I am lucky to have a fantastic view of the Wellington harbour from my office desk. It has been great to look out at the spectacular weather that the Capital has enjoyed over what has been a longer than average summer. That said, we all know that winter is rapidly approaching and the summery views from my office window will disappear for a period. The delay in the change of seasons got me thinking about the economy, the inevitable cycles and how we prepare for what we know will happen even if we don’t know when.
Things are generally looking good in the property world with the Auckland residential prices creating the halo effect across the country, vacancy rates in the main centres are low, construction is strong, the cost of borrowing is at historic lows, and the government is spending on infrastructure projects as are many of the local authorities. So overall things are tracking well in the property industry.
Not wanting to be a wet blanket, but we all know, like the Wellington summer, the good times do not last forever. Looking back over the past 50 years, each decade has had an economic downturn, most commonly in years ending with ‘7’ or ‘8’. This is true for the 1960s, 1970s, 1980s, 1990s and of course our most recent financial crisis from 2008. So history suggests that we are due an economic downturn within the next two years, and we all know how short a period that is in the property world.
Each of these downturns were caused by different economic drivers, with the timing and events not widely foreseen. Who knows what may trigger our next downturn, President Trump, long term dairy slump, Brexit, North Korea, Russian conflicts… your guess is as good as mine?
What history reminds us is the importance of planning for ‘what ifs?’. What if there is an economic downturn over the next two years? What would your property position look like? What can you do now to best position your business’ property portfolio or requirements for a downturn? What can you accelerate now to protect your position? These and other ‘what ifs’ are questions that property owners and property users need to be asking. The answers will vary depending on your unique circumstances, there is no universal solution. Asking the right question and finding the optimum answer to your questions is where TPG can assist. We are in business to help you make better property decisions.
Please feel free to give TPG a call about anything property – it costs nothing to talk.