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Regions lead the charge as residential property values rise

Tags: Residential

New Zealander’s living outside of greater Auckland are fed-up with fodder about the city’s residential housing market, says national residential manager for Bayleys Real Estate Daniel Coulson.

New Zealander’s living outside of greater Auckland are fed-up with fodder about the city’s residential housing market, says national residential manager for Bayleys Real Estate Daniel Coulson.

“However, these frustrations are actually fueling regional growth, as residential property outside our main centres enjoy a prolonged period of time in the sun.”

Latest data from the Real Estate Institute of New Zealand (REINZ) reveals another month of record median sale values and sustained growth across regional New Zealand, while main centres Auckland, Wellington and Christchurch take the back-seat achieving comparatively modest activity.

The statistics highlighted that in the year-to-date there has been a rise of regional hot-spots like Northland, Marlborough and Southland as they overtook main cities in terms of growth and the performance of their residential housing markets.

Record median sale prices have been recorded for the month of May in;

• Northland ($450,000) - a rise of 29 percent year on year
• Manawatu/Wanganui ($269,000) - a rise of 20 percent year-on-year
• Nelson/Marlborough ($483,250) - a rise of 22 percent year-on-year
• Southland ($238,000)-  a rise of 14 percent year-on-year.

The results come to light amidst data from Statistics New Zealand which reveal that inward migration has realised a record net gain of 72,000 people in the 12 months to May 2017.

“Of this number, it’s estimated that nearly two thirds of the incoming population is bound for Auckland,” Mr Coulson says.

“While Auckland might appear an attractive base for internationals beginning life in New Zealand, anecdotal evidence suggests that more than 32,000 of those coming into the country are Kiwi’s returning home, looking to establish a family base in regions such as the Waikato, Bay of Plenty and Marlborough. 

“Strong sales growth across regional New Zealand supports the theory, with Real Estate Institute of New Zealand chief executive Bindi Norwell remarking; “Buoyant activity across a number of regions contrasts with the continuing stability of Auckland.”

“However it’s not just those returning home from overseas which understand the lure of the regions.” Mr Coulson adds.

“It’s easy to see why Aucklanders continue to migrate within New Zealand. The median house price in Auckland is sitting at $952,000. Working on the basis that for long-term residential property owners (which is 10 years or more), they’ll have something to the effect of 60-70 percent equity in their property,” he says

Mr Coulson adds that regional property value growth could broadly be categorised into two sectors – the heart and the head. The first encompassing relocation to new areas, and the second underscored by investment returns.

“By selling up the Auckland address – even at the average price levels, most Aucklanders looking to move out of the city would walk away from their current property with about $600,000 in the hand… which is enough to buy mortgage-free in their choice of province across the country,” he says.

“That psychological lure of being mortgage free is a strong motivational factor.”

Mr Coulson says that plummeting yields from residential investment property in Auckland had also financially motivated a considerable swathe of Auckland-based investors to look to the regions for returns above 5.5 percent.

“With Auckland house prices having increased on average by 29 percent since the beginning of 2015, yields have consequently evaporated to the point where it is now common to see rental returns of less than four percent,” he says.

“As sale values continue to flatten, there is less likelihood of capital gain growth in the Auckland residential property sector and investors are now weighing up their options. 

“Are they comfortable with a return of four percent, do they look to invest in other opportunities like shares, or persevere with the residential property market outside Auckland in search of more appealing returns.?

“That’s where opportunities in the likes of Northland, the Bay of Plenty and Nelson are coming into play.”

Mr Coulson says that for the likes of Hamilton and Wellington, investors were cognisant of the city’s tertiary education populations which require student accommodation. While for properties in the Far North and Nelson the drivers were coming from localised economic growth, buoyed in tandem by internal migration out of Auckland.

Mr Coulson added that a flow-on effect of the regional internal migration flow out of Auckland was that remote geographic locations were now emerging as holiday home destinations.

“Aucklanders traditionally tend to own holiday homes within a two-and-a-half hour drive of their city residence – such as Mangawhai and Omaha to the north of the city and Coromandel Peninsula to the south,” he said.

“By relocating to provincial cities around the country, Aucklanders are now seeking out new holiday home destinations within a two-and-a-half hour drive of their new residences. That’s opening up holiday home opportunities in townships in the likes of the Eastern Bay of Plenty, Southern Hawke’s Bay, Southern Taranaki, Golden Bay/Tasman Bay, and Central Otago.”

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