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Home / Hawkes Bay Today

Housing market up 20 per cent and rising (+ video)

By by Patrick O'Sullivan
Hawkes Bay Today·
10 Jul, 2016 02:08 AM6 mins to read

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Hawke's Bay real estate agents say out-of-town buyers have helped to push property values up to 20% higher in the last year. Video by Duncan Brown

The Hawke's Bay real estate market looks set to follow Auckland, with agents claiming a 20 per cent rise in Hawke's Bay values since last year.

The average Auckland house value is nearing $1 million. The QV housing index for May shows values have are now 78.4 per cent higher than the previous peak of 2007. Napier and Hastings values are just 10.2 per cent above the 2007 peak at $359,000 after a protracted slump in the local market. The 2007 peak was only surpassed last year.

Some fear rampant Auckland prices are a bubble set to burst, dragging the country's market down with it, others are not so sure because of demand, low interest rates and a perceived lack of political will.

Prime Minister John Key recently told the central bank to "just get on with it" and introduce immediate restrictions. The Reserve Bank told Reserve Bank deputy governor Grant Spencer said moderating housing demand was a "team effort" and the Government needed to stem immigration if it wanted to stem house values.

"We cannot ignore that the 160,000 net inflow of permanent and long-term migrants over the last three years has generated an unprecedented increase in the population and a significant boost to housing demand," he said.

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The Reserve Bank tightened loan-to-value (LVR) restrictions in November, requiring banks to seek a 30 per cent deposit for Auckland investment properties.

The halo effect of buyers seeking value and higher gearing in regional New Zealand is influencing the Hawke's Bay market.

Tremains Real Estate director Simon Tremain said based on REINZ figures Napier and Hastings values have risen 20 per cent.

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"As a rule of thumb anything bought in 2015 or before you could say has gone up 20 per cent," he said.

In Hawke's Bay the rate of houses sold outpaced the number listed "so that has got to have upward pressure on the market".

"I have never seen it like this. The sheer number of buyers making offers even though we are in the middle of winter.

"We now have had two months in a row with more than 300 sales. While stocks are low and demand high you would naturally assume that will continue."

Harcourts managing director Kaine Wilson said there was no crystal ball for predicting trends "but my personal point of view is it's definitely looking that way, although we are getting a lot more stock coming to the market than we have had for a little while".

The extra listings "married up" with lengthening days now winter solstice had passed.
The trend of out-of-town buyers was continuing, especially from Auckland with Australian buyers also active.

"From the low end of the market to the mid $1 millions there is still high demand. Once you cross that threshold it is a different market with limited buyers."

Schooling was a strong factor for location desirability.

"We have seen recent high demand around Te Mata Primary and no doubt the same is true for the Napier/Taradale areas."

Leaders real estate agency managing director Elanor MacDonald said prices were likely to rise steadily until supply loosened up, "which does not look likely anytime soon".

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"All suburbs are currently popular, especially in the $300,000 to $350,000 and $450,000 to $550,000 brackets," she said.

Ahuriri, Napier Hill, Havelock North and waterfront properties were drawing the greatest interest.

Property Brokers regional manager Paul Whitaker agreed with Mr Tremain's 20 per cent estimate in value increases and said growth would continue.

"There is a lot more room for movement," he said.

Supply and demand was a factor, especially with the out-of-town influence from Auckland buyers and low interest rates.

He said while higher prices were closing the door to home ownership for some people, for others increased home values was their only chance - parents were now able to borrow against new-found equity.

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"It's not all bad news for first-home buyers."

He said the strong market brought a new challenge to the industry.

"It goes around from telling people, your price is a bit too high to how can we list more property and answer the argument of people of saying there is nothing out there to buy."
Hawke's Bay economist Aaron Drew said the government scheme announced last week, to provide $1 billion in interest-free loans to councils to fund infrastructure in high-demand housing areas, was "a drop in the bucket" and would not stem the flow of people and money from Auckland.

"It was a very small figure in terms of the total amount of infrastructure investment that is required to build infrastructure such as new railways, sewage systems, water reticulation, electricity networks and eroding.

"In Auckland they may need a second runway for Auckland International airport and there is a lot of pressure on the rail - we know central rail requires about $2.5 billion and a second harbour crossing is being talked about. You also have social infrastructure such as hospitals and schools.

"So I don't think Hawke's Bay is disadvantaged. There has been extremely strong population growth in New Zealand and some regions are absolutely struggling with those numbers, whereas the Bay is only just starting to feel population pressures and has a long way to go to be as acute as other parts of New Zealand, but particularly in Auckland."

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Mortgage adviser Steve Davies said a quarter of his inquiries were from Aucklanders.

"We have definitely seen an increase in enquiry out of Auckland looking to buy down here," he said.

There were mainly investors, many using equity in their Auckland properties.
He said it made Hawke's Bay more competitive "which is a bit unfortunate for first-time buyers".

"The ones I'm seeing from Auckland are more interested in multi-dwelling properties for return rather than the first home buyer market."

He said while some talked of moving to Hawke's Bay none had yet made the move.
He said he wasn't too concerned with the Auckland bubble bursting because there was still ongoing demand for more homes.

"I don't actually believe it will burst. It may level out and slow down."

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Mr Davies owns a house in Auckland's eastern suburbs.

"That's interesting to sit back and watch."

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