Points to note:
- Price growth rates in 2002 varied widely around the country.
- Last year's growth followed a lacklustre period. In some places, prices actually fell over the last five years.
- Anybody investing in property should have at least a ten-year horizon. And if we look back over the last decade, house price growth in most places was uninspiring.
Let's look first at the past year. The fastest growth was in Nelson, at 22 per cent, followed by Auckland City at 19 per cent, Invercargill at 17 per cent and Napier at 14 per cent.
Wellington at 11 per cent, and Tauranga, 10 per cent, were close to the national average. But Hamilton and Christchurch at 6 per cent, Dunedin at 5 per cent, and Palmerston North at 4 per cent, were nothing to write home about.
Still, at least the numbers were all positive. When the BNZ weekly economics newsletter looked back five years, it found a much gloomier picture.
In Hamilton and Christchurch, prices actually fell from the end of 1997 to the end of 2002. That's a sustained period, not just a blip on a chart. And while Christchurch prices fell just 1 per cent, the Hamilton fall was a significant 5 per cent.
The best performer since late 1997 was Wellington. Even there, though, prices grew only 30 per cent over the five years, which is not a great annual rate.
Other reasonable performers over the five years were: Nelson, 26 per cent; Napier, 20 per cent and Auckland, 18 per cent.
Then there's a big drop down to Palmerston North, 10 per cent; Dunedin and Invercargill, 8 per cent; and Napier, 5 per cent. Over five years, these are pretty feeble growth rates.
As I said, though, we should take most notice of ten-year growth rates. If you invest in a house over a shorter period than that, there's too big a chance you'll lose money or make very little, especially after paying commissions, legal costs and so on.
So what's happened since the end of 1992?
Of the ten cities, only in Auckland have prices more than doubled. There they have grown 137 per cent, or about 9 per cent a year.
In Wellington, prices have grown 93 per cent over the decade. In Tauranga it was 70 per cent; Napier, 54 per cent; Nelson, 50 per cent; Hamilton, 45 per cent; and Christchurch, 38 per cent.
Then there's a big drop to Palmerston North, 16 per cent; Dunedin, 13 per cent and Invercargill, 9 per cent.
Invercargill's growth amounts to less than 1 per cent a year. In several cities, you could have done much better in a bank account.
That doesn't mean, of course, that the ten-year rates will necessarily continue.
Invercargill, for instance, has seen a dramatic turnaround since 2000 and prices may keep zooming up.
All I'm saying is that, with any investment, people often expect the trend of the last year or two to continue.
Too often, it doesn't. Just ask anybody who invested in world shares, or funds that hold world shares, in the late 1990s, when returns for four years were 35, 27, 26 and 37 per cent - well above recent house price rises.
Suddenly, in 2001 and 2002, returns plunged to minus 28 per cent and minus 30 per cent.
It's hard to imagine New Zealand house prices going down that much.
But there's certainly no guarantee that they will continue to rise fast.
