We’ve all heard the stories. A friend, relative or work colleague has become disillusioned with buying in a market where so much of their income goes towards the mortgage. So, they’re selling up and they’re off in search of the next best spot.
But, where is that? Where is good to buy right now? Where are the next hotspots?
Many of regional New Zealand’s attractions are well-documented. More affordable houses, shorter commutes, more time to spend with the family, strong communities, a growing number of job prospects, hospitals, good schools and a better lifestyle. But now, many of the regional hotspots are also becoming increasingly unaffordable. So where next?
Check the latest figures for regional house price growth and these five regions deliver a robust average of 38.6%, and show that the regions of Hawkes Bay and Nelson, have grown more strongly than the traditional regional hotspots of Bay of Plenty and Waikato.
• Hawke’s Bay - median increased 51%, from $290k to $438k
• Nelson - median increased 42%, from $357k to $510k
• Bay of Plenty - median increased 41%, from $379k to $535k
• Northland - median increased 30%, from $330k to $430k
• Waikato - median increased 29%, from $379k to $490k
Of course, if you’re comparing apples for apples, the exchange is still an attractive one, using your cashed-up Auckland property to either get the same style of house but with no mortgage, or upgrade to a larger house, in better condition, in a great location. What’s not to like?
Facilitating the shift to more remote places are technology improvements and lower operating costs which have encouraged employers to expand their regional presence.
Add the recent Government announcement of a roll-out of projects it will finance from a regional development fund of $1 billion a year, and there is even a stronger injection of confidence into the regions.
Infometrics chief economist Gareth Kiernan says the growth has helped provide stability and certainty, and increased profitability in areas where economic agglomeration has occurred. “Having an employment focus attracts even more people because people go where there are jobs. Over the medium term, it provides a solid base and relates to growth in residential construction as it means they retain workers who move to the area.”
Tauranga, for example, has seen growth due to the larger population, infrastructure and increasing volumes through the port and as a freight and distribution hub. “To a lesser extent, in Hamilton you have the inland port at Ruakura which will grow further over the next 25 years. This is tied in with the university and technical institute which are making a name for Hamilton.
“In Palmerston North, there is Massey University in partnership with veterinary facilities, Landcare etc where they’re establishing an agricultural and technical innovation centre.”
As a consequence, there have been some growing pains, with housing demand out-stripping supply in many areas, which has seen prices rise.
REINZ was one of the first organisations to talk about the halo effect Auckland was having on the surrounding regions, back in October 2015.
Bindi Norwell, chief executive at REINZ says: “At the time, Auckland was experiencing record median prices so first-time buyers and investors were looking to areas that were more affordable. The first regions to experience this effect were Northland, Waikato and Bay of Plenty.”
Over time, the halo effect has spread further afield to include areas such as Hawke’s Bay, Bay of Plenty, Wanganui, Queenstown and Otago.
QV’s Andrea Rush says that the Queenstown Lakes District has seen a strong percentage value growth, and that has now pushed buyers further out to the neighbouring MacKenzie District.
“When prices in Queenstown jumped …this led those priced out of that market to begin purchasing in MacKenzie District towns such as Tekapo and Twizel and some of the highest percentage growth has been seen here over the past 18 months.”
Likewise, in the North Island that flow-on effect has seen relocators looking to Rotorua, Hawkes Bay, Kaipara District, Whangarei and Kerikeri for more affordable housing.
Investors also turned their sights on these areas when the first round of investor LVRs, requiring a 40% deposit for Auckland investors was introduced, putting further pressure on regional prices.
It’s not just about escaping our biggest city.
“In Wellington, recent house price growth has led to strong rises in the Wairarapa particularly in commutable areas such as Greytown and Carterton.”
In the South Island, people have relocated from Christchurch post-quakes to Timaru, Nelson and Tasman. Dunedin has also benefitted from those relocating in search of more affordable housing. Even Invercargill and Southland are now seeing more growth.
Rush says with high house price growth, retirees have also chosen to cash up their city homes and retire in more affordable regions.
The big question is, is the housing growth sustainable and will regional economies continue to boom?
REINZ data shows median house prices across New Zealand increased 7.1% in January 2018 with Otago (up 32.9%) and Hawkes Bay (18.4%) experiencing record growth. Bindi Norwell comments: “This increase defies the predictions of many commentators who 12 or 13 months ago were adamant that house prices would fall in 2017.”
Andrea Rush expects to see further value growth in the regions, particularly in the South Island.
“As the KiwiBuild programme begins building around the country, this will also provide further housing supply in those particular regions and may well end up being a ‘drawcard’ for those areas/regions.”
So while the big cities and those surrounding them in ever expanding circles look like a popular bet, searching a little further afield could also be a smart move that pays off in the long-run.