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Urban-fringe living affordable for home buyers despite commuting costs

Tags: Property Insight Research Residential

It’ s official – it’ s cheaper to buy a home on the outskirts of Auckland and commute to the CBD than it is to live in central-city suburbs.

New research from Bayleys Real Estate, has, for the first time, broken down the costs of buying residential property in city-fringe suburbs compared to the commuting costs associated with buying a home on the city’s outskirts or outlying areas.

And the savings can stretch up to tens of thousands of dollars.

Bayleys Research manager Ian Little said while the cost-savings had long been ‘assumed’ the hard data finally generated an exact dollar value on the cost of commuting from Auckland’s outlying suburbs and satellite towns.

“When comparing the cost of financing a mortgage, based on current median house prices within suburbs serviced by major public transport hubs and the cost of commuting, it’s clear that Auckland’s outer suburbs offer excellent value for money,” Mr Little said.

“Cost is clearly a major consideration in home purchasing-decision, with household incomes ruling certain suburbs in and out of the budget.

“A majority of residential property purchasers face a choice as to whether they would prefer to live in relative close proximity to their employment and minimise any commute despite the higher costs of housing or whether to purchase a more affordable home further from town and take on the extra commute.

“Backed up by the financial data though, living on the city fringes or in rural towns within an hour’s commute can deliver significant cost savings. Lifestyle block owners’ would argue that living away from the noise and congestion of the inner city is worth the time spent commuting anyway.”

A Ministry of Agriculture and Forestry survey found the primary motives for people choosing to live in lifestyle and rural areas were almost entirely based on ‘lifestyle advantages’ such space, privacy, clean air, and child-friendly sections.

“These considerations generally trump the time spent commuting,” Mr Little said. “For example, assuming the commute from Pukekohe to the city is an hour longer than the journey from Orakei or Remuera, an urban commuter making the trip daily could potentially spend 480 hours a year more travelling than their city-dwelling counterpart.

“While the data used for our research was confined to Auckland, it’s a fairly safe conclusion to say similar figures would come from provincial cities such as Whangarei, Hamilton, Tauranga and Rotorua with commuters residing in their respective provinces,” Mr Little said.

“The obvious difference between Auckland - compared to Northland, the Waikato, and Bay of Plenty - is of course quicker than commuting times in the provinces as there is considerably less traffic on the roads into and out of the smaller cities.”

Bayleys’ research analysed the cost of commuting to and from the city’s CBD, for passengers travelling by train to the east, south and west, utilising the Northern Express bus service to the North, and ferries for Waiheke Island and the inner-harbour suburbs Devonport, Bayswater, Northcote, Birkenhead, Beach Haven and Hobsonville.

Car parking and fuel costs were factored into the commuting equation, as were season travel passes for trains, buses and ferries.

“The difference in the cost of servicing a mortgage used to buy a median priced Orakei or Remuera home, and the cost of servicing a mortgage used to buy a median priced’ home in Pukekohe, located at the end of the southern railway


link, can be approximately $49,000 in the first year,” Mr Little said.

“Using Real Estate Institute of New Zealand median purchase prices, and the ANZ variable mortgage rate of 6.74 percent, the cost of financing the first year of a mortgage for a median priced home in Orakei, is $84,060. In Penrose several stops down the train line, the figure is $37,224. In Pukekohe, the cost of financing the first year of a mortgage for a median priced home is $31,128.

“The cost of commuting from Pukekohe to the CBD by train is $4,032 on the AT Hop system. So the financial benefits are clear. The mortgage servicing and commuting costs for the Pukekohe home owner total approximately $35,150.

“That’s $49,000 less than financing a $1million mortgage in Orakei.”

Mr Little said there were also marked savings for motoring commuters coming into the city from outlying towns.

“According to the Automobile Association, at 80 cents a kilometre for a medium sized car, the cost of driving from Pukekohe is $19,700 per annum. It then costs $3,720 to park in downtown for a year. So all up, it’s $23,420,” he said.

“Even taking this into account the total cost of transport and mortgage finance, commuting in from Pukekohe provides a financial saving of around $29,500 compared with the Orakei home’s mortgage costs.

“And that’s on the assumption that the Orakei home owner walks to work and doesn’t have to pay for their own car parking. If they drive to work or catch public transport, then the variance becomes even greater.”

Mr Little said the Pukekohe home buyer scenario would be replicated in Auckland’s outer Western suburbs such as Waitakere, Ranui and Swanson which were serviced by the rail network.

“On the North Shore, the primary public transport option is the bus service and as with locations to the south, east and west, there are still potentially substantial cost-savings for those commuting into the city centre from the likes of Coatesville, Dairy Flat, and Long Bay.”

Mr Little said Auckland’s CBD - with its high proportion of apartment dwellings - was the notable exception to the general rule of housing being more expensive centrally than in urban suburbs.

“The median sales price within the CBD in the final quarter of 2014 was $272,000. For many apartment dwellers though, they have minimal to non-existent commuting costs. They simply walk to work or study, or at worst catch a one-zone bus or ride a bike or scooter,” he said.

“This can lead to a complete reversal of the commuting journey - with central city residents heading out to the green belts or beaches over the weekend for recreational pursuits.”

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