NZ’s regional renaissance set to continue

NZ’s regional renaissance set to continue

By Geoff Barnett - National Manager of Century 21 New Zealand

Recent Quotable Value statistics revealed a slight softening in Auckland’s house values for the first quarter of 2016. This however appears to be short-lived. Auckland is showing signs of heating up again in the second quarter and I expect this to continue for the foreseeable future.

The softening was entirely predictable given Government and Reserve Bank restrictions on loan-to-value ratios and overseas investors which came into effect late last year.

What’s more, some commentators suggest additional lending restrictions might be applied to the Auckland market given low interest rates are not helping to ease the pressure. The Prime Minister is also musing over a potential land tax for foreign buyers.

For Australasia’s fastest growing city, overall values were still up nearly 17% as at 31 March compared to one year earlier.

With interest rates down and our regions performing well despite lower dairy payouts, I believe 2016 will be relatively strong across the country. Outside Auckland, the rest of the country is experiencing a lift particularly for Hamilton, Tauranga, Hawkes Bay, Nelson and Wellington.

Our capital city is now going very well with values in the Wellington City area up 4.2% in the last quarter and up 8.9% on a year ago. This reflects what we’re hearing from our Wellington franchise owner.

The likes of Auckland property investors are switching to Wellington for much better rental yields while also enjoying strong capital gains.We’re seeing some real excitement in the capital with many properties now selling well over valuation, while Auckland’s more central suburbs are effectively catching their breath.

Another observation is that Auckland’s outlying areas remain popular.

With the average weekly rent across the Auckland region now in excess of $500 and some interest rates falling below 4.5%, many renters are contemplating becoming buyers. For many when they do their sums it just makes more sense if they can get a deposit together.

We’re seeing more young Aucklanders in particular opting out of their central rentals to buy further afield. It seems many are now more willing to accept a longer commute if it gets them on the property ladder. Century 21’s offices in the likes of South Auckland’s Manurewa will tell you for free that more ‘city kids’ are coming out every day.

We’re also seeing more Kiwis buying apartments as their first home option, while others now view apartments as a way to stay in their community, free up some capital, and create an easier lifestyle.

With the average Auckland house price now at least a staggering 10 times more than the average household income, apartments offer a more affordable entry point.

It has been a long time coming but the cranes are back in business with a record number of multi-residential apartment developments going up.

Nearly two decades ago New Zealand’s leaky building crisis shook significance confidence out of apartment and town house sector and then the Global Financial Crisis saw new builds disappear from our cities skylines. However a return of confidence and more safeguards around construction and capital gains are seeing our retail banks willing to lend on apartments.

Those promoting the many apartment developments in and around Auckland at the moment will tell you they’re getting a lot of babyboomers and empty-nesters buying.

Long gone are the days when apartments were associated with overseas students in the CBD. Babyboomers wanting to stay in Auckland, in particular, are increasingly looking to high quality apartments, in a safe and attractive environment, with good capital gain prospects, and which they can easily lock up and leave when they travel.

Auckland’s future growth is assured and this in turn gives plenty of assurance to Auckland property buyers and owners knowing that any softening will not be long term.

As I mentioned earlier, we’re now also seeing some good growth in other cities and centres. The media is regularly reporting the young family who’s moved to Northland or down the line to the Waikato or Bay Of Plenty, selling their $1m-plus home in the big smoke and buying something much bigger for half the price two hours away. Some dub this the donut effect.

Regardless of its name, I believe the strong real estate growth we’re now seeing in many of New Zealand’s regions particularly those centres near Auckland will continue for some time to come.

Lower prices in the regions and a great lifestyle, helped by the workplace becoming more flexible and mobile, not to mention ongoing transport and information technology improvements will all lead to a regional renaissance in New Zealand. This is just the start of it.

www.century21.co.nz

ENDS

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