New Zealand’s residential housing sector has experienced an unprecedented boom since 2014, with a buoyant economy driven by high immigration, increased tourist spending and a status as a ‘safe-haven’ relative to more volatile countries.
However one market in particular has emerged as one of the strongest regional performers across New Zealand.
Spanning some 8,000 square kilometres at the southern end of the North Island, the Wellington region’s residential housing market has enjoyed a prolonged period of growth with home-owners reaping the benefits of capital gains, increased competition and savvy urban development.
“Property values across the region have risen 31 percent in five years,” says Bayleys Wellington residential salesperson Mike Lovell.
“Across the country we have started to see these gains taper off during the year to October 2017, however Wellington has bucked the trend, achieving record increases during the first half of the year, where the median sale price lifted during both the March and June 2017 quarters.”
Data from Bayleys Research shows that Wellington has achieved a record median sale price during the June 2017 quarter, increasing 9.8 percent year-on-year to $599,500.
Lovell says that sales activity across the region started to climb around October 2015 when the second round of loan-to-value (LVR) restrictions was established by the Reserve Bank of New Zealand.
“The LVR restrictions enacted in 2015 effectively cracked down on lending to investors in Auckland while simultaneously easing lending conditions for those borrowing money to buy property in other cities across the country.
“Rather than face credit constraints and rising prices in the Auckland market, we noticed a growing number of property purchasers turning their attention to Wellington as a more affordable alternative with just as much potential for value gains,” Lovell says.
In terms of activity, the number of sales recorded in the year to June 2017 fell by eight percent compared with the same period in 2016, contrast with national activity which fell by nearly 20 percent, caused by election-induced uncertainty and tightened credit conditions.
“Despite this, the decline in regional sales has been much more subdued than what we have witnessed in Auckland and across the rest of the country,” says Lovell.
“Regional sales activity has been impacted by credit conditions however unlike the rest of the country, Wellington has experienced falling supply numbers in conjunction with a reduction in new listings.
“Properties across Wellington are being tightly held as fewer properties for sale, means less sales, resulting in fewer options for home-owners who may be looking to upgrade to a larger family home,” Lovell says.
Latest data from realestate.co.nz shows that Wellington’s inventory is as low as 6.3 weeks – compared with the long-term average of 18 weeks - making it the tightest market across New Zealand’s 16 regions for the 20th consecutive month.
“This has heightened competition for quality properties, increasing prices while the average days on the market for the region has dropped steadily over the last two years – now currently at 27 days.
“Limited local stock is seeing prospective purchasers make their decision to purchase quite quickly,” Lovell says.
“With forecasts estimating 80,000 new residents by 2043, Wellington is one of the country’s fastest growing regions, however roading and accessibility have long been considered its Achilles heel.
“In a marriage of the public and private sectors, construction has begun on the four-lane Transmission Gully which will run 27 kilometres between Porirua and Kapiti.
“Large scale projects like this have resulted in increased interest in locations to the north of the central city, which will see commuter times into the CBD reduce as stages of the projects are gradually completed,” Lovell says.
“Despite rising construction costs and a shortage of skilled labour proving to be a challenge for Wellington’s residential development, apartment sales now dominate the inner-city market and 68 percent of those recorded in the last 12-months has been attributed to attached-style housing.
“Overall residential building consents have increased to 67 percent in the June 2017 year, which has been aided by explosive development in the north-eastern area of Lower Hutt where the construction of retirement units has really taken off.
“With competition for quality properties driving price growth, local and central Government are working more closely to encourage affordable housing developments.
“Recently utilising the findings of the ‘Mayoral Housing Taskforce’, the Wellington City Council voted to release more council land for development, convert more inner-city buildings into affordable residential housing and simplify the consent process, amongst other initiatives.
“It’s been estimated that Wellington currently has a shortage of around 3,500 homes and it’s pleasing to see that this is being addressed swiftly by bold initiatives like a focus on building smaller homes, overhauling rates, increasing density and residential height limits,” Lovell says.
Voted the world’s ‘coolest capital’ by global travel guide Lonely Planet, Wellington is regarded as New Zealand’s cultural hub with some of the country’s best coffee, craft beer and spectacular coastal scenery.
Despite these obvious attractions, the recent performance of its residential housing market, and subsequent initiatives by local and central Government have combined to strengthen a market which is both welcoming to first-home buyers and lucrative for existing home-owners.
“We’re proud to operate in a market with strong sales across all property types, ranging from luxury five bedroom properties to apartments and smaller one and two bedroom properties.
“Success can be measured by Wellington’s relative affordability,” says Lovell.
“New Zealand’s capital city boasts a median sale price which sits under the Government’s threshold for ‘affordable’ property at $600,000 – and the fact that this is $245,000 less than the average Auckland home has not gone unnoticed by savvy purchasers,” laughs Lovell.