30% price collapse and probably more. I know that those of you who live in Auckland can't see it, but believe me it is coming because the population of NZ won't tolerate being priced out of a home forever. I invite you to contemplate what that might do the balance sheets of those over-leveraged property developers that call themselves 'retirement villages'.
Ok I feel better now. back into my kennel.
SNOOPY