Auckland widens the property gap

By Bruce Morris

Kara Moeller-Laird and Gervais Laird with Tessa (4) and Morgan (6) are happy in Grey Lynn, where property prices are booming.  Photo / Richard Robinson
Kara Moeller-Laird and Gervais Laird with Tessa (4) and Morgan (6) are happy in Grey Lynn, where property prices are booming. Photo / Richard Robinson

House prices throughout most of New Zealand are stalled at levels up to 30 per cent below the peaks of the property boom as the gap widens between Auckland and the rest.

Latest statistics reveal a sea of red across the North Island where, outside Auckland and Wellington, only four of the 201 areas surveyed are recording average prices above the overall market highs of late 2007.

The 53 suburban breakdowns in Wellington show five areas with average prices higher now than in November 2007, and the best of them is up only 2.5 per cent.

But Auckland gives an entirely different picture, as shown in the quarterly Property Report liftout in today's Herald, publishing QV house price data for the 422 biggest North Island towns and suburbs.

The city-wide price indicator has been dragged down by the struggling Rodney, Papakura and Franklin areas, but otherwise it is up almost everywhere except for parts of Waitakere and Manukau.

Leading the Auckland pack are Kingsland (up 19 per cent to the end of March), Grey Lynn (up 17.9 per cent) and Mt Eden (up 16.1 per cent).

Then, all above 10 per cent, come Western Springs, Epsom, Westmere, Meadowbank, Pt Chevalier, Sandringham, Lynfield, Onehunga, Glendowie and Mt Albert.

While outer areas such as Wellsford (down 17.4 per cent), Clendon Park (down 14 per cent) and Manurewa East (down 12.3 per cent) are struggling, prices in the central Auckland suburbs continue to rise.

At the far end of the deficit scale, some provincial towns are taking a hammering. Prices were pushed up in the boom years as new investors chased quick capital gain through the early and mid-2000s, and they were punished when the slump came.

The result will make gloomy reading in towns such as Pukehina (where prices are down 31.6 per cent since late 2007), Kaikohe ( down 29.9 per cent), Kaitaia (down 24.5 per cent) and Taumarunui (down 24.4 per cent).

Provincial cities haven't escaped either. While values have risen a little lately, prices in Whangarei have dropped by nearly 17 per cent since November 2007 and Hamilton, Tauranga, Rotorua and Taupo are all down by between 10.6 and 13.5 per cent.

Many areas hit their highs well before late 2007, opening up a wider gap with Auckland at the time, so the decline in provincial centres is probably worse than the figures show.

Auckland's property prices have always been the country's highest, reflecting the demand provoked by a constantly rising population, opportunity, the city's gateway position and even its mild climate. Property prices in the big cities around the world - New York, London and Sydney among them - have opened up wide gaps with their national neighbours.

The Real Estate Institute median price for wider-Auckland in April was about $490,000 - a giant step up in value from Rotorua ($254,000), Whangarei ($259,000), Hamilton ($338,000) and Tauranga ($343,000).

But the ratios between Auckland and the rest have stayed fairly constant over the past 10 years. Monthly median data has its pitfalls, but the figures suggest the cities are all up between 75 and 100 per cent over that decade.

So is Auckland, already well ahead of the pack, now starting to break clear from the field?

Professor Bob Hargreaves, who leads Massey University's property unit, says it all comes down to demographics.

"When you get growth, you get demand and when there is no demographic growth you will be going backwards."

Economist Rodney Dickens, managing director of Strategic Risk Analysis, accepts the logic of the contribution to house prices from the demand created by an expanding population and job opportunities.

But he thinks there may be more to the present Auckland spurt.

Prices in many towns and cities grew at a higher rate than Auckland during the boom, he says, as investors went elsewhere "all caught up in the myth that property looked cheap compared to Auckland ... and of course there was a reason for that.

"I think what we may be seeing now is a restoring of relativities - the catch-up factor."

A TALE OF TWO PLACES

Grey Lynn: + 17.9 per cent*

When Gervais Laird and his young family came back to Auckland after a stint in Sydney he was keen to return to his old stomping ground of Grey Lynn.

Mr Laird flatted there in the 1990s and said the area had gentrified since.

Grey Lynn has recording a 17.9 per cent rise in average house values since 2007; only neighbouring Kingsland has increased in value more.

"It was an alternative-type neighbourhood. And it still is to a degree, although there are lots of people my age in suits getting into cars in the morning these days," Mr Laird said.

"Most of the old villas have at least been given facelifts, if not replaced. The cafes, restaurants, much posher food and clothes shops ... it's certainly pushing that way."

The 41-year-old lawyer said he and his wife, Kara, an architect, were fortunate to buy into the neighbourhood last November. He said that because of speculators, even the suburb's few remaining "old dumps" were out of reach of first-home buyers.

They went to every auction and open home in Herne Bay, Ponsonby and Grey Lynn for a month, before eventually buying their three bedroom villa in Chamberlain St.

"We missed out on one auction, which went for $300,000 over what we thought it would go for.

"We bought just as the market took off in the area ... it seems like it's going crazy around us at the moment. You have two-bedroom houses selling for close to $1 million, which is just nuts."

But one of the area's charms was the "spectacular community" of new homeowners and those who bought there long before the area's prices shot up.

"There's a real sense of consistency and community in those suburbs."

Kaikohe: 29.9 per cent*

After Jolene Albert and her partner's home was wrecked in the Christchurch earthquakes they decided to go north.

Ms Albert, originally from the Bay of Islands, had lived in Christchurch for 12 years but her Avondale home was red-zoned after earthquakes in February last year.

The family of four will take possession of their new home in Kaikohe on Thursday.

"We lost our house down there and have come back. And yes, the houses are cheaper and you get a lot more for your bang here."

For $285,000 they bought a three-bedroom house on a 270sq m property with a sleepout, double garage and an extra shed.

Kaikohe has had the country's second-biggest drop in house values since 2007 - the average has fallen by 29.9 per cent.

Ms Albert, 35, said the main issue was finding a job in the area, which they both now have.

* Since market peak

- NZ Herald

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on production apcf02 at 24 Oct 2014 20:33:01 Processing Time: 266ms