The “Golden Triangle” – the term economic commentators use to describe the geographic area bound up by Auckland, Hamilton and Tauranga – has long been a major centre of growth in New Zealand’s residential property market.
It’s where about 50 percent of New Zealand’s population lives and much of the country’s economic activity takes place, and all signs are that it will continue to be fertile ground for growth.
But now the positive effects of that growth are stretching south to Rotorua and Hawke’s Bay.
For many New Zealanders, regions to the immediate south and north of the Golden Triangle are areas of high unemployment and concerning social statistics, but that story is changing.
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The Government’s focus on regional development could prove to be a significant catalyst for growth.
The property market’s prospects in regions outside the Triangle are improving, with massive infrastructure spending in the pipeline, a rapidly growing population base feeding residential construction activity and the wealth effect from recent house price growth underpinning retail spending.
Tourism is a sector slated for significant growth. A reduction in travel times from Auckland will make it easier for tourists to seek out more remote destinations and encourage Aucklanders to buy or develop holiday homes beyond current hotspots.
Service industries will naturally gravitate to new tourist locations, providing opportunities for savvy residential and commercial property developers and investors. It is possible the region could see the development of more retail and hospitality hubs, which in turn will drive growth in residential property values.
While the larger centres have experienced slower rates of price growth, the regions on the fringes of the Golden Triangle have enjoyed much stronger rates of growth as they play catch up.
Rotorua's residential property market has seen huge growth in recent years - last year more than $400 million worth of real estate was sold - and although the market has slowed down somewhat in the first half of this year, agents describe activity as sustained and positive. Lack of stock is a problem, but recent business investment in the city and the announcement of new retail developments will provide the impetus for more activity in residential space, such as Kawaha Point Villas and the proposed 200 new and affordable homes in Ngongotaha.
Hawke's Bay is also enjoying positive market activity, recording a 17.3 percent increase in price growth last year, and above average growth this year. Napier values rose 3.1 per cent in the first quarter of 2016 and 16.5 percent on the same period the year before.
Low interest rates and the easing in the loan to value ratio restrictions have seen many more first-home buyers active in the region.
Buoyancy in the market is driven by a number of factors - low unemployment and a strong local economy - but lifestyle is seen as a strong pull factor for outside buyers.
Investors are still active and include baby boomers looking for rental properties, or buying for family who can't afford to get in on their own, or ahead of family moving back into the area from other areas or overseas.
Property Institute of New Zealand chief executive Ashley Church says: “Tauranga and Hamilton have done well because of their proximity to Auckland, and Auckland is growing primarily as a result of migration.
“For migrants, I think it comes down to opportunity, and there are opportunities in the Bay of Plenty and in the Waikato and indeed further south.
“Tauranga has critical mass. In fact, Tauranga is bigger than Hamilton, and it has long been a destination for retirees. It has a good climate and it has a pretty strong service economy. Businesses there can attract and retain good staff.
“Hamilton’s success is probably more a reflection of a) its proximity to Auckland, and b) price. House prices in Hamilton are lower than in Auckland, and Hamilton is just an hour and a half down the road.
“I think if we were having this conversation in 10 years’ time, you might find that that success story has continued further south to Hawke’s Bay and even Manawatu. All of those areas are growing and their economies are diversifying in the same way that Tauranga did 20 years ago.”
Mr Church said improvements in infrastructure were driving much of the success story. “I come from Hawke’s Bay. When I was a kid the road between Napier and Taupo was a five-hour drive. Now, it’s an hour and a half, and the drive will eventually get to the point where it cuts through the mountains. That will happen right throughout the country.
“I think what people forget is that the measure for progress is the past. When I came to Auckland in the late 1970s as a kid, there were virtually no motorways. The infrastructure we take for granted now didn’t exist back then. In the space of 35 years – and that’s a blip in the history of the country.”
