For the country as a whole, the median value lifted 380%.
CoreLogic head of research, Nick Goodall, said there were significant differences across the country.
“A 500% increase in Dunedin, compared to 262% in Wellington, does translate to quite different compound annual growth [CAGR] rates of 7.4% and 5.3% respectively.”
He said one factor driving that increase was the lower starting price.
“It was cheaper to start off with so has often been more affordable for potential buyers.
“This has translated to a greater yield for investors, especially with relatively high rental prices, thanks in part due to the university and student population.
“Equally for homeowners, it’s more accessible and the mortgage would be more affordable.
“When measured by mortgage serviceability, for most of the last 25 years Dunedin has been the most affordable ‘main centre’, though Christchurch did overtake it around 2017 as the rebuild led to a noticeable lift in supply, which contained house price growth.
“More recently Wellington is now the most affordable, as house price declines – and still-high incomes – have improved affordability in Wellington when compared to the other main centres.”
He said the compound annual growth rate across the country was 6.5% a year.
In comparison, the NZX50 had annualised growth of 8.42% over the same period, or 655% in total.
Goodall said it is likely that future growth would be closer to 3% to 4% a year, in line with expected income growth.
CoreLogic's head of research Nick Goodall.
“The main reason for this is that many of the factors which have brought about such strong growth in residential property over the past few decades are unable or unlikely to occur again.”
Land restrictions had loosened a lot in recent years and were likely to limit land-value growth, he said.
The fundamental fall in interest rates from about 20% to 5% over multiple decades had allowed greater borrowing but the shift could not happen again.
There had also been significant income growth from buyers as most households moved to dual income.
“One final speculative point would be that it feels like there will be a change to our tax system at some stage in the future.
“Who knows when this occurs or what it looks like but it does seem like there will have to be a rebalancing of the tax take, towards wealth or capital gains and away from income.
“This would further limit the likely future growth rate of residential property value.”
Dean Anderson, founder of Kernel Wealth, said property was an attractive investment to New Zealanders in part because they could leverage their investments to maximise their gains.
Although the sharemarket outperformed, people who borrowed 80% of the purchase price of a property would make more in dollar terms.
“The best-performing asset classes have been shares, property, bonds and then cash. The major difference between buying a house and buying shares is people are really comfortable borrowing 80% to buy a property and that leverage generates better total returns.”
But he agreed with Goodall that the picture had changed into the future.
“Those numbers we’ve seen with house price growth over the past 20, 30 40 years – are they going to continue going forward?
“Wellington’s received their latest valuations and a lot people have seen their RV drop 20% or 30%. That is a really good reminder that property is not a one-way bet.
“To make a good investment return out of property isn’t as easy as it used to be, you need a lot of capital, your cash flow is probably negative, [and] you’re really banking on some capital gains which are uncertain going forward.”
He said there was a lot of property coming into the market, especially when migration was flat.
Rents weren’t rising as fast as they had been and expenses for property owners were still increasing.
People were banking on a hypothetical capital gain that might not be as much as they hoped.
The sharemarket could make more sense, he said.
“Businesses are things that are productive, innovative, selling goods, I would argue for many people that’s a better place to be investing than just property.”
He said the New Zealand obsession with buying property was changing.
“The next generation were struggling to get 10% or 20% to buy their own home let alone an investment property.
“I think the capital required and the cash flow required have changed the game.”
