Buoyant local economies, job growth and more affordable housing spell exciting prospects for property markets in provincial centres.
As summer gets into full swing across the country, the sun is shining particularly brightly on our regions. Basking in the glow of a strong national economy, soaring primary exports, growing regional investment and more affordable housing, there is much to enthuse about for home buyers and investors across the provinces.
The Ministry for Primary Industries has forecast that New Zealand’s primary sector exports will grow by $505 million to a record high, with earnings set to hit $44 billion in the year to June. The forecast covers a wide range of products across dairy, forestry and horticulture, which support economic activity across virtually every region.
Late last year, the national unemployment rate fell to 3.9 percent – the lowest in a decade – and it is regional New Zealand which is seeing the strongest growth in employment. According to government statistics, Taranaki is leading the charge, adding 4,300 new jobs in the year to September 2018, an increase of 7.1 percent; followed by Gisborne/Hawkes Bay (6,400 jobs; up 6.5%); and Otago (6,700 jobs; up 5.5%).
Though the larger Auckland market added a lot of jobs (34,600), its expansion rate of 3.9 percent was broadly matched by regions including Tasman/Nelson/Marlborough/West Coast (3.4%) and the Waikato (3.3%).
It stands to reason that flourishing regional economies will translate into demand for homes. Research by CoreLogic shows that local labour markets, in particular, are a key driver of property values.
So, it’s little surprise to see that cities in the three strongest job-growth regions also saw sharp rises in average house prices over the past year: Dunedin (Otago), where prices rose 10.5 percent; Napier (Hawkes Bay), up 10 percent; and New Plymouth (Taranaki), up 6 percent.
However, there were notable exceptions. While Southland posted static employment figures, Invercargill saw some of the highest house-price inflation, at over 12 percent according to CoreLogic.
Prices also leapt in Palmerston North (up 12%) and Whangarei (up 11%), despite subdued job growth in their regions of 2.4 percent and 0.9 percent, respectively.
Rise and fall
In ANZ’s latest Quarterly Economic Outlook, the forecast continues to bode well for our regions. It sees expansion continuing, with exports “expected to contribute to growth … and business conditions expected to improve”. Good news for our regions. But will house prices follow suit, given the plateauing in prices in main centres such as Auckland and Christchurch?
“Places are always going through cycles,” says Kelvin Davidson, senior research analyst at CoreLogic.
“Some places are going up, then they go through a soft patch and another place takes over for growth. Over the next year, it’s going to be a question of provincial increases against the flatter markets in the big cities. Just on the back of two things, really: cheaper home values and strong underlying economies.
“But, even out in popular areas such as Hawke’s Bay, Whanganui and Invercargill, I’d still be expecting a general slowdown in price growth. There might be small pockets of acceleration, but generally it will be deceleration, as we’ve already gone through the peak in the housing-market cycle.”
Three of the best
Given the subdued outlook for house-price inflation over the coming year, the best buying opportunities look set to be those in regions with a strong job market, affordable housing and plenty of lifestyle opportunities. Based on these criteria, much of the best our regions have to offer can be found in these three regions:
Over a third of those purchasing property in Dunedin now are first-home buyers, which is a strong reflection of the region’s continued growth and buoyant economy – as well as the city’s more affordable homes, which currently sell for $50,000 less than Otago’s median price of $480,000, according to REINZ.
Great lifestyle options, sunny climate, fantastic fresh produce… plus jobs and cheaper housing. Across Hawke’s Bay, the median price is $464,123. You’ll pay extra to live near the beach in Napier ($507,000), although with a median price of just $435,000, nearby Hastings has its own attractions for buyers.
Continued investment and the country’s strongest job growth make this region a stand-out for affordability and lifestyle options. Many have already made the move, fuelling Taranaki’s record house-price growth during 2018. However, despite median prices rising nearly 9 percent over 2018, Taranaki still boasts some of the country’s most affordable property, with a median price of $380,000, and $417,000 in New Plymouth.