Property market: Time to cash-up?

Auckland house prices are at record highs (Getty)
Auckland house prices are at record highs (Getty)

Property investors and people close to retirement are being told the time has come to cash-up.

Some economists are predicting house prices are about to change direction thanks to increased supply and falling immigration.

Wellington-based Infometrics' latest look at the housing market predicts prices will fall 11 percent in the two years to September 2019.

"If building activity hits the levels we are predicting then there could eventually be some softening to house prices in Auckland and regional property markets in the 'halo' around Auckland," says chief forecaster Gareth Kiernan.

But financial adviser Martin Hawes doubts the building sector has the capacity to construct the sheer number of houses Auckland needs to ease the crisis, which has seen average prices hit almost $1 million.

Nor does he expect supply to fix the problem on its own, saying it'll take a recession to put a real dent in the problem.

"It's not going to be a one-trick pony," he told Paul Henry on Tuesday.

"It won't be just that we can build enough houses. Something else will have to happen - a fall in immigration, and possibly some kind of recession or something that happens that sees job losses and dampens everything down."

The longer house prices keep rising, the harder they'll fall, says Mr Hawes, leaving investors and homeowners at risk of being caught with negative equity.

"I think we're at a tipping point now - if we went much higher over the next year or two, we'll be far more likely to see an Irish-type scenario. Housing in Ireland fall 50 percent."

Despite his scepticism, Mr Hawes says it's probably time to sell anyway if you're an investor or close to retirement and thinking of downsizing.

"If you look at history on this, when a market gets above the trendline, one day it comes back," he says.

"This housing madness will finish one day - we just don't know the manner of the finishing, or when. This isn't going to go forever."