KEY POINTS:
Thinking of buying a house in Auckland and wondering when prices might bottom out? If recent history is any gauge, we are some way from the lowest point.
Prices might not rise until between 2010 and 2012 but precisely when they will hit their low point won't be known until well after the event.
Some real estate experts say the housing market, particularly in Auckland, goes through highly predictable boom-bust patterns.
Every five and seven years, we ride the same roller coaster of a slow but gradual price-creeping rise then a sudden big heart-stopping dip, which takes many people by surprise.
But that pattern should be no surprise, says Michael Springford, who has LJ Hooker agencies in Whangarei and Warkworth.
Anyone can see the cycle, says the agent who has been in the business since 1972.
Prices fell after the 1987 sharemarket crash, rose around 1992 and peaked in 1997, bottomed out again until 2001/2002 and then rose until last year.
The "adjustments" are highly predictable, Mr Springford says.
If that pattern is repeated, we are in for at least another couple of rocky years. The bottom won't be reached for two to four years, assuming global financial stability returns.
Mr Springford is picking the next boom will occur between 2012 and 2017.
Tracking the latest cycle backs up the boom-bust theory.
House prices started rising about 2001 and peaked last year, fulfilling the pattern.
Real Estate Institute figures show that in October 2001, the Auckland median price was $258,000, peaking after six years last December at $460,000.
Auckland's median price has now fallen 8 per cent to $423,500, and some real estate commentators are predicting that the drop will eventually be 30 per cent.
Yale University economist Robert J. Shiller recommends studying the erratic but rhythmic rising and falling of international house prices, a move the New York Times described as him "acting more like a historian than an economist".
Mr Shiller cites the world's oldest house price yardstick, the Herengracht index, which the Dutch have used to measure price changes in a desirable area of Amsterdam since about 1620.
BNZ chief economist Tony Alexander is taking a less historic approach, predicting that New Zealand house prices will not start to rise for two years.
By the end of this year, he says, house prices nationally will be down 5 to 10 per cent. They will be flat next year and will start to rise in 2010.
Massey University real estate lecturer Graham Crews said the Ratcliff theory of the classic residential cycle, developed about 60 years ago, remains fundamentally unchanged. It shows the market swinging from demand or supply balances to imbalance, and back again.
The low point is when the real estate cycle reaches its depth "which may be very shallow or very deep, depending on income, employment, and business conditions.
The absolute depth depends on the prices at which lenders will redeem foreclosed properties and sell them.
Real estate agency Barfoot & Thompson has produced a graph that records fluctuations in Auckland prices over the past 40 years.
Although it shows minor levelling-off points, the chart shows a spectacular overall rise - of 4940.51 per cent in four decades.
The chart also illustrates the five- to seven-year boom-bust cycle.
But, it says, the average house sale price for Greater Auckland rose from $10,669 in 1968 to $537,772 this year.
"After 80 years in the business, what we've observed is that there's only one direction the Auckland property market consistently heads - and that's up," says the agency.
"Yes, like all markets there are fluctuations along the way, but Auckland residential property has increased in value for as long as we can remember."
Barfoot & Thompson's more recent numbers show average prices moving around, from $525,316 in June to $497,479 in July and then $524,248 in August.
Mr Springford sees no point in trying to pick the bottom of the cycle.
"Buy now," he says. "Property you buy today will be worth double in 10 years."
