There is a remarkable property story unfolding in New Zealand and for once it does not involve Auckland. Rather, it is our provincial cities and towns that are finally getting the recognition they deserve.
Auckland is our biggest city, so it is natural that every rise, fall and sideways movement of the property market is going to be analysed and scrutinised. For more than a decade Auckland has seen phenomenal growth and the concern was that it was not sustainable and the bubble would burst. While there has not been a pop, the market certainly has slowed down.
In regional New Zealand, especially the markets that Property Brokers operates in, the story is quite different. Growth is strong, prices have reached peak levels in some cases and the future is looking very bright.
There are a number of theories for this boom, with the main one that cashed up Aucklanders are quitting the rat race for a change of lifestyle in the provinces. Either that or Auckland investors are getting nervous about the future of the market in the City of Sails and are snapping up properties at reasonable prices further afield.
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These stories have been around for a little while now, and while they were anecdotal at first, figures are starting to back up the tales. And it is not just Aucklanders going rural, residents of our capital city have followed suit.
A glance at Property Brokers’ North Island residential sales figures reveal that about 500 of the 3,400 properties sold in 2018 were to buyers from Auckland or Wellington, who were either relocating or investing in the regions.
This is good news for the housing market in the regions because it indicates the Auckland-centric nature of New Zealand’s property market continues to change. Auckland is no longer seen as the only place to make money in the residential housing market. People are seeing that there are good deals in the regions.
One of the reasons for the good performance of the regional markets is the affordability issue. People are struggling to buy their first home in Auckland and it is also harder to fund an investment property there because you won’t get enough rent to pay the mortgage.
However, in many parts of provincial New Zealand, you can still get sufficient rent to be able to pay the mortgage. We are also noticing that the raft of compliance changes and legislation regarding rental properties is having an affect on investors. The result is that many of these houses are going on the market and it is the first home buyers who are purchasing them.
Some of these buyers are local while some of them are people moving from the big cities to take advantage of the affordable prices here.
There is a desperate shortage of rental properties in most places and a lot of landlords are deciding that it is too difficult, they don’t have enough time or it is too expensive to get compliant with the new rules. So, they are choosing to sell. While there is a desperate shortage of rental properties, at least more first home buyers are getting an opportunity to purchase a property.
For us at Property Brokers, we are seeing good results in many of our provincial markets, especially Manawatu, Wanganui, Horowhenua, Wairarapa and Hawke’s Bay. Demand is strong and we are also finding that volume is increasing, which is interesting because if you look at recent Real Estate Institute of New Zealand (REINZ) data, overall volume is dropping.
We are heartened to see our market share increasing and we are on track for one of our best years yet. As things stand, we are set to sell close to $2 billion worth of real estate in the year to June 30, 2019.
The future is certainly looking good, especially now that the coalition Government has kicked the Capital Gains Tax idea to the kerb. It appears that the Government has realised that the cost of administration outweighed any benefit.
We are quite confident that there will be continued growth in the regions and we don’t expect our regions to follow Auckland too closely. Even Auckland appears to be levelling out rather than experiencing a major drop.
The market there has seen well over 100 per cent increase in a decade, so this correction seems to be a bit of a blip. The prices in some areas of Auckland are probably back to where they were two to three years ago, but it certainly has not been the major drop that many thought it would be.
However, our market is the provinces and my advice to anyone who wants to get on to the property ladder is to look for the opportunities out there because prices are still going up significantly year on year.
Holding off is not going to get you a better deal so I would encourage anyone who is looking to buy, to get out there and find a property to purchase sooner rather than later.
- Bill Highet is the Chief Operating Officer for Property Brokers.
