QV is pointing to LVR speed limits, stricter retail bank lending criteria and uncertainty ahead of the election as the reason for 2017's overall slowing residential property values.
But it says it also saw periods of rapid value increases in some areas and decreasing values in others.
Overall the nationwide average shows residential property values increased +6.6% or +$41,660 during 2017 from $627,905 in December 2016 to $669,565 in December 2017, according to the latest QV House Price Index statistics. The average national value increased +3.6% over the final three months of 2017.
These value increases were higher than in recent months.
Sales volumes were down on 2016 for every month during the year and between February and October they were in excess of 20% below 2016 levels before picking up in November when a post-election late spring bump saw them jump to just 10% lower than November 2016 levels.
QV National Spokesperson, Andrea Rush said “Potential housing policy changes in the lead up to the election also caused uncertainty and people took a wait and see approach causing activity to slow dramatically over the winter quarter and this resulted in value decreases in many areas.”
“The usual annual spring surge was very slow to arrive and listing levels and market activity did not pick up until November and December and this can be seen in both sales volumes and value growth recovering in the last two months of the year.”
They are now saying the slight easing in LVR restrictions by the Reserve Bank due this month is likely to help improve activity and demand in housing the market as we move through the summer months.
And they expect residential property values to hold for the most part during 2018 "but the trend of lower rates of growth is likely to continue." This is because low interest rates, relatively high net migration and lack of supply will mean core market drivers remain for the main centres
"However, areas where investors were previously very active may continue to see values drop back where prices remain too high for first home buyers particularly in Auckland, Hamilton and surrounding districts,” says Rush. “Some regional areas may continue to see stronger value growth than the main centres during the year.”
Main centre overview:
Of the main centres Porirua city, Napier, Hastings and Whanganui saw the greatest percentage growth during the year.
Auckland
The average value across the wider Auckland region increased 0.4% or $4,583 from $1,047,179 at December 2016 to $1,051,762 at December 2017. Values rose 1.2% over the past three months.
Annual growth ticked up again across the Auckland region in the final quarter of 2017 with most areas seeing values rising again. The former Auckland City Council central suburbs saw values rise 2.2% in the year to December and 1.6% over the final quarter of the year with Auckland City - East continuing to rise above average for the region, up 3.6% year on year and 2.8% over the past three months, the average value there is now $1,575,133. Strong value growth also continues for Auckland City – Islands with the Waiheke Island market driving growth up 13.7% in the year to December and 6.6% over the final quarter of the year.
North Shore values also ticked up again rising 0.7% in year on year and 2.6% over the final three months of the year. Waitakere values also rose 1.0% over the final three months of 2017 although values were down 1.9% in the year since December 2016.
Meanwhile, values are also increasing again in both Rodney and Franklin and particularly in Papakura which rose 2.2% year on year and 2.6% over the final three months of the year. Manukau bucked the general trend as values there dropped 1.0% year on year and 0.3% over the past three months.
Hamilton
Values in Hamilton dropped slightly by 0.5% over the past three months but rose on average by 1.6% or $8,586 over the past year from an average of $534,860 in December 2016 to $543,446 in December 2017.
Tauranga
Tauranga home values increased 3.2% year on year or $21,528 from an average value of $672,197 in December 2016 to $693,725 in December 2017. After dipping in November, values in the city had begun rising again by December and values rose 1.0% in the final quarter of the year.
Meanwhile, the Western Bay of Plenty market has seen sustained growth throughout 2017 and rose 9.1% in the year to December or $52,185 from an average value of $571,520 in December 2016 to $623,705 in December 2017. Values rose 1.4% over the past three months.
Wellington
Values across the wider Wellington Region rose 9.4% or $ 54,040 over the past year from an average value of $574,410 in December 2016 to an average value of $628,450 in December 2017. Values across the region rose 3.6% over the last quarter of 2017.
Wellington City increased by 9.1% year on year and 3.3% over the past three months. The average value there is now $756,879. Wellington – North is up the most, increasing by 6.2% over the past three months alone and 11.2% in the year to December 2017. Meanwhile values continue to rise strongly across Wellington’s regional centres. Upper Hutt is up 11.1% year on year and 2.6% over the past three months; while Lower Hutt rose 11.4% year on year and 1.0% over the past quarter; and Porirua rose 13.2% year on year and 3.7% over the past quarter. Finally, the Kapiti Coast is up 13.5% year on year and 3.8% over the past three months.
QV Wellington Senior Consultant, David Cornford said, “It was another year of relatively strong value growth throughout the Wellington region however year on year value growth slowed considerably during 2017 compared to 2016.”
“Value growth took a breather over the winter months and during the build up to the election however by mid spring market activity had started to pick up and value growth continued.”
“A shortage of stock, low interest rates and a relatively strong local economy continues to support a robust property market in the Wellington region.”
“First home buyers had a strong presence in the Wellington market throughout 2017.”
Christchurch
Christchurch city values have remained stable, dropping slightly by 0.1% or $541 over the past year from an average value of $494,247 in December 2016 to $493,706 in December 2017. Values have increased slightly by 0.4% over the past quarter.
Meanwhile, growth remains strong across Canterbury’s regions. The Waimakariri District up 1.7% year on year and 1.5% over the past three months; while Selwyn values increased slightly 0.3% year on year and 0.7% over the past quarter.
QV Christchurch Property Consultant, Hamish Collins said, “It’s been slow and steady for the Christchurch housing market during 2017. We have seen less activity than in previous years as heat comes out of post-earthquake market and overall the market has normalised after the earthquakes”
“The high level of housing stock on the market has given purchasers’ more options and vendors are finding they need to adjust their expectations from a moving post-earthquake market to a slower environment.”
“First home buyers remain active in the market as do those purchasing “as is where is” properties with existing unrepaired earthquake damage.”
“Those in the investor market remain anxious about potential changes to regulations such as insulation, building warrant of fitness and taxes and investors have also been hamstrung by LVR and bank lending restrictions throughout the year.”
Dunedin
The recent trends continue as residential property values continue to rise across Dunedin. Values rose 10.4% or $36,965 over the past year from an average value of $354,133 in December 2016 to an average value of $391,098 in December 2017. Values increased 2.7% over the final three months of 2017.
Of particular interest is the strong growth of the Peninsular and Coastal part of Dunedin, which is up 5.6% over the past three months and 17.9% year on year, followed by the Southern area which increased 5.4% over the last three months of the year and 10.9% year on year.
QV Dunedin Property Consultant, Aidan Young said, “Demand for residential property in Dunedin has remained strong, from both the local and national buyers throughout 2017.”
“First home buyers have remained active throughout the year with the lower entry point of the Dunedin market aiding this situation.”
“The LVR restrictions had little effect on values, although it did see an easing in demand from investors due to the 40% deposit requirement.”
“Supply has been consistently low, with good quality properties being sold relatively quickly and vacant land has also been receiving good prices as demand for sections remains strong.”
“The upper end of the market has seen some slight shifts, indicating good confidence for higher priced homes.”
“The election appeared to slow activity, but we have not seen any material impacts yet.”
“Value growth has been moderate during 2017 and we can expect to see a similar positive outlook for the market in 2018, providing conditions remain.”
Nelson
Nelson residential property values continue to increase, rising 11.1% or $55,318 year on year from an average value of $499,866 in December 2016 to $555,184 in December 2017. Values rose 1.8% over the last three months of 2017.
Meanwhile, values in the Tasman District have also continued to rise, up 11.4% or $56,927 year on year from an average value of $499,082 in December 2016 to $556,009 in December 2017. They increased 3.0% over the last quarter of 2017.
QV Nelson Property Consultant Craig Russell said, “The Nelson/Tasman market experienced strong value growth over 2017 despite a slow winter period in the build up to the election.”
“The market here is considered to be more robust than other regions given the strong local economy and being a desirable place to live.”
“Low interest rates continue to fuel demand which has outpaced supply. This is particularly true for section sales with pent up demand driving up land values as new stages of developments are released to the market.”
“During 2017 we saw a surge in activity for high value properties being sold particularly around Ruby Bay/Tasman, Nelsons Port Hills, College area and Atawhai.”
“Listing numbers remained relatively stable in 2017 with a decrease occurring in winter which we consider a normal seasonal trend.”
“Sales volumes decreased in 2017 compared with the previous year as homeowners either chose to renovate over buying, or were simply priced out of the market.”
“Investor activity also eased during the year following the introduction of the 40% deposit requirement in late 2016.”
Hawkes Bay
Values continue to rise across the Hawkes Bay region. Napier values rose 15.1% or $62,770 year on year from an average value of $415,189 in December 2016 to an average value of $477,959. Values rose 2.6% over the past three months.
The Hastings market also continues to rise up 14.9% or $57,828 year on year from an average value of $387,133 in December 2016 to an average value of $444,961 in December 2017. Values increased 3.0% over the last three months of the year.
Other Provincial centres
The growth in values across many central and lower North Island provincial areas continues. Values in regions including South Waikato, Opotiki, Rangitikei, Tararua and Carterton have increased particularly over the past three months. Meanwhile, provincial areas to the South and North of Auckland – including the Kaipara, Hauraki and Thames Coromandel District - continue to see values decrease despite the trend of market growth over the past few years.
In the South Island regional centres, it’s a relatively stable outlook. Values across most areas are either flat or steadily increasing. The MacKenzie District continues to rise up 5.2% over the past three months and 24.7% year on year which is the highest annual rise in the country, while Southland and Invercargill are also continuing on an upward trend. Market growth remains strong in the Queenstown Lakes, as values increase 3.0% over the past three months with an average current value now much higher than the Auckland Region of $1,111,995.
QV House Price Index - Three Months to December 2017
| Territorial authority | Average current value |
12 month change |
3 month change |
| $ | % | % | |
| Auckland Region | 1,051,762 | 0.4% | 1.2% |
| Wellington Region | 628,450 | 9.4% | 3.6% |
| Main Urban Areas | 786,246 | 4.6% | 3.6% |
| Total New Zealand | 669,565 | 6.6% | 3.6% |
| Far North | 421,582 | 11.8% | 3.0% |
| Whangarei | 499,205 | 9.0% | -0.3% |
| Kaipara | 496,551 | 6.2% | -3.7% |
| Auckland - Rodney | 941,029 | 1.3% | 0.1% |
| Rodney - Hibiscus Coast | 921,890 | 2.0% | -1.7% |
| Rodney - North | 961,471 | 0.4% | 1.6% |
| Auckland - North Shore | 1,226,509 | 0.7% | 2.6% |
| North Shore - Coastal | 1,405,509 | 0.7% | 3.1% |
| North Shore - Onewa | 981,844 | 0.6% | 2.1% |
| North Shore - North Harbour | 1,192,164 | 0.6% | 2.1% |
| Auckland - Waitakere | 824,271 | -1.9% | 1.0% |
| Auckland - City | 1,245,536 | 2.2% | 1.6% |
| Auckland City - Central | 1,085,314 | 2.2% | 0.6% |
| Auckland_City - East | 1,575,133 | 3.6% | 2.8% |
| Auckland City - South | 1,100,710 | -0.4% | 0.1% |
| Auckland City - Islands | 1,161,110 | 13.7% | 6.6% |
| Auckland - Manukau | 895,606 | -1.0% | -0.3% |
| Manukau - East | 1,150,996 | -0.9% | -0.7% |
| Manukau - Central | 695,724 | 1.1% | 1.1% |
| Manukau - North West | 769,615 | -1.5% | -0.3% |
| Auckland - Papakura | 696,713 | 2.2% | 2.6% |
| Auckland - Franklin | 666,676 | 1.0% | 0.5% |
| Thames Coromandel | 700,175 | 9.9% | -2.6% |
| Hauraki | 373,059 | 5.6% | -7.0% |
| Waikato | 459,226 | 7.0% | 3.9% |
| Matamata Piako | 429,173 | 9.8% | -1.7% |
| Hamilton | 543,446 | 1.6% | -0.5% |
| Hamilton - North East | 689,194 | 1.2% | -0.3% |
| Hamilton - Central & North West | 493,950 | -1.2% | -2.3% |
| Hamilton - South East | 495,151 | 2.2% | 0.2% |
| Hamilton - South West | 488,101 | 4.4% | 0.2% |
| Waipa | 530,552 | 9.0% | 0.9% |
| Otorohanga | 287,098 | 16.3% | -1.2% |
| South Waikato | 229,124 | 24.1% | 9.4% |
| Waitomo | 203,650 | 18.0% | 1.7% |
| Taupo | 463,012 | 12.1% | 3.9% |
| Western BOP | 623,705 | 9.1% | 1.4% |
| Tauranga | 693,725 | 3.2% | 1.0% |
| Rotorua | 412,741 | 10.0% | 0.3% |
| Whakatane | 414,658 | 11.0% | 1.1% |
| Kawerau | 188,379 | 6.8% | -1.0% |
| Opotiki | 287,980 | 15.1% | 5.5% |
| Gisborne | 293,346 | 8.9% | -0.6% |
| Wairoa | N/A | N/A | N/A |
| Hastings | 444,961 | 14.9% | 3.0% |
| Napier | 477,959 | 15.1% | 2.6% |
| Central Hawkes Bay | 299,844 | 19.5% | 4.9% |
| New Plymouth | 436,669 | 6.2% | 2.7% |
| Stratford | 252,131 | 6.3% | -0.7% |
| South Taranaki | 206,129 | 4.1% | -2.1% |
| Ruapehu | 171,244 | 10.2% | 1.8% |
| Whanganui | 235,900 | 15.1% | 2.5% |
| Rangitikei | 193,409 | 20.7% | 8.0% |
| Manawatu | 325,330 | 14.2% | 4.2% |
| Palmerston North | 375,217 | 8.7% | 2.5% |
| Tararua | 191,343 | 13.5% | 7.6% |
| Horowhenua | 296,139 | 16.5% | 3.0% |
| Kapiti Coast | 545,818 | 13.5% | 3.8% |
| Porirua | 540,535 | 13.2% | 3.7% |
| Upper Hutt | 469,691 | 11.1% | 2.6% |
| Hutt | 524,357 | 11.4% | 1.0% |
| Wellington | 756,879 | 9.1% | 3.3% |
| Wellington - Central & South | 752,918 | 8.0% | 3.2% |
| Wellington - East | 802,331 | 8.6% | -1.4% |
| Wellington - North | 684,032 | 11.2% | 6.2% |
| Wellington - West | 876,596 | 7.4% | 3.2% |
| Masterton | 325,167 | 19.6% | 3.9% |
| Carterton | 363,112 | 15.0% | 5.6% |
| South Wairarapa | 446,831 | 22.8% | 2.4% |
| Tasman | 556,009 | 11.4% | 3.0% |
| Nelson | 555,184 | 11.1% | 1.8% |
| Marlborough | 450,525 | 6.8% | 3.5% |
| Kaikoura | N/A | N/A | N/A |
| Buller | 179,147 | -3.6% | -4.2% |
| Grey | 209,053 | -1.7% | 0.1% |
| Westland | 241,677 | 3.4% | 1.8% |
| Hurunui | 388,677 | 3.7% | 5.3% |
| Waimakariri | 439,059 | 1.7% | 1.5% |
| Christchurch | 493,706 | -0.1% | 0.4% |
| Christchurch - East | 371,592 | 0.8% | 0.2% |
| Christchurch - Hills | 665,019 | 1.3% | 2.5% |
| Christchurch - Central & North | 583,755 | -0.3% | 0.6% |
| Christchurch - Southwest | 470,896 | -0.7% | -0.1% |
| Christchurch - Banks Peninsula | 509,724 | -0.7% | -0.7% |
| Selwyn | 546,232 | 0.3% | 0.7% |
| Ashburton | 347,698 | -1.4% | 0.8% |
| Timaru | 351,623 | 5.1% | -0.2% |
| MacKenzie | 511,978 | 24.7% | 5.2% |
| Waimate | 231,430 | 2.7% | 4.1% |
| Waitaki | 288,202 | 12.2% | 0.1% |
| Central Otago | 467,458 | 17.4% | 0.0% |
| Queenstown Lakes | 1,111,995 | 8.8% | 3.0% |
| Dunedin | 391,098 | 10.4% | 2.7% |
| Dunedin - Central & North | 408,365 | 10.9% | 2.5% |
| Dunedin - Peninsular & Coastal | 364,115 | 17.9% | 5.6% |
| Dunedin - South | 375,130 | 10.9% | 5.4% |
| Dunedin - Taieri | 398,926 | 7.5% | 0.0% |
| Clutha | 201,971 | 8.1% | -1.6% |
| Southland | 271,698 | 18.8% | 6.9% |
| Gore | 220,411 | 9.3% | 1.7% |
| Invercargill | 256,433 | 8.5% | 4.8% |
No chart with that title exists.
161 Comments
A great time to sell while prices are still high
Anyone who cashed out earlier & invested in stocks has exceeded all returns on Auckland property by a country mile.
Still the ardent spruikers will be pleased with their modest property increased statistical values Some here appear to only be one trick property ponies
You've also paid interest on that leverage, and forgone the opportunity cost of investing that interest paid.
Assuming property doubles every 10 years, and shares increase at 7% average.
Scenario 1. Purchase 1 million dollar property with $200,000 deposit, interest only at 5%.
Equity after 10 years: $1,200,000
Scenario 2. Invest 200,000 in share market an average 7% return.Plus $40,000 annually (equivalent to interest payment on mortgage from scenario 1)
Equity after 10 years: $946,088.19
You come out on top with property, plus you've gained some utility from it (either as a home, or as a rental). The risk is you have zero diversification. A single market factor can wipe out any gains.
At the end of the day, the two get a lot closer than what you have outlined. For property, one needs to include rates, insurance, and maintenance costs. From 2006 to 2016 I rented after owning a home for 20 years. During these 10 years, I made more money via investing the house price equivalent in term deposits (not to mention my share market returns!) than my landlords made on the homes that I rented after including all costs, income, and capital gains. A side benefit for me is that I got to sample various locations in NZ before finally deciding to buy when it became more advantageous to own than rent (Hawkes Bay, other locations may have different results)
The long term history has the share market outperforming the housing market in terms of total return, so I'd use a higher rate of return for the share market as compared to the housing market return. If one was quite foolish, one could have borrowed funds at a similar rate and invested into the sharemarket at the same leverage as housing. Works great in a rising market, just like speculating on capital gains works in a rising housing market.
The above replies summed it up perfectly well. Property is a slow capital gains asset class. The S&P has been rising almost 20% average each years for the past 5 years(good market conditions)...with no maintenance costs etc... I dont know why people think property prices are going up crazy and that its a huge bubble. They should look at Cryptocurrencies hahaha
@gooki The core problem with the above calculations is that it assumes the money spent on interest would be available to buy additional stocks. However the money to pay most of that interest came from the rent. Because you dont have that rent income if you buy stocks you cant invest the $40,000 extra.
The actual result from your scenario is $393,430.30 worth of stocks.
In reality stocks have a higher growth rate than housing (you have given them both a rate of ~7%) and so the difference after all factors are considered is a performance in ungeared stocks of about 0.5 when compared to geared housing.
That's right Dodo Poppy ...it is because you don't have a Point to Miss in the first place ... However, you insist on pushing your head deep in the quicksands of illusions you solely believe in this market ( Oh sorry, along with the ill-informed who follow your infinite property investment wisdom !!)... all despite damning facts and numbers coming out almost everyday like the report above ... But hey, cannot teach an old dog new tricks as they say ..eh ?
So where is that Cancer that you mentioned yesterday ?? I thought you said there was no CG and some nonsense about rewriting the "solid as houses" statement ....!!
get your head out of the sand pit for a breather Poppy - You might learn something ---
your wishful thinking might suffocate you !! ... lol
Hawke’s Bay house prices increased 15% - requiring 500k to 600k for a family home in good suburb.
These were Auckland prices not so long ago.
Aucklanders now moving in to HB.
http://archive.stats.govt.nz/browse_for_stats/population/estimates_and_…
You can still get a family home in Napier in a good suburb for under 450K, and for a bit less in Hastings.
I think part of the reason for the 15% increase in prices in Hawkes Bay is that a lot of new builds have come on the market in the last year, meaning a lot of sales in the 600K - 750K+ sector of the market.
What seems to be happening is that the main global cities (gateways to economic regions) have maxed out and/or been suppressed by recent house price inflation dampening policies.
This is leading to increased interest in other cities and regions that are perceived to be good value. Hobart in Australia and Montreal in Canada.
On a smaller scale we can see areas around once booming cities in NZ doing very well. Masterton, South Wairarapa, South Waikato, MacKenzie and Central Otago.
Auckland is a Beta+ Global City:
https://en.wikipedia.org/wiki/Global_city
Have you not heard of the Internet, container ships and wide bodied airliners?
Rubbish.
Look at those listings.
Auckland is just benefiting from a boost due to the fact that it is an economic hub of NZ. It gets that high by default.
For Instance, Auckland is supposedly a more 'connected' city than Geneva, Vancouver, Berlin, Manchester, Cologne, Rotterdam.
You have to be joking.
An edge over Seattle and Vancouver?
An edge over Brisbane?
Auckland is more connected to Asia than them?
Rotterdam is the largest port in Europe, the third largest in the world.
I know it's an overall score, but I can't help but think Auckland is there out of pity.
Auckland is not an international city in comparison to that list you have there. But like others had said it is what it is by default because is the economic hub of nz . All countries at least needs one hub, Auckland just happens to be so because of the wharf and international airport. Moved that to somewhere else say 40 odd years ago then Auckland will not be what it is now.
Why would you leave -
http://www.telegraph.co.uk/travel/galleries/The-worlds-most-liveable-ci…
.. 13 of the 20 cities are in Europe-Scandalnavia .. three in Canada , two in each of Oz and NZ ...
D'yer reckon that whoever drew up the list hasn't travelled to Asia , South America , Africa , Russia .... or the USA ?
... Wellington ! ... got to be kidding ... that place isn't a patch on Timaru ... go go Timmers !
Surprised the prices have held as they have, given the amount of doom and gloom at times. Around my area, there hasn't been much for sale over the last 4/5 months, and anything decent has been snapped up for what seems to have been a reasonably high price (i haven't followed the market that closely so cant give percentages etc etc, just anecdotal)
Most of the commenters here don’t appear to be active buyers/sellers in the market so rabbit on about why their view is correct without any understanding as to what the buyers/sellers motivations are. In the meantime, real transactions are occurring and we surmise on their motivations.
The two sales in 1071 that I managed to get details on were:
1. Death of owners in a car accident, sold to a retired couple moving back into town where they used to live - $2,850,000
2. Death of one owner, other going into a rest home, sold to a couple that live within 500 metres and had coveted the house for 30 years - $2,300,000.
Simple transactions. It would be great to know more about other transactions to form a view, but we can’t get that info. In the meantime it’s Groundhog Day on the forums where each side plays ‘whack a mole’. Entertaining but not Illuminating.
Simple transactions. It would be great to know more about other transactions to form a view, but we can’t get that info. In the meantime it’s Groundhog Day on the forums where each side plays ‘whack a mole’. Entertaining but not Illuminating.
Yes, whack a mole is a perfect analogy, but don't expect any meaningful insight. Qualitative insight on attitudes and behavior can be partly gleaned, but it's largely emotional rhetoric.
"Entertaining but not Illuminating" - I'm not sure it's even entertaining - much of what is said is repetitive by the same people without any sort of evolution of ideas. Unfortunately you have to wade through a lot of chaff to get to anything that is actually useful and practical. Some seem to claim they have the answer but when pushed seem to go silent when asked for something practical.
I hadn't heard this rule before - 50/30/20 rule
"The 50-30-20 rule puts 50 percent of your income toward necessities, like housing and bills. Twenty percent should then go toward financial goals, like paying off debt or saving for retirement. Finally, thirty percent of your income can be allocated to wants, like dining or entertainment."
https://www.lifehacker.com.au/2014/12/some-good-financial-rules-of-thum…
Seems a rather negative way of looking at things. Maybe people have realized that these places offer extraordinarily good value for money. All those folk looking for the real New Zealand can find it in these places. Also while the percentage increase looks high it is coming off a relatively low value so the dollar increases aren't that great.
I like to think that NZ is growing up a bit. Let's all get a bit more responsible. Stop thinking of places like Whanganui as "holes" and start cherishing them and improving them. Let's gentrify the whole of NZ and raise everyone up.
Gentrification doesn't occur by pumping up house prices, ZS.
Gentrification does require some degree of value creation in order to occur. Inwards migration of high productivity labor, capital for investment/consuption purposes, etc.
Simply investing in property doesn't promote gentrification, in fact it can only imply the opposite. Raising the prices of property without a corresponding raise in productivity will have the opposite effect to gentrification.
Wanganui was a key NZ city when we had the frozen carcase trade with the UK direct from the port. Continued to a degree when the lamb trade was a staple. Since that has passed, Wanganui declined and inspite of the odd optimistic splurge has gone nowhere in the last 40 + years. Ditto small places up the coast, such as Waverley, Patea, Waitotara.
Merely bumping up the populatiion and thus increasng house prices wont change the issues - it is provincial NZ with little more happening than in many 3rd world rural areas. The difference being it has infrastructure paid for by previous wealth - albeit crumbling.
A thriviing benefit funded breeding and drug industry isn't enough.
Are you off your meds? This is tongue in cheek, right? Gentrification usually means that an older delapitated area is brought up to the standard of similar suburbs elsewhere. The investment is safe because the flow of money will likely continue. Given the cost of renovations I imagine most regional centres would struggle to find a gentrification prospect.
Given the cost of renovations I imagine most regional centres would struggle to find a gentrification prospect.
Whangarei has some lovely California bungalows and villas. It doesn't have the cachet though. You need that "x factor" for gentrification, like Ponsonby and its cafe / food strip.
Gentrification is usually a younger middle class pursuit. Often younger couples who have enough disposable income to afford a fixer upper in a potentially up and coming neighbourhood and the means to renovate. Gentrification happens when the younger middle classes are locked out of more expensive areas near to their work places. So usually gentrification happens near work/commuting opportunities, not just randomly in the middle of nowhere (job/culture opportunity wise).
I think it's pretty clear that property investors have struggled to continue buying up in the main centres with the LVR and other restrictions, in a low yield environment have spilled out into the regions where yields are better. It's unlikely that will lead to gentrification. Landlords are not the gentrifiers usually.
Spot on. Gentrification usually happens in an out of fashion area that has some natural amenity value that is not reflected in the current price due to the run down state of the building stock. Often it is a time thing, the area has a good location but the housing stock is outdated and poorly maintained. Watch out for artistic types moving in who can see its underlying value.
It is completely different to house prices being pumped up with new money. That happens once the place has been substantially improved.
The defining text here is 'How Buildings Learn', Stewart Brand. But the point he makes about gentrification is that prices have to be reasonable to begin with........quoting Chris Alexander:
The money is wrong in most buildings, and it's crucial. There should be more in basic structure, less in finish, more in maintenance and adaptation. Once a building heads downhill, you lose motivation to fix it. You have to maintain a steady flow of money into a building, and mortgages skim that.
(Bolding mine). I think that neatly describes the state of Awkland housing.....
Good to see you quoting from top sources. Brand also talks about how 90% of design decisions are wrong, you need to have adaption designed in. Well both points mean that 99.9% of New Zealands houses are
trash that are little more than fodder for a bulldozer. The consent system, or local government system to approve houses, which by all accounts you are somewhat of an expertt in, is fatally flawed. Designers are supposed to get the house perfect from the outset, and the state of our housing says they don't.
Maybe we are looking at ex-Auckland into provincial city ‘gentrification’.
Using your example on a macro-country scale: Young couple (or empty nest couple) takes their Auckland money or equity and buys a house in an up & coming provincial city e.g. Taurange, Gisborne, Napier etc and Improves the house & landscaping, thus gentrifying a city outside of unaffordable, untransportable, etc Auckland. Starts adding to the local economy with a business or additional job.
This was Nationals Plan all along - pour hundreds of thousands of immigrants, foreign buyers, international students into Auckland, drive prices up, then force Aucklanders into the regions. Brilliant!
What's the obsession with Artists?
Artists don't determine gentrification. It just so happens that sometimes gentrification follows their poor asses. Definitely not a necessary prerequisite, nor determinant.
Plus, New Zealand doesn't have anywhere near enough culture, or the right type of culture to foster that sort of gentrification.
They do to a degree, the edgy, risky, bohemian factor to areas is often sort after, that's the mojo that the "creative" types introduce, which is then lost through gentrification - Shoreditch in London, longer ago Soho in London, Kings Cross in Sydney, The Bronx once synonymous with crack and gang warfare, Harlem, Mission District in San Fran.
I agree there's not too much of that in Auckland.
Definitely, I agree it's a preliminary gentrification stage.The poor follow the cheap residences.
As you agree, though, my point being we don't have that level of culture in New Zealand. We may have once done, but not enough anymore. NZ's demographic is far too diverse now meaning that reaching a critical mass of cultural consensus gets relatively more difficult.
We aren't a 19th century Paris, swarming with artists ready to snaffle up cheap loft apartments.
Pretty much the only culture we have going is Pacific Island Churches.
If you want to follow them around the country, go for it. They will not result in gentrification, however.
Sure maybe, that's certainly what my in-laws are doing (selling up in Auckland and buying/building in Cambridge) but I doubt many JAFFA's sell up and move to Whanganui.
Nelson, Napier, Cambridge sure, but I doubt Whanganui. House price rises can be purely psychological, so it could simply be a case of the psychological contagion, the media have certainly relentlessly contributed to the mentality and sentiment of house prices increases (despite no spectacular wage, GDP or productivity increases). But also, could just be the investor effect. I bet property investors can get decent yields in some regional towns.
But gentrification is also not just money moving from one place to another, it's the renovation of older properties, trendy more upmarket bars, shops, eateries appearing. Yes sometimes that follows downsizers or "escape to the country" peeps but it's more strongly associated with middle class work/culture opportunities.
Yes, that’s the next ricochet step. Colleagues are now selling their 800k family homes in provincial city and buying in small towns within commuting distance with a view to retirement. And putting 400k in the bank.
Perhaps following Bob Jones lifetime investment advice for wage earners.
Gentrification: Look at Waipawa, Greytown, etc ... small towns with renovated villas, antique shops, cafes, labrapoodles, etc .... the cluster effect, and the debt-free story.
I mean you don’t need much income when you’re debt free, if you’ve been used to a 750k+ mortgage in Auckland.
If you take basic supply and demand theory and apply a price floor above the equilibrium price, you would see exactly what we are seeing the market. That is, supply exceeding demand and prices above the level necessary to clear the available stock. Therefore the best explanation is that sellers expectations of price have formed a price floor. While this is in effect prices won’t fall but neither will all sellers who want to sell be able to. It’s easy to say heroically that sellers just wont sell if they can’t get the desired price. But since many buyers are reliant on a sale of an existing property this can’t continue for ever.
Or, just perhaps possibly maybe, the Gubmint has institutionalized the price floor via Welcome Home loans....
I am the first to admit that matters of finance are not a subject that has interested me much. Thus I am a simpleton in such matters. However, to my innocent mind these figures suggest to me that New Zealand has created a situation where we as a nation can no longer afford our own housing market.
"It is what it is so suck it up." What a stupidly arrogant comment. This insanely greed orchestrated housing ponzi must end and unless managed exceedinglu well it will be with a big bang. I suggest that will be a time for your ilk to remian very very quietly behind the scenes. The anger in society will be much worse than that after the 1987 crash when so many of us gave up on this badly run country. I was somewhat forced to return here in my retired years due to most of my savings being in unreliable NZ dollars. Too often the exchange rate was disastrous.
Hi DGZ and all other contributors,
All the best for 2018!
Just catching up on what's going on in residential real estate.
The latest data shows that prices have held firm through 2017 - even in those regions where the largest gains were recorded through 2014-2016 (such as Wellington and Auckland).
So, I'm not sure why some people here have been asserting that house prices have been falling?? They haven't.
TTP
Exactly, we have made ourselves completely uncompetitive by giving priority to house price rises instead of to increasing productivity. Thus smaller, growing businesses in the productive economy are less profitable as their workers need higher wages to afford the rent. They are thus unable to expand.
Basically why it's useful to have (cough) lovable rogues such as Gareth Morgan putting ideas out into the conversation about how things can be changed to give Kiwis access to home ownership, as had been achieved successfully in the past. As demographics tip and more voters are renters than owners politicians will obviously need to respond.
I'd guess ideas such as Kiwibuild and removing the ringfencing tax advantage are a sort of first fruits. We may see a reversion to NZ's efforts of old that helped actually achieve a high rate of home ownership.
People who refuse to believe they were in any way assisted by the increased access to land and increased supply of housing through those earlier NZ measures will of course see such things as horribly unjust or nasty signs of so-called "communism", insisting they never received such benefits.
I'd prefer to see us drop company and personal income taxes and recoup that elsewhere in order to encourage productive investment. The only way we can improve wellbeing in the long term is to improve productivity.
.all over the globe we have asset bubbles. Yet we tax labour. We need to tax assets and let their value align with the ability to produce. Chance of it happening....zilch until the pitchforks are out. The wealthy are in control and it's working for them... and clearly demostrated by some commenters on this site.
indeed, wages are easy to tax though, paid routinely at a point in time, pretty much a set income (bonuses aside), no work required to clip a ticket.
The "too hard basket" is exactly where the IRD should be looking as evidenced by the disproportionate amount of money lost to tax evasion/avoidance vs benefit fraud, the narrative that "we" pay for benefit therefore don't want to see it misused/misappropriated is incredibly strong, and justified to a degree, yet people don't lift their heads up and see that "we" also pay for tax evasion/avoidance - https://www.victoria.ac.nz/news/2017/08/why-is-tax-evasion-treated-more…
We're in a democracy thankfully, so when the majority see specuvestors as the parasites that they are, there will be repercussions, the resentment is already there, and that is also something true around the Western world.
Our society appears to be formed around capitalism/neo-liberalism strongly, but also a desire and drive for 'equity/equality/opportunities' - which is madness. It's like mixing wolves with sheep and expecting at years end to harvest wool and lambs...when in reality all you're left with in the short terms is fat wolves, and in the long term, an empty paddock..
Personally I disagree strongly with some of the comments above. We do not need radical change, we need subtle adjustments that bring things gently into line. Revolutionary and drastic change is usually a really, really bad idea, but it is what happens if you ignore a problem long enough.
Labour, physical capital, land ownership and yes, banking, are essential and important parts of our society. Problems arise when any part starts to gain too much privilege and that part becomes parasitic rather than symbiotic. The success of the system of governance we have inherited from Britain is that it seeks to provide a mechanism for reining in privilege when it becomes excessive.
At the moment, finance has excessive privilege and funds less productive investment in housing, this gives the illusion of a well functioning system but really you are living off existing capital. The problem is really no where near irreversable and it probably only needs a few simple tweaks in the right places to sort it. I don't think we are really looking to try to figure out what those subtle tweaks might be, and fighting amongst ourselves is a really bad idea.
The whole conception that the interests of labour are somehow opposite to those of physical capital, land ownership or banking is an extravagant deception concocted by those who would steal power in order to impose their will on others. The bloodshed of the French Revolution, Napoleon Bonaparte, the English Civil War (and slaughter of one third of the people of Ireland by Oliver Cromwell), the Stalin regime, Hitler, Mao Tsetung, Pol Pot, did not happen by chance. They did need useful idiots.
The way forward is to identify how each group can support the other to mutual benefit. Nearly all business transactions are unforced ones of this type. You choose to buy something and the seller chooses to accept your currency in return.
Mainly the recognition that our business model has gone astray and that relying on immigration and more mortgage borrowing is not the answer. A search for more subtle solutions rather than accepting the noddy ideas that someone else presents in order to further their own agenda.
That's one of the challenges I think we have - is that residential property owners/investors can see that long term high immigration/high debt isn't the solution - yet many vote for the party that is pro those policies because of the financial benefit to themselves. I think as soon as we can see beyond ourselves, and see the greater good for society/all, then we might be able to come up with viable plans/policies..but many don't appear to be ready for that yet...I'll act/vote in benefit for the short term self, not the long term good for most.
Yes, precisely. I am something of a frustrated manufacturer who does no manufacturing any more because the world is stacked in favour of finance and property.
We need to start talking about things that matter, the current account deficit for instance. I think some in National do understand the issues, and Bill English probably does have a good grip on it. Others, such as Judith Collins, blithely talk about us "being a capital importing nation" as if it is just how it is. I was interested to see if Bill would make his mark once freed from being deputy to his highly competent but banker predecessor.
The current model is one that National inherited but failed to reform. They put their energy into some of the wrong things and had some pretty big things to deal with. Labour are, if anything, more pro immigration and borrowing (only they like to do the actual spending bit too, cos only they can know what's good for you).
Winston may yet surprise us though, just as Jim Anderton did. Labour will presumably continue their long tradition of applying patches and medicine that weakens the patient and the Greens will continue to be a wholly destructive force in their refusal to accept that mining is part of life and that responsible mining is a good thing.
I think if track record is anything to go by, Labour are the party more likely to take radical action while National tends to be more of a status quo, keep things as they are party. E.g. the early 80s liberalisation was done by Labour, as was NZ's initial land reform.
As with you, I voted National back in Key's first two terms hoping for some action to improve our productivity and longer term economic prospects.
The problem might be identifiable - to you; me and others in a minority, but to our political class, who are all schooled in the same branch of capitalist economics? Nope! To them, on ALL sides of our political spectrum, the answer actually is "immigration and more mortgage borrowing"
I find the general aversion to tax cuts totally bizarre. They are great way to put money in people's pockets when they need it most and times are hard. Yet, for some reason governments only seem to do it when times are good. National stuffed up big time by not getting things going faster with generous tax cuts and instead relying on more borrowing feeding into higher house prices - the banker's preferrred solution. So instead of everyone being able to make their own decisions and a resulting vibrant productive economy we got a re-run of puffed up Aucklanders and a disgruntled generation of renters with student debts. Ridiculous.
Of course if tax cuts are not matched by reduced spending then tax cuts are another name for more debt. The problem (as in Trumpland) is when these cuts are used to fund 1% ers or boomer lifestyles, but with the future repayaments of debt falling to future taxed labour of the young. .
Nah, tax cuts are self extinguishing if you just adjust the thresholds and target them as much as possible at those who earn less and will spend it rather than the better off who will save it. Can be done well, and it is immediate not dependent on some fancy "infrastructure project" or other fashionable fantasy. The whole point in a recession is to get the place working asap, not in ten years time.
We followed "international best practise" (for the bankers, that is, not us) and cut interest rates, thereby transferring money from pensioners with $10000 on deposit to give to lawyers in Auckland who were earning good money. Stupid. The shortfall in government revenue in a recession is the result of past excesses, better to have slashed government spending wherever but compensate by generous tax cuts so we can all get back on our feet.
The way that Labour paid down debt under Michael Cullen was to not index link the thresholds so people moved up into higher brackets as things improved. That's why I said tax cuts can be self extinguishing. Problem was the business model under Cullen was to encourage borrowing and house price inflation, so his achievement was to pay off $30 billion in government debt by getting us to borrow $100 billion in mortgage debt from our Aussie bankers. He thought that was very clever, probably still does.
The problem with tax cuts is that if everyone diverts them to housing nobody is better off but house prices (which are just a tax on New Zealanders via debt) increase. Worse people can borrow at a multiple of income.
In terms of government spending, people need to get familiar with where this goes. For example, NZ super takes a shocking and rapidly increasing amount of government expenditure. I’ve talked to boomers who think they’ve prepaid and earned their superannuation. Spoiler: they didn’t and they haven’t. Previous tax cuts should have been used to perfund the boomers superannuation costs. Since that didn’t happen us x,y and others will need to pay extremely high taxes at some point.
If you really wanted to lower income tax you would make KiwiSaver compulsory, raise the age of super. You could also introduce a land tax/capital gains tax to broaden the tax base and take some pressure off income taxes. But all this is very unpopular because people don’t understand their own self interest so it won’t happen. Imagine if we’d had compulsory KiwiSaver in the 90s?
People who refuse to believe they were in any way assisted by the increased access to land and increased supply of housing through those earlier NZ measures....
You could take this a bit further. Current land and housing stock is there because of a historical process. Epic battles were waged throughout the ages to secure land and resources. Fleets crossed the oceans to terraform jungles and hostile regions into facsimiles of bucolic English countryside. Just take a gander at One Tree Hill. Control was wrestled from previous inhabitants and then jealously guarded, sometimes calling for immense family sacrifices on the battlefields of Europe, North Africa, Pacific and Middle East.
All this can now be purchased for a few dollars by practically anyone in the world. For a person born and raised in China this might look like quite a good deal.
If interest rates go just 1% there'll be some panic selling. How could imagine any else occuring.
Then the modest little wooden houses of Mt Eden, and Parnell for that matter, will start going back to what they have been for 20-30 years : Aging and substantially unimproved. (Don't let a new kitchen fool you !)
... I reckon Kodak.coin will be the next big thing to develop ... I can picture a 10 000 % profit for my Kiwisaver funds if I go lock stock and telescopic barrel into the latest cryptocurrency ...
Then , in 2019 , I'll have the deposit for a house in Orc Land ...
What could possibly go wrong ... easy peasy ...
I'd seriously consider diversifying a small amount of your equity into other investments if you're 100% in real estate at the moment.
I pulled out a very modest 1-2% of my equity early last year to put into cryptocurrency, knowing the risks. I figured in the worst case, if I lost about 1% it's not really going to affect me.
A year later the gains have been over 50x overall and I'm astounded.
j3y, we spent equivalent of $300 NZD on crypto mining equipment in late 2012, and sold out late December 2017 for $500,000 NZD equivalent. It was a long time to wait, but clearly the best three hundred bucks we ever spent. We have reinvested 6-7% back in but not sure we will ever see a windfall like that again in our investing lives! In fact, of the amount we have reinvested I think we've lost a couple of grand already, it's a very volatile market but we will go long on cryptos as we did the first time and see where we are at in 3-5 years.
Sounds like a very reasonable choice. I'll be cashing out the majority of my crypto in the coming weeks, then leaving the rest to see where it ends up. Even if you're the most conservative investor, putting 1% or a fraction of a percent of your equity into it is just a no brainer.
Property in Aus has peaked and the same applies over here. There has been a once in a lifetime boom and real returns on property are going to be much lower going forward. In fact real returns might well be negative on a 5,10,20 year view.
People need to change their mentality to the new norm. There will be opportunities to the more astute in playing the Auckland intensification game.
I have the answer to the housing problem - Every person on this planet should have a fair shot at owning their own home or roof over their head and be afforded the opportunity of being the master of their own destiny (well at least in NZ, there are a fair few countries that need a little nudge in this direction ie. NK) At the present time the odds seem stacked against your average person working 9 to 5
maslow's hierarchy of needs five stage pyramid.
I particularly like this saying, there are a few versions, however they all amount to the same thing -
"If you’re not a communist at the age of 20, you haven’t got a heart.
If you’re still a communist at the age of 30, you haven’t got a brain."
I have tried to keep this brief with a little bit of background. My answer is we need to level the playing field so the middle class does not disappear completely, they are the life blood of our society as we know it, without the middle class (or engine room if you prefer we, as a Western Christian Civilization are in my opinion on a rapid decline.
My suggestion - every person should be allowed to own a property in NZ and one other property for Ma and Pa Kettle retirees to have a Granny flat to supplement their pension (or non pension in the near future). That all landlords should not be allowed to offset their tax/income and that for every extra property owned it should be treated the same as tax brackets ie. two properties = a higher tax bracket.
I would appreciate your comments (without abuse) which would be great.
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