Property will double in price in decade: marketers

Could property prices continue to double every 10 years? Investment property marketers believe so, but economists doubt it.

"What you will find is a small group of people who are very wealthy owning the majority of the property and most other people will not be able to afford to own," says property author and founder of the Hybrid property services group, Kieran Trass.

"That's going to happen in New Zealand over time."

Trass is imagining how the future would look should property prices double every 10 years, a scenario those selling investment properties to mum and dad investors are telling their clients will happen.

"I think we are going back to where we came (from). Back to the days where a few landlords owned all the land in the country and other people worked but never expected to own property."

Perhaps new ways of buying into the housing market will emerge as a result of the repeated doubling of property values he and his peers predict, he says. "Maybe there will be ownership-sharing loans where the bank takes a share in the houses people buy. "Instead of owning a property, people will invest a little money in a fund which happens to own the suburb of Mt Eden, or wherever. They might buy shares in the fund for the right to live in their home, and share in the growth."

It's an image of the future to which most New Zealanders would react with horror; the antithesis of the Kiwi dream. It raises the spectre of home affordability getting worse until only the richest can afford property, and the rest are consigned to tenancy-slavery.

But it's the kind of New Zealand that would have to emerge, if - and it's a big if - house price growth rates pan out to be as high as investment property marketers predict.

We asked 10 of the best-known investment property sales organisations to tell us the capital growth predictions they put to investors thinking about buying properties from them.

We got answers from Hybrid Group, Key2, Safe as Houses, Catalyst2 and NZ Invest, all of which said they believed property values would double in the next 10 years, although a number said they preferred to use more conservative projections of 5% growth each year with prospective clients, rather than the 7.2% needed for prices to double.

Russell Benshaw, of Key2, said: "When we do a financial analysis with clients, we stick to a standard 5% per annum, but we do a sensitivity analysis with 6%, 7% and 8%. If we told them we were going to get them 10% per annum, they would say you have got rocks in your head because the figures would look crazy."

Nevertheless, Benshaw says he expected the properties Key2 sold to outperform the 5% figure over the next 10 years.

Benshaw predicted the market would see only flat to modest growth in the next couple of years, but would then push on again, a view shared by many, although some, such as David Orrell of Safe As Houses, which specialises in building or buying properties for investors and then leasing them to Housing New Zealand, says older hands like himself remember beyond seven years ago, when the country experienced a period of no growth which lasted five years.

But even if that happened again, those buying now and holding on for 10 years - the minimum he suggests is reasonable - would still get that doubling effect. "I haven't got one customer who wouldn't say they were glad they bought a property from me five years ago," Orrell said. "I would definitely say in 10 years' time, that'll be true of people buying today."

Like Key2, Safe As Houses uses a 5% projected growth rate.

Tanya Kwasza, of Catalyst2, says her firm uses just 4.65% capital growth rates from projections as a worst-case scenario.

NZ Invest uses a rate of 7% in projections.

Few of the firms give credence to a possible drop in prices.

But is the continued doubling of house prices possible?

Jeff Matthews from Spicers is pretty clear on that. "It just won't happen," he says. Forward projections of 7.2% per annum can be sho