Does your home earn more than you?, All things property, under OneRoof

Homes in less than seven percent of New Zealand suburbs have earned more than the average Kiwi worker, according to analysis by OneRoof.co.nz and CoreLogic NZ.

That number is down massively on last year, when capital gain exceeded the median wage in 30 percent of Kiwi suburbs, and a far cry from 2016 when 59 percent of suburbs earned more the median wage – sometimes in excess of $200,000.

CoreLogic NZ and OneRoof analysed the median values of 661 suburbs across New Zealand from 2008 to 2017, and looked at how many saw annual gains above the median salary.

The suburbs examined were those that had automated valuation models going back to 2008, and although the figures don’t cover every suburb, they give a fairly accurate picture of market activity in the country over the past ten years.

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The figures show that in the 12 months to October 1 2018, 44 suburbs out of the 661 examined enjoyed capital gains above the median individual salary of $51,844.

Wellington had the biggest share of suburbs earning above the median salary, followed by Napier, Queenstown-Lakes and Thames-Coromandel.

Only one suburb delivered their homeowners gains of more than $100,000 in the last 12 months - Saint Marys Bay in Auckland. It saw a $119,650 increase in its median value, more than double the national median wage and $43,418 above the median wage in Auckland.

The next highest performing suburbs were: Vauxhall, in Dunedin (up $87,850); Wanaka, in Queenstown Lakes (up $86,050); and Mount Victoria, in Wellington (up $82,800).

The figures show that, of the 661 suburbs examined, 101 fell short of their 2017 values. Auckland had the biggest share of loss-making suburbs (62 in total, with an average loss of $12,686) followed by Christchurch (33 suburbs and an average loss of $4,584).

Just one suburb lost more than the median salary: in Westmere, which sits next door to Saint Marys Bay, the median value fell $55,250 in the last 12 months.

Values rose in 60 percent of Auckland suburbs in the 12 months to October 1. The average gain was $15,313, with 38 percent of the city's rising suburbs seeing gains of less than $10,000.

Queenstown Lakes had the highest average suburb gain, at $61,754, with just two suburbs in the region seeing value rises well below the median salary: Arrowtown ($18,850) and Fernhill ($5900).

In Wellington, 39 suburbs saw values rise in the last 12 months, 19 of above the median salary. Blue chip harbourside suburbs Mount Victoria and Hataitai enjoyed the biggest gains ($82,800 and $74,450 respectively), but the average gain for the city was an impressive $52,507.

Dunedin had 44 suburbs that rose in value, four above the median salary, illustrating the surge in market activity the city has seen in the last 12 months. The average gain for the city was $39,457, with Vauxhall (+$87,850), North Dunedin (up $67,850), Waverley (+$64,750), and Macandrew Bay (+$56,950). Nearby Invercargill had 21 rising suburbs and an average suburb gain of $30,307, with Richmond enjoying the biggest dollar rise at $38,550.

OneRoof editor Owen Vaughan said: "When tracking suburb values, we tend to focus on whether it has gone or down by ‘x’ percent, not the dollar value that represents. But by looking at both you can see that even small percentage changes in high-value suburbs translate into significant dollar gains or losses.

"Thus, the top-earning suburbs, Saint Marys Bay, can still reap $100,000-plus gains even though not much has changed in its market in the last 12 months (its median value is up just 5.4 percent). Whereas a $87,850 increase in Vauxhall's median value represents a much bigger percentage change on the year before - 15.5 percent.

"While homeowners in high-value suburbs can take comfort that their properties are still earning a decent chunk of money even in a relatively flat market, the flip side is that their homes can drop substantially if values dip by just a few percentage points.

"For every Saint Marys Bay that's enjoying huge gains there is a Westmere that's suffered a $50,000-plus drop in value.”

CoreLogic NZ senior researcher Kelvin Davidson said: “It’s important to note that the comparison of property capital gains has been made to national, individual earnings. Combined household incomes are much higher and will have beaten property gains in many areas.

“We also need to bear in mind that the value growth is only ’on paper’ until the property is sold, and people often have to buy and sell in the same market, where everything has changed in value by similar amounts. Even so, the fact remains – even in a subdued national market, property continues to deliver strong tax-free gains in certain areas, especially Otago and Southland in the past few years.”

The percentage of suburbs earning more than median salary has dropped considerably in the last two years, the result of a slowdown in the Auckland housing market.

CoreLogic NZ and OneRoof.co.nz's analysis of the median values of 661 suburbs across New Zealand from 2008 to 2017 compared to the median wage shows clearly the extent of the Auckland property boom, the depressing effect of the LVRs and the recent lift in regional housing markets.

Vaughan said: “In 2008 no suburb saw gains above the median salary, then $37,960, but most suffered drops in value, with 609 suburbs recording an average loss of $21,077. Saint Marys Bay lost the most - $133,800 - while Winton, in Southland, saw the biggest increase, at $19,000.

“The picture remains the same until 2012, when the market was starting lift itself properly out of the doldrums of the GFC. That year 87 suburbs enjoyed capital gain above the then median salary of $41,912, and a further 461 enjoying an average lift of $14,073. Thirteen suburbs, all in Auckland, earned more than double the median salary. Of those, two earned more than four times the median salary: Westmere (up $175,700) and Saint Marys Bay (up $178,350).

“In 2013, the market was in full flow, with 25 percent of suburbs seeing lifts in value above the median salary, then $43,940, all of them either in Auckland or Christchurch, which was kept afloat by the need for housing in the wake of the damage caused by the 2011 earthquake.”

Sixty-six suburbs earned more than $100,000, of which only one was outside of Auckland - Clifton, in Christchurch, which rose ($104,000). The best performing suburb was Epsom, in Auckland, which rose $201,000, while the worst-performer was Akaroa, in Christchurch, which dropped $39,850.

Vaughan said: “In the figures for 2014 you can see the depressing effect of the first iteration of the LVR, introduced by the Reserve Bank to slow the rapidly growing property market: just 17 percent of suburbs earned more than the median salary. The average gain in Auckland was $61,666, down from $89,694 the previous year.

The figures for 2015 show the property market had bounced back, and then some, with the average gain in New Zealand sitting at $59,606, fuelled by rising demand in Auckland. Six hundred and thirty suburbs of the 661 tracked rose in value - 202 of which saw increases above the median salary, then $45,864. Of the 156 Auckland suburbs tracked, just nine saw gains below $100,000. Forty-five Auckland suburbs earned more than $200,000 and five - Westmere, Epsom, Castor Bay, Murrays Bay and Saint Marys Bay - earned more than $300,000, with Saint Marys Bay ranking highest, with a rise of $323,550 - more than seven times the median salary."

Davidson added: "The second iteration of the LVR rules, which hit Auckland investors with a minimum 30 percent deposit requirement, came in response to these chunky gains in the city, and helped divert demand to other parts of the country."

The best-performing suburb outside of Auckland was Mount Maunganui, in Tauranga, up $106,050. The figures show a clear surge in Tauranga's property market - the average gain for the year was $56,920 up from $14,329 the year before. Market activity was also slowing in Christchurch, with median values up an average $15,929, down from $33,554 the year before.

Vaughan said the figures clearly reflect the market peak in 2016. "Fifty-nine percent of suburbs earned more than the median salary. No suburb broke the $300,000 mark, and for the first time in the period assessed, a suburb outside of Auckland saw the biggest rise in median value: Arrowtown, in Queenstown, jumped $244,450. The next biggest riser was Saint Marys Bay, which earned $235,300 - down 21 percent on the year before.

"Of the 161 suburbs that earned more than $100,000, 57 percent were in Auckland. The previous year, Auckland represented 99.3 percent of $100,000-plus earners. The change reflects the catch-up being played in the regions, with the figures showing strong growth in high value areas close to Auckland (the average rise in Tauranga was $121,658 and in Hamilton $83,420) and Queenstown, where the average gain was close to $200,000."

The figures also show the flattening in Christchurch's market, with the average gain there just $7039. The worst-performing suburb was Clifton, Christchurch, which dropped $31,350. The average drop of the 15 suburbs that registered a loss was $5476.

By 2017, a new iteration of the LVR and a tightening of bank lending had started to put the brakes on market, with 30 percent of suburbs earning more than the median salary, a drop of 29 percentage points on the previous year. Just 17 suburbs earned more than $100,000, with Queenstown, up $217,400, earning the most. Of the 200 suburbs that earned more than $49,868, just 29 were in Auckland, with Oneroa earing the most, at $212,000.

Davidson said: “In hindsight, LVR III, which imposed the max 60 percent LVR for investors everywhere (not just Auckland), and 80 percent limit for owner-occupiers really took the heat out of the market, especially in Auckland. Of course, other factors were at play too – such as the fact that Auckland’s affordability problem had just got worse and worse."

Vaughan added: “In 2017, for the first time since 2014, Auckland suburbs started losing money. Sixty-six Auckland suburbs dropped in value, ranging from Unsworth Heights, which fell $800, to Golflands, which dropped $81,700. Saint Mary Bay's median value lifted just $20,400 - a drop of 91 percent on the previous year. The slowdown was also apparent in Tauranga, where the average gain dropped to $28,385, and Hamilton, where the average gain was $19,408. The drop in growth was less profound in Rotorua, where the average gain was $42,906, down from $67,800 the previous year.”

Davidson said: "There’ll likely continue to be local hotspots that deliver gains in excess of wages in 2019. But with many headwinds facing the property market – such as the ring-fencing of rental losses and the foreign buyer ban – it wouldn’t be a surprise to see more households having to revert to the old-fashioned way of making money, i.e. earning a wage."

Salary v suburb: 2008-2018

2008

• Median salary: $37,960

• Percentage of suburbs where gain was above median salary: 0

2009

• Median salary: $39,520

• Percentage of suburbs where gain was above median salary: 2

2010

• Median salary: $40,456

• Percentage of suburbs where gain was above median salary: 2

2011

• Median salary: $41,600