Bach sales a barometer for economy

Tuesday 8 January 2013

At this time of the year plenty of time is spent pondering what lies ahead for the real estate market.

Sitting at the beach on the Coromandel one could be accused of having rose-tinted sunglasses when predicting markets and the economy are on the up.

But I have had this theory for some time that the bach market is quite a good barometer on what is happening in the property market and the wider economy.

Talking to the local real estate agent only confirms that view but also sheds some new light on what drives the bach market.

When economic times are tough the holiday house market pretty much closes down and very few transactions are done.

While asking prices may be low, deals are few and far between.

As the economy picks up. the bach market accelerates. There are signs that this is happening already and that augurs well for the housing market and, more importantly, the economy in general.

One of the factors, though, that is different is that people have money sitting around and many of the options, such as bank deposits, just don't look attractive.

What looks good is the prospect of owning a bit of beach paradise.

There are signs that people are starting to look at holiday sections again.

I always had this theory that when the economy really has a head of steam up, like in the last property peak fuelled by generous bank lending, people were splashing out significant sums of a bach ($1 million plus is not unusual for many of these places) and then borrowed a little more to buy the boat then a little more again to buy a car powerful enough to tow the boat.

The bach was often only used a few weeks of the year, which all up made it a pretty expensive holiday. Quite possibly it's cheaper to jet off to Europe or somewhere in the Northern Hemisphere for a cheaper holiday

But contrary to the view that all baches are only for the super-rich, a look through the local property guide shows that you can buy anything from $200,000 right through to $1.2 million.

But for many people the bach purchase is a generational buy and something that stays in the family.

When the agent says something like "baches do go up in price" he is probably right because people hold them for such long periods of time.

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