But, if you look back at any 6-month period over the last 32 years, house prices only went up in Auckland 76% of the time. They went down the other 23% of the time. And by up, I mean that they went up by at least $1.
In Wellington City, things were similar. House prices went up 77% of the time and went down 21% of the time.
Things were even less certain in the South Island. House prices went up in Christchurch 74% of the time and 68% in Dunedin. That makes Dunedin one of New Zealand’s unluckier cities when it comes to house price growth.
So property prices are certainly not a sure bet in the short term. There’s a decent chance they go down in value.
But the chance that you lose money depends on how long you hold on to it. Like most investments the longer you hold on to properties, the higher the chance your house value goes up.
Us economists often use models to calculate the chance of something happening. One common approach is using a Monte Carlo simulation.
Here’s what that means in simple terms. You take what’s happened in the past. Then, you re-run scenarios lots of times to understand what could happen again in the future.
My model shows that if you bought a property in any random year, there’s a 70% chance your house goes up in value over the next 12 months. Though, that also means 30% of the time, you would lose money over the next year.
Hold on to that property for 2 years, the chance of making money goes up to 75%. Hold it for a year longer and the likelihood goes up to 79%.
After 10 years, the chances of making at least $1 from house price growth goes up to 92%. That means that the chance of your house value going down is just 8%.