Auckland's housing market would be more at risk in a property downturn than any other main centre, while Christchurch would be the least at risk, according to a new Property Vulnerability Index developed by property data company CoreLogic.
The Index is based on a broad range of economic and housing measures, such as demand for property in each area, affordability, credit behaviour, local employment, investor activity and the balance of supply and demand, which are weighted according to their likely impact on the market to assess each district's performance in a potential downturn.
CoreLogic says the Index is not intended as a forecast of values, but is a "relative assessment of each area's risk in the event of a more significant downturn in the property market."
The chart below places the country's main urban districts on a spectrum from most vulnerable to least vulnerable, with the most vulnerable districts tending to be smaller provincial centres such as MacKenzie in the South Island and Otorohanga in the North Island.
However there are two centres which stand out as being vulnerable - Auckland , which is by far the country's largest property market, and Queenstown-Lakes, which has a very high market profile compared to the size of the district's population.
Major centres with mid-range vulnerability levels are Dunedin, Invercargill, Hamilton, New Plymouth, Napier and Lower Hutt, while Whangarei, Tauranga, Whakatane, Hastings, Wellington, Nelson, Christchurch and Timaru are rated as least vulnerable.
CoreLogic Chief Property Economist Kelvin Davidson said this country's housing market had been in a significant upswing phase for more than a year, but noted that "nothing can go up forever."
"The Government and RBNZ [Reserve Bank] have introduced various measures to try and curb skyrocketing housing values, which alongside rising mortgage rates, should certainly prove a strong headwind to price growth," he said.
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52 Comments
Ah good ole Wellington, invinceability of a city with a monstrous and well protected bureaucracy!!
in other words the regions which have the highest house prices and the highest percentage growth in the last few years.
On a side note - Lower hutt has 260 houses for sale as of today (40% of them off the plan) - this is the highest number of houses on the market since 2018 and 80 (30%) more than this time last year.
Incorrect. Its based on many variables. I'm in Tauranga and its in the least category, mainly because of the retired down here that are cashed up Aucklanders with no mortgage. Its an elderly population that's also reflected in the higher than normal vaccine uptake on the TV3 news the other day. Tauranga has had massive house price gains in line with Auckland but Auckland is at the opposite end of the scale.
I suggest reading my comment again. My comment was its the regions with the highest house prices and the greatest percentage increases.
Auckland and Queenstown at $1.3M and $1.5M as the average house price have a much higher house price than Taraunga at $1.089M (these are based on yesterdays QV figures). Making these 2 regions the highest house price
Secondly regions with the highest percentage increases since 2016 (all figures off property hub)
South Wairarapa : 128.6%
Gisborne: 127.2%
Lower Hutt: 97.2%
Carterton 96.6%
Dunedin : 90.6%
Invercargill : 82%
Meanwhile Tauranga has risen just 59% in the last 5 years - the above regions are all in the mid range of vulnerability and all have a higher than 80% price increase in the last 5 years. Five regions have either or nearly doubled their prices in 5 years.
Tauranga I agree is a lovely place to live and house prices are high - but not the highest and have risen steadily overtime and not rapidly.
Do you still have that problem where nobody indicates before turning?
They didn't have indicators, back in the day.
Both locations are objects of speculation not backed by any fundamentals, and certainly not local fundamentals. Queenstowns income has tanked both internationally and domestically. The average worker barely survives in either location due to lack of accommodation, and the the cost of rent that todays debt enslavement model requires. Auckland is being strangled by never ending lockdown, a lack of students, and foreign capital.
Interest rate rises, Dti inbound shortly, China and US bubbles making popping noises. International speculators and overseas citizens fighting it out for limited MIQ slots, with most failing. Perhaps we are finally about to really see how naked some speculords really are.
Did the smart money fix for five years last year...?
Yep. Queenie is a time bomb in terms of property prices.
It's always been that way.
Yep, those prices are tick tick ticking, before exploding even higher.
I sure did
Can't help but notice the average and less vulnerable categories are dominated by government supported centres, retirement villages and welfare towns.
Really Hastings and Manawatu are the least vulnerable. God help us. Hastings went from $280K to $750K in the space of six years. But most workers are still on minimum wage +$3 to $5 per hour.
Hastings includes Havelock North, which has seen an influx disgruntled Aucklanders and Wellingtonians into new subdivisions over the past few years, as has Frimley in Hastings proper, and the rural surrounds.
Many telecommuting and FIFO workers, so main centre salary with a Hawkes Bay lifestyle. It's easy to see the attraction.
On the flipside, clueless out-of-town investors have also shamelessly pumped up the prices in Flaxmere because for years it had the most attractive yields. Good luck trying to evict the wrong tenant, you're going to need it.
Your exactly right. After each of our regular Hawkes Bay trips I wonder why we still live in Auckland. It's certainly come a long way from the 80's and 90's.
"nothing can go up forever."
Orr...Hold my beer
As a boomer & owner of 3 properties, we must be one of the hated, but we didn't do it to make money as such. We live in one house, as you do & rent the one next door (it's part of our cross-lease section with a shared driveway) while the third property is used by our son & family for... wait for it... no rent.
We had an inheritance 4 yeas ago so we bought something run down out in the middle of nowhere, so he could pursue his goal of growing stuff. We got it for a good price & it has doubled in price since then. Nice. It's still a bit old & cold so we'll do up the kitchen & bathroom this summer & maybe the cabin out the back if we've got any money left. After nearly 9 years travelling the planet, he arrived home broke, just like his father did 40 years ago. We get fresh eggs weekly & tomatoes & assorted vegetables seasonally. The pumpkins have been a particular success, however, please note, we didn't set out to buy any of the properties to ''make money.''
The rental next door provides us with 2 extra car parks during working hours as we work from home with 3 staff & have done for 25 years now. It also gives us some control about any future developments as the single access driveway is on a tricky corner so we're covering our bases for the time being. We still have a mortgage. Our house is 40 years old, the other one is 70 years old & bowling them both & starting again is an option.
Yes, financially we have done very well, if you believe what they're suppose to be worth today, but even down grading in our old age has a cost, & we don't consider ourselves to be particularly rich. I suppose you might call us typical mum & dad investors, but, as I said earlier, we did not set out to ''make money'' on any of the properties we bought, but it's turned out that way after a lifetime of working & paying taxes. Given a choice, we would much prefer the prices to be way lower than what they 'reported to be' & the interest rates to be a lot higher than they are, as we now have some savings in our early retirement.
But hey, you can't have everything right?
Not sure what the moral of your story is here
Just a flex.
Well one moral I notice straight away is it doesn't pay to let your kids rent a house for free. Very bad idea as they never learn how to handle the value of money when everything is given to them. Poor way to build character in your kids I'm afraid, even a token rent is better than zero.
I think it great. We plan to give our 2 Grandsons a house each when they are 21. The houses will still be owned as part of our family trust.
There is no moral to it.
It was just a comment saying "we got rich off property but don't hate us, it wasn't our fault".
On the other hand I've had people hating on me despite doing risky developments which add titles for others to build on, all the while paying tons tax every step of the way.
It was just a comment saying "we got rich off property but don't hate us, it wasn't our fault".
OK. So will the old farts cheer on their kids making fortunes out of NFTs and the metaverse? I hope so.
The guys that will bring NZ into Upland kind of metaverse will 100% make a billion of it.
He is just another old boomer like myself who is trying to ease his conscience as people like him who have more than one residential property have contributed hugely to the incredibly high house prices we are currently experiencing in New Zealand. One of the reasons Auckland will stay in level 3 for some time yet is that there are a large number of people in Auckland living in very crowded conditions as a result of high rents and high house prices.
Yup. Interesting also that the poster states "as I said earlier, we did not set out to ''make money'' on any of the properties we bought, but it's turned out that way after a lifetime of working & paying taxes". They don't directly claim that their wealth is all a result of their hard work, but the implication is that it's relevant - despite the fact that at least one of their houses was bought with an inheritance. And a lot of the resentment younger people feel towards people in this position is (1) because a refusal to admit that owning multiple properties generally means you are extremely wealthy - much wealthier than most people who are buying their first homes now can ever hope to be, even if they work similarly hard. There seems to be some magical thinking going on where people seem to think that wealth isn't really wealth if it is tied up in property. And (2) because of the notion that all of this wealth is down to 'hard work' and deserved because you've 'paid taxes.' Whereas in reality people starting out today will have to work a lot harder to achieve the same level of wealth, won't be able to afford the same kinds of luxuries (like the massive luxury of being able to stay home and look after your kids, or even have more than one kid). And that the majority of wealth that's been earned through capital gains is a result of policy settings that had the effect of benefiting asset holders and the cost of non-asset holders.
Our story roughly echoes yours. A big house to squeeze a large immigrant family into. The house next door to stop any development that would be detrimental to our place - rental for a decade then five years with our daughter and family in it. One CBD apartment bought with the idea that two of the girls would live in it while studying - that never happened and it has been solid profitable minimum hassle rental since 2008. Rents dropped 20% with Covid driving foreign students away and I'm guessing sale price will have dropped by 25% since the govt changed tenancy laws and mortgage interest as tax deductable but no complaints - it has paid for itself. So quite by accident we own 3 houses, have three small mortgages and property has made us more money than our employment over the last 18 years. For our 4 grown up children it would be best if house prices dropped significantly. If that happened our lives would hardly change - those mortgages are maybe 20% of current property value but any inheritance would be less. I'm just scared for the young FH buyers - if your property is worth less than its mortgage then your property becomes a prison.
I would call someone who has enough spare money to be able to keep one extra house so they can 'cover their bases' and another extra house that they can let a family member to live in for free rich. I'm not knocking you - you have several hundred thousand dollars (at least) that you can afford to spare, then using it to support a family member rather than blowing it on fast cars and fancy booze is a great way to spend it. But why pretend that owning three properties (freehold, presumably) doesn't make you wealthy, even if you've got what sound like good reasons for wanting to keep hold of them?
Wrong John absolutely not. Good for you, what you have achieved sounds like good conservative investment. Property owners should differentiate between conservative investment, and maximum debt fuelled binge like speculation, which up until recently has been used primarily as a strategy to minimise personal income tax. They are quite different mind-sets.
So when is this downturn or any other downturn going to happen?
While we have lots of milk and AG product, but we absolutely don’t call the tune on when the emperor’s new clothes moment will occur. It probably should have happened in the last ten years but artificial central bank intervention in the form of print at all costs have stopped a reset happening. This has rewarded the speculative borrower, and punished the conservative saver. When will be set by events in global monetary policy just like the GFC. While we have problems, we are a pea floating on the ocean that is European, US and Chinese debt. Leveraged debt has been so good for so long many simply believe it cannot go in reverse, and are vocal about it on here.
That said lots of bad sounding press about China real estate defaults and US stock market bubble. A few trillion losses here or there surely couldn't cause a problem in global lending confidence...could it?
Yes, property will either correct or crash, when there is a significant global financial crisis. And a crisis will come but we don't know when. My guesstimate has consistently been 2022 or 2023.
If history is anything to go buy, any house price crash will happen at the precise time that would maximally screw over millennials. The current average age of millennials is 32.5, and the average age of first home buyers is 35. Thus I predict the crash will be in 2.5 - 3 years, when the average millenial has just bought their first house.
I’ve now been waiting for that crash since 1971, in that time I’ve seen many dips but the trajectory has always been up. Sorry to spoil your misguided dreaming.
Read what I wrote.
I said correct or crash. Not simply 'crash'. But that's possible, just because it hasn't happened before doesn't mean it can't.
NZ property has corrected a number of times since the 70s.
It will happen *if* global central banks start seriously raising rates. We're too small to keep rates pinned lower than everyone else in globally inflationary environment. At some point the cost of fuel and consumer goods will really start to hurt if that happens -- it'll be a political tug of war between 'I can't afford to eat' and 'but my capital gains'. I mean, more than it already is.
It's worth noting that we've had substantial capital inflows from overseas in recent years. That can reverse very quickly if our dollar starts tanking.
Inflation has always been a house owners best friend. The higher the better as suddenly your $1m mortgage will look like peanuts. Yes you have to suffer for a year or two in the beginning. When we bought our first house in 1971 in doubled in value in the first year. Our mortgage was horrendous at the start but in one year inflation took my wages from 26 pounds a week to $40 pounds a week
Watch the US stock market
Many thanks to CoreLogic on behalf of investors in Whakatane, Christchurch, Hastings, Tauranga, Manawatu, Marlborough, Waimakariri, and Timaru. Free advertising is always appreciated.
This is a circular argument. The lax lending behaviour of the (primarily aussie) banks is what's driving the rampant house price inflation. The places most vulnerable are those that would be most impacted if responsible credit criteria were reigned back into line.
If DTIs are the eventual stick used to bring the banks back to earth, then obviously places where DTI ratios are most out of whack will feel the pinch first. Just look what happened during the brief window in Australia between the end of the Banking Royal Commission and government backflip on responsible lending criteria...
As a side note, the government is still making a song and dance about intervening in the market but is simultaneously pump-priming lending with near-free credit to banks while saying 'look the other way' on any meaningful restrictions on lending like DTI. You are the mark, the bank is the pickpocket and the government is the elaborate distraction.
Funny and pathetic how ANZ's Zollner laments crazy house prices...
Yep! Laughing all the way to the government funded share buyback.
🤣🤣 Yea okay. Click bait BS,
Seriously, this will only end when the supply of 'greater fools' runs out ... anyone care to suggest when this might be?
The 'greater fools' run out exactly the same moment as the 'greater mortgages' do. Not a minute sooner.
When access to printed credit has meaningfully and prudent controls.
The risk is highest in the places with most of the new builds.. these teaser interests rates sub 2% will reset to normal levels (more than double even at today’s rates) within 2 years… it’s eerily similar to the phenomenon that triggered the 2008 sub prime market in the USA
We know how correct these "experts" are in COVID times.
I wouldn't pay any attention to such guesses taken out of thin air.
Corelogic has invented a new "index" with dodgy "measures" to grab a headline.
"measures...which are weighted according to their likely impact on the market to assess each district's performance in a potential downturn"
Who really believes this rubbish?
More than you think, unfortunately.
I think we can all agree that corelogic and many economists predictions of house prices over the last 2 years have been utterly useless and harmful in most cases. Corelogic can get f**cked as far as I'm concerned.
They have to make money and stay relevant somehow.
I agree with you though. All these "expert commentaries" are merely "personal opinions" based on zero evidence because COVID is a new beast.
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