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Will rising Oil Prices affect the Property Market?

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  • Will rising Oil Prices affect the Property Market?

    Latest Hybrid Property Cycle Clock Commentary Overview
    What Price Will Oil Have On Our Property Markets?
    By Kieran Trass of the Hybrid Group

    In this months property cycle clock commentary consideration is given to what impact the rising oil price will have on our property markets. Also considered is which regional towns are likely to evidence negative growth in prices and why.
    We have recently evidenced strong petrol price rises which in itself is proving costly enough but also the recent depreciation of the NZ Dollar has delivered a double edged sword effectively 'ramping up' the effect of internationally rising oil prices.
    So is it time to PANIC? It is certainly timely for us to re-visit the impacts we can expect as the effect of higher oil prices flow through to our property market.
    The first impact considered is the potential impact on our overall economy.
    The second impact considered is on potential property buyers and the impact of rising oil prices on any property purchasing decisions.
    The third impact considered is on tenants and the impact of rising oil prices on any property renting decisions.
    The current status of the property cycle is examined at a regional level for Auckland, Wellington and Christchurch. The 8 regions specifically covered are Auckland’s 4 regions (i.e. North, Central West and South/East Auckland), Wellington’s 2 regions (i.e. Wellingtons Central suburbs and Wellingtons Hutt suburbs), and Christchurch’s 2 regions (i.e. East and West)
    An overview of each of the Auckland, Wellington and Christchurch property markets are also included. Comments include details of each of these cities recent property market activity plus an indication of what lies in store for their property markets over the short to medium term.

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  • #2
    Umm those Auckland City apartments are looking a lot more attractive these days


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    • #3
      After a 'clean' inspection recently, my tenants were very appreciative of some petrol vouchers as a 'reward'!



      • #4
        I've wondered about this too. There are already properties for sale being advertised as close to town to "save on petrol".
        My Profile


        • #5
          Over two years ago, I posted this article on here.

          How Energy Trends Impact Home Prices & Mortgage Rates
          by Peter G. Miller

          The price of oil has shot up in recent weeks, a matter which could seriously impact the real estate marketplace.

          Huh? What's the tie between energy costs and real estate?

          One connection is that if we are truly at the end of a brief recession, then the economy should begin to expand and as it grows it will require more energy. But if the cost of energy rises, the expansion itself can be slowed or halted because rising fuel prices are a sort of economic tax.

          So while real estate has done unusually well during the past year, an expanding economy would mean more jobs, less unemployment, and higher pay for lots of people, people who might like to buy a first home or move up. Dampen the recovery and home sales are likely to slow.

          A second connection is that the cost of fuel is a broad-based expense reflected in the price of just about everything. Raise oil prices and a variety of costs are likely to increase, meaning higher inflation may be in the works. If so, interest rates could go up, something which is never good for real estate. >>


          The Energy Peak is the trigger. The US$ (petrodollar) will crash out, its already started. From there its inflation and high interest rates. When oil prices have inflated in the past, the housing market deflates (look at 1974 and 1980). This time its a lot more serious. In past events, oil was pushed up by political events. This time it's because demand is outstripping supply. In other words this spike can't be corrected easily, so the affects are unknown and a lot more serious.

          Would love to see Kierans report, but I'm not a subscriber. (Does that mean this thread should be in the commercial section?)
          Find The Trend Whose Premise Is False - Then Bet Against It


          • #6
            I would be inclined to say yes. I will have an impact on Property prices in general.
            Time to Panic ? No, if you are in for the long haul , but if you are trading / speculating " short term " it may put the odd spanner in the works.

            Rising Oil prices will have a negative and a positive effect on Property values
            Negative : Short term there will be a lot of pressure on People to pay for the mortgages, Job losses, higher interest rates, and so on. = downward pressure in the market .
            This downward pressure could be short lived, or go on for some time. It like trying to find the "holy Grail "
            The positive : Long term, higher Oil/petrol prices are also associated with higher costs. In other words if you want to build a house, it will cost you considerably more to do that. That in turn will push up the existing house prices as it would be more cost effective to buy an existing home ,instead of building one.

            However, to make things a little bit more complicated . Add migration to the mix and it becomes rather interesting indeed ! To have a constant increase in Property prices, at the end of the day you still need someone to buy / rent them = increase in population.
            Unfortunately, over the time to come it will get more and more difficult for New Zealand to do this.
            Every country in the world will be trying to attract ( young ) people to replace the so called "Baby boomers" . Governments world wide all will be facing the same problem , a lack of Tax paying People "
            So , its not just a matter of opening the immigration doors into NZ , there will be intense competition from every country in the world . As every country in the world will be after them !

            But then again , there always will be people selling up and buying a place somewhere else. And if you know where they are all want to move to, you always will have rising property prices in that particular area, and falling values in others.


            • #7
              Also, all the under-investment in roads over the past several decades is having an impact on city property prices. People are not happy commuting taking 2-3 times as long as it should due to traffic, on adequate roading. In Wellington Transmission Gully should have been built 20 years ago and now it looks like it will be another 20 years in the making. For city property owners this is good news. With the last announcement of delay, I know of several people who finally gave up waiting for the road to be built and are now moving to the city, fed up of 10+ hours a week spent in traffic, not to mention the petrol cost.