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Property has always been a passion for New Zealanders but interest has intensified recently. New Zealanders move, on average, every five to seven years. Our homes are our biggest investments and property remains the favoured form of investing for anyone with cash to spare.
The current boom shows most clearly in the Quotable Value Quarterly Price Index. (The index charts quarterly house price movements against a base figure set in December 1989.)
The index, produced by QV New Zealand Ltd, shows that prices have risen 16.6% since the December 2001 quarter. Prices were up 2.6% in the March 2003 quarter alone.
Auckland city is the epicentre of the boom, with the QV index rising 2.4% in the March quarter and up an impressive 16.6% since December 2001.
Prices have powered on this year. Separate figures compiled by the Real Estate Institute of New Zealand (REINZ) show that March set new records for sales volumes and prices.
And while the sales volumes dipped slightly during April, they rebounded strongly in May. Meanwhile the median house price continued its upward trend, reaching $200,000 in March, $203,000 in April and $210,000 in May.
Auckland’s median house has stabilised at $289,000, down slightly from $290,000 in April but considerably ahead of the May 2002 median of $266,000.
REINZ national president Graeme Woodley said: “(Despite) a few regional blips, the overall market appears very solid and clearly there is a lot of capital flowing into residential property, both from occupiers and investors.
“Interestingly, while Auckland led the way, a number of regions appeared to lose ground, albeit temporarily, due, we suspect, to the short trading month.”
| Region |
April 2002 median house price |
April 2003 median house price |
| Auckland |
$265,000 |
$290,000 |
| Northland |
$155,000 |
$150,000 |
| Waikato/Bay of Plenty/Gisborne |
$169,000 |
$180,000 |
| Hawke’s Bay |
$131,100 |
$156,500 |
| Manawatu/Wanganui |
$115,000 |
$114,000 |
| Taranaki |
$105,750 |
$117,000 |
| Wellington |
$212,000 |
$225,000 |
| Nelson/Marlborough |
$167,750 |
$198,000 |
| Canterbury/Westland |
$146,000 |
$155,000 |
| Otago |
$105,000 |
$121,000 |
| Southland |
$82,000 |
$95,250 |
Source: REINZ Property Market Report 21 May 2003
It is extremely difficult to pick the peak or bottom of a market, even with inside knowledge and detailed data. Property booms typically last between 18 months and two years. A property cycle - that is, the time from peak to peak - typically lasts around seven years.
The current cycle commenced in the late 1990s and took off in 2001. Prices rose particularly strongly in 2002. The continued rate of growth suggests the current boom will last at least another year, fuelled by continuing low interest rates, positive migration and economic growth.
In fact, New Zealand is one of the few countries not facing a property crash, according to the International Monetary Fund’s influential World Economic Outlook.
While Australia, Britain and the United States are all experiencing, or expected to experience, corrections in property prices after recent booms, New Zealand appears to be one of the few markets still in a boom cycle.
The REINZ reports that the rural lifestyle market is going from strength to strength. There were 770 sales recorded during May 2003, breaking all previous sales records.
The May sales had a combined value of $233.9 million and a median sales price of $240,000.
REINZ rural spokesperson Murray Cleland said demand for this type of rural property was strongly linked with the urban residential housing market, which is currently performing strongly.
Soaring house prices and current interest rates are making New Zealand homes less affordable, according to the latest AMP Banking/Massey University home affordability survey.
Of the 11 regions surveyed in the March quarter, seven recorded declining housing affordability. Put simply, people in large parts of the country are finding it tougher to buy a home and service a loan.
Affordability declined in Auckland, Manawatu/Wanganui, Waikato/Bay of Plenty/Gisborne, Hawkes Bay, Canterbury/Westland, Otago and Southland.
The 4.7% drop in affordability during March follows a record drop during the December quarter.
Much of the impetus behind New Zealand’s property boom is due to the strong economy. ANZ’s Economic Focus report notes that growth has continued to accelerate this year and is expected to peak above 4%.
The report states: “Housing activity has strengthened considerably over the past year but we do not believe the market as a whole has become over-heated . . . Looking ahead, the drivers of economic growth look strong.”
- Coastal and waterfront property remain in significant demand.
- Lifestyle areas including Northland, Nelson and Hawkes Bay are experiencing a big increase in house sales.
- Auckland's apartment market continues to recover lost ground.
- Overseas and out-of-town buyers are featuring in the Southland resurgence.
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