The average New Zealand dwelling value increased by 5.1% in the 12 months to November with house values in many parts of Auckland increasing by more than 10%, Quotable Value (QV) says.
"We are seeing a reacceleration of values in Auckland with the residential price movement index chart now showing a steepening upward trend and values in some areas rising 5% over the last three months," QV national spokesperson Andrea Rush said.
"Residential property values in the other main centres including Hamilton, Tauranga, Wellington, Christchurch and Dunedin are also showing moderate increases."
Within the Auckland region, only Franklin, Papakura and Manukau Central now have average property values below $500,000.
However the areas in the south of the Auckland region where average values are lowest also posted the strongest value gains in the 12 months to November, with average values ring 10.1% in Papakura, 11.1% in Franklin, 13.8% in north west Manukau and 11% in Manukau central.
In Wellington City average dwelling values increased by 1.5% in the 12 months to November but declined by 0.9% in Lower Hutt.
In Christchurch average values increased by 3.7% in the 12 months to November with the biggest increase occurring in the south west of the city where values were up 5.4%.
Click on this link to see QV's average housing values in all districts of the country and their movement over the last year.
You can track the movement in the QV House Price Index in the chart below:
Auckland prices rising at 'eye-watering rates'
The QV press release quoted Auckland Registered Valuer Bruce Wiggins saying house prices in the super city were continuing to rise at "eye-watering" rates.
“We are seeing examples of well presented, but not high end properties selling for much more than their original purchase price within a short space of time. While these have often been upgraded in the intervening period, the rise in sale price far exceeds the money spent," Wiggins said.
“One North Shore townhouse that sold in the $700,000s three months ago was renovated to a good standard internally and was under agreement in the $900,000s three months later.”
“Conditions are also favourable for investors, and in South Auckland there have been examples of investors buying multiple properties, adding fuel to the investor rule debate for investors with five or more properties that the Reserve Bank is currently looking at," added Wiggins.
No chart with that title exists.
37 Comments
Its not a boom , its called Irrational Exuberance
And its fueled by:-
- Aucland Councils incompetence in planning for growth
- An open- door- immigration policy
- Cheap money coming on-shore ( especially from China )
- The RMA and taking two years to get a section subdivided
- The awful and destructive practice of LAND BANKING which is land speculation disguised as investment ( Tax free at that )
- And the Beehive which is behaving like a hare caught in the headlight
Aucklanders think this unearned wealth arsing from revaluatons is a ticket to spend big and live the dream , they are wrong .
Its worth remembering that a windfall lunch like this is never free , and its now in dangerous territory.
These price levels are not sustainable and there will be casualties
Boatman:
What makes it un-sustainable?
My reading of the situation is this will continue until there is no arbitrage value left between Hong-Kong and Auckland prices, and Beijing and Auckland prices, and that is some way off
Until that equalisation point is reached it will / must continue, and you can assume that
(a) 25% of the resident asian population already own 25%+ of existing auckland housing stock
(b) an estimated 10% of the existing Auckland housing stock is owned by non-residents
(c) at current levels of immigration that 35% ownership above will increase, they arent sellers
(d) the level of immigration into Auckland requires 20,000 dwelling units annually if not more
(e) The current level of development of new auckland builds is less than 10,000 pa
(f) The question is what level of production of new builds should be geared up for
(g) do you gear up for 20k pa, or 30k pa, or 50k pa? .... give us a figure
(h) If you gear up for 40k pa what do you do if immigration reaches its arbitration limit and stops, what do you do with all the industries and trades and people geared to produce 40k pa
(i) do you maintain an industry at 20k pa that just satisfies inbound migration only
(j) the housing business plus related industries cant just be turned on and off at a whim
And do you include "housing" options like THIS as an acceptable part of that "convergence with Hong Kong"?
http://www.dailymail.co.uk/news/article-2275206/Hong-Kongs-metal-cage-h…
FFS. Lack of land space given your population level (think Hong Kong, Singapore, Japan, Netherlands) is a disadvantage an economy needs to overcome. When you don't have that disadvantage, why impose a voluntary penalty on yourself so your non-rural economy has to be Hong Kong or nothing? Without Hong Kong's population numbers, location, or history?
Here you go - what has happened over the past 5 years was just the beginning
NZherald - foreign interest growing - buying to continue
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11369995
Stuff.co.nz - Buying - It's just the beginning - much more to come
http://www.stuff.co.nz/business/industries/63898959/Chinese-property-in…
What are we looking at here? 20% rise per year? For 2-3 years? On top of prices that are 30-60% over priced. The resultant crash is going to be a whopper! In the last 6 years we had our chance to tip toe away from this cliff. It is too late now. Best we sell all our properties to foreiners and they take the loss. Then we can pick up the pieces afterwards.
Prices will fall something like 40% one day. Only a fool can believe otherwise.
I now accept theories that explain that a bubble like our one is sustainable until 2021-2025.
If we are still talking to each other on this site, we can remind each other as appropriate.
It is b----y fools who think prices can never fall, who end up taking down the entire economy ultimately - them and the fool local governments who created the game-able property markets in the first place with a quota system on land. Unfortunately everyone ends up bearing the cost, and there is no real appropriate incentive like jail sentences, for people who are actually responsible.
The more leveraged you are when the crash comes, the bigger the insolvency. I guess it makes no difference apart from the size of the haircut taken by your ultimate financiers - the taxpayers who will bail out the financial institutions.
Perhaps if we all keep saying it - it will happen, i mean i wonder how much feedback "house price rise stories" introduces into the market, then regulary block tv shows updates at 7:00.
Add into the mix new overpriced cv's etc - i mean............. perhaps we are just living out a life sized version of milton bradlys monoply game.
I get the sense there is a Lack of Political will to grab this (land supply) bull by the you-know- what , and deal with it .
Two tiers of Government ( Central Govt and Local Govt) , both unwilling to tackle the problem , and are simply fluffing about the edges of the problem .
They need to tackle supply constraints at all levels and that includes this awful practice of LAND BANKING of some 45,000 sections ( according the Bernard Hickeys research ) by land speculators in Auckland alone .
Land banking is not a productive economic activity , the value add is ZERO , simply because the land is not being used for any meaningful activity and is constraining supply to the detriment of all Aucklanders .
Central Govt needs to TAX speculators who add no value and get tax deductions for holding assets that generate ZERO income ( An asset generating ZERO income is not an investment anywhere )
From a taxation point of view , the The land bankers intention is purely for opportunistic or specualtive gain , its not to generate annuity income , rents, dividends , a retiremment savings plan , and it cannot be anything other than speculating in land .
Land Banking should be recognised for what it is . trading in land , and taxed as such
The RMA is the next problem and then you have the issue of the arbitrary ring around Auckland , and the next is the open door immigration policy .
Local Goverment has the power ( but not the will ) to rate vacant fallow and undeveloped sections so as to incetivise its development , and contribute to the orderly growth of Auckland .
Simply , if a section is vacant for longer than 2 years , it should be rated at 200% annual rates
In some twisted logic Auckland council gets the beneift of its failure to plan for growth , and assumes that the new values of properties is an open chequebook to spend and rack up debt on our behalf .
Aucklanders see this unearned income from increased values as an opportunity to borrow against the asset's new found value .
We are kidding ourselves , lunch on the scale does not come for free !
Sooner or later somebody will tackle it because the current situation is unsustainable and the longer it is left, the bigger the problem and crash at the end. Ponzie schemes never carry on for ever so the sooner we address it the less damage. If National do not adequately address it in the next three years then there will be one hell of a mess when a future government decides to. And if a future government decides to continue kicking the can down the road the future crash will just continue to grow exponentially. As it stands Nationals initiatives do not look like achieveing much so we are still on a very alarming trajectory for the next couple of years at least.
National has basically sold us down the river for the sake of John Key's crony capitalist mates. The situation is now unreformable, and they fully meant it to be that way.
Note that the crashes everywhere else have been followed by desperate attempts to reinflate the bubble prices, as if that was the "norm" rather than a bubble in the first place.
And as Brendon says, Pommyland has gone into a third generation under this racket now. NZ the way you want it for your descendants? Apparently if you are a baby boomer who owns their own house, yes. It is sign of a decadent civilisation when a generation decides to shaft the following one instead of trying to make things at least slightly better for them, as used to be the case.
The problem is not land banking. Someone has to own those undeveloped tracts and putting on penalties isn't really going to help much - it will just mean the only people/companies that can afford to speculate are the ones that have enough market dominance to pass on the cost elsewhere.
Re-read that and memorise it.
The difficulty comes when the banker won't sell for reasonable market price - or does what is happening in other towns (like dannevirke) where the banker is also a developer or has similar interests, and insists on adding into the sales contract covenants that say the land purchasers will also buy an over priced house from the developer.
So either asking far too much, and expecting demand to keep increasing until you get it*, or adding in unrelated extra overheads is the problem. It might be that sections in areas scheduled for immediate use in the town plan are given higher rates demand if registered purchase notices are significantly above the local mean, and it may be that RMA needs a provision that removes the ability for associated parties to demand unusual encumberances to the local land lots (ie that there is grounds put in place to challenge and remove caveats and convenients etc that are associated party or specific - that would protect the areas property values, but not lock in particular suppliers or interested parties.) Bare land for development _is_ a valid local resource issue.
Bare land for development is an economic competitive advantage.
Imposing growth boundaries is like fielding an All Blacks team selected only from people whose weight is the same as or below that of Japanese rugby players, because heavier players are a sign of irresponsible consumption of the earth's resources in the form of food.
Why can't Kiwis take real life as seriously as they take sport???
I think we are following the British property boom bust model.
I discussed this in June here.
"1. In Parliament there has been a battle on whether the blame for unaffordable housing is the fault of this government or the previous one.
The current government is advocating that they will return New Zealand to its historic housing affordability levels over the next 12 years.
I have my doubts. New Zealand seems to be following the British model after a fifty year delay."
The above link seems to have degraded. It can be found by googling Brendon Harre Top 10.
Brian Rudman continues on similiar themes with todays NZ Herald opinion piece "Santa, let's talk about housing".
I have left a comment there saying (waiting moderation).
"It is the State that provides the infrastructure for new urban developments -roads, water, public transport etc. The State also provides the legal framework -zoning, title etc.
If the State wants to nudge the market, to break the landbankers and property speculators then it just needs to add buying farms at farm prices. Do that in partnership with large scale affordable housing development agencies and then the mutal back slapping from our politicians would be genuine.
Do we have politicians with the political will to do what it takes to provide affordable housing?"
Except , we dont have ;-
- Monaco's Tax Haven Status
- Londons centre of world banking and insurance status
- New Yorks financial centre status
- Moscows' oil and gas ( and few parts of Moscow are at these prices the place has dreadful housing estates )
- Syndeys Listed mining Companies and financial hub status
- We have only cows , sheep and migrants with laundered money to keep us going
Yes, but after the Australians seem to slam the door on currupt Chinese officials securing their loot in the shape of a barn in Australia - they are coming here. We are not far from China, either, in case they have to run for it. Look at Dotcom about how much even prior convictions keep you out of NZ if you have money.
You have a point that Auckland's real estate values are irrational. But so are the values of most cities on that list and so is the belief that money printing is "helping the economy" and not just the rich.
Monaco is a meeting point of the rich and famous, fine. London is mostly a dump - only people who dont know London would be stupid enough to buy a house there. Forget Moscow - it is like mega-Australia: a decade+ of resources bonanza and not put it to any good use at all. Dito Sydney. New York is ok. We should invest the money we make from Auckland sheds into a good apartment there.
The other end of the scale.
http://globaleconomicanalysis.blogspot.co.nz/2014/12/4-million-homeowne…
I have done nothing and " earned" about a half million Dollars in the past 9 months , and its all TAX FREE .
All thanks to the Auckland house price boom (an increase in my home value on a mini-lifestyle property in Greenhithe)
Frankly its crazy , and we are living in a fools paradise if we think this is grounded in reality
Is not money for nothing...the prices or raw materials and construction costs are huge. Just to rebuild a 110 sqm Ponsonby villa, you would not get change from $650k at the minimum. So where i find this so wacky is i just bought a house in Taupo (bigger than my ponsonby villa) for $150k....work that out? I have bought at below cost by at least 66-75%??? I'd say the provinces are going to explode in the next 2-5 years....buy while you can....and Auckland is only going up or flat.
Areas that baby boomers retire to will see a lift in prices, already happening in Tauranga.
The effect of the election can't be understated, if a LGIMW combo had of got in we would have seen an almost total implosion of central government. But a National victory has ensured continued growth in population, GDP, credit and inflation and in these conditions house price inflation becomes systemic and inevitable.
As Kumbel and I have, increasingly wearily, noted, the matter of land available for development but not being so used, can be resolved by the local authority concerned.
There are almost no legal impediments to this: the grounds for rating are nicely and succintly set out in Schedule 2, Rating Act 2002 thusly:
Schedule 2
Matters that may be used to define categories of rateable land
1 The use to which the land is put.
2 The activities that are permitted, controlled, or discretionary for the area in which the land is situated, and the rules to which the land is subject under an operative district plan or regional plan under the Resource Management Act 1991.
3 The activities that are proposed to be permitted, controlled, or discretionary activities, and the proposed rules for the area in which the land is situated under a proposed district plan or proposed regional plan under the Resource Management Act 1991, but only if— (a)no submissions in opposition have been made under clause 6 of Schedule 1 of that Act on those proposed activities or rules, and the time for making submissions has expired; or (b)all submissions in opposition, and any appeals, have been determined, withdrawn, or dismissed.
4 The area of land within each rating unit.
5 The provision or availability to the land of a service provided by, or on behalf of, the local authority.
6 Where the land is situated.
7 The annual value of the land.
8 The capital value of the land.
9 The land value of the land.
So it would be perfectly feasible, for a TLA to do something along the following lines:
For each property meeting these criteria:- exceeds 2 ha in size (4, above) AND
- has a capital value less than 1.2 times the land value (8, 9 above) AND
- is currently growing ponies and thistles (1, above) AND
- could be developed for housing (2, above) AND
- could be serviced via an extension to existing TLA services (5, above)
- and is not subject to inundation or subsidence (6, above)
THEN
the rates on the aforesaid land shall be levied as though the maximum number of dwelling units were already there, (i.e. a swingeing differential which constitutes an economic incentive to do something with it or quit it)
AND
To the extent to which the aforesaid rates levied, exceed the rates which would otherwise be levied on such land, the proceeds shall be applied to the provision of new or the extension of existing services to enable the swift development of such portions of suitable land as are deemed be the Council to be next on the list, and as publicly notified via the LTP.
Of course, chaps and chapesses, there isn't a TLA in the nation that has the cojones to do any of this, let alone think about it out loud, so don't hold yer breath waiting for any of this to occur....
I hadn't really thought about it, waymad, but the Rating Powers Act is so broad you might as well call it the Print Yourself Money Act.
There is a genuine option to rate undeveloped land within an urban boundary highly but to allow an exemption for those who have genuine reasons to use the land that way (the petting zoo etc). A common method for doing that is to require an annual declaration of circumstance for those who want the exemption rather than creating a zillion rules for who pays and who doesn't.
Unfortunately with the state of the AKL market being what it is I suspect the unintended side effect of that scheme would be to stop development completely rather than hurry it along.
I think you'll run into problems with Superior legislation and fundamentals that say certain groups cannot be targetted for punitive action if they have broken no laws. Such targetting of fictious value could be easily considered targetted and punitive.
That's why I was wondering about making such claims related to RMA (ponies and thistles not being proper residental care or resource) and public good (land banking for a profit is one thing, perpetual holding for unrealistic gains is just a thorn in everyones side and serves no useful purpose for the owner). Hence the possibility of introduction of controls to encourage or even force sale, should the price be over a certain figure (eg 30% or 50% over RV) that the pressure is then put on the owner, why aren't they selling at that figure, such an introduction would give a purchaser an avenue to press a claim against the worst offenders.
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