ANALYSIS: As a rule, most people when starting out as property investors probably purchase a dwelling not far from where they live. That is because the purchase is something new to them and they will naturally want to mitigate the risk that they are buying something without knowing anything about the area they are buying in.
But later, when looking for a second property either in addition to the first or more probably these days to replace the first one, increased experience of what being an investor entails is likely to see people cast their eyes further afield.
What sort of things might a person take into account when considering where to buy their subsequent investment property? If it were me, my starting (but not finishing) point would be an examination of likely population growth for different parts of the country. You can find this information by going to the hyperlinked page of the Statistics New Zealand website.
Go to “Population Projections” then the third to last little blue box which comes up after that. Unfortunately this particular government department’s website search engine is stuck in the 1990s and you have no chance of finding the correct table if you use their search facility.
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The rather detailed table which does come up shows projected populations for each region and local authority area (plus Auckland local board area) in five yearly jumps from 2018 – 2048. I’ve calculated growth rates for 2023-48 at the local council level and found strongest growth of 47% is projected for the Selwyn District just south of Christchurch.
Next comes Waikato District at 43%, Queenstown-Lakes 38%, and Hamilton City 33%. At the other end of the spectrum we have shrinkage of a projected 15% for Buller District, 9% for Ruapehu District, and 6% for Westland.
These population changes are not new trends and areas of fastest growth going forward have tended to have the fastest growth in recent years also. So, does this mean their prices have soared by far greater proportions than low population growth locations? No.
Independent economist Tony Alexander: “If you’re going to be more than just cannon fodder in the next cyclical upturn in the housing market, you might want to develop your analysis.” Photo / Fiona Goodall
Locations with high growth in housing demand tend to produce highest growth in new housing supply. Long-term price changes are surprisingly similar around the country and might become more so in the future now that supply growth is easier and aging people are looking to cash up from the cities and shift to somewhere more relaxed and cheaper.
However, what do you do next after downloading population projections? You need to gain insight into growth in new house supply just in case some places have got ahead of themselves with supply growth. There are no projections for future supply. But you might want to look at growth in the number of consents issued in recent years for new dwellings to be built and you can also get that information from the Statistics NZ website here.
Open “Industry sectors”. Open “Building Consents – BLD”. Find “Building consents by territorial authority (Monthly)”. It’s about halfway down the long list. Now you’re on your own. First, pray, second, make sure you select “Dwelling units” in the second white box, “New” in the third, “Number” in the fourth, and “Select all” in the last box. Download at the bottom right side.
By now, 99% of you will have given up. But if you’re going to be more than just cannon fodder in the next cyclical upturn in the housing market, you might want to develop your analysis, spreadsheet management, and website logic tools. Why? Because this past decade of house construction boom may have produced excess housing numbers in some parts of the country and if you buy just because the location is cheaper than in a big city, you might find yourself well behind the average capital gain which comes for the next 5-7 years. Good luck.
- Tony Alexander is an independent economics commentator. Additional commentary from him can be found at www.tonyalexander.nz
