OneRoof Property Report: Covid housing boom - NZ cities have twice as many $1m suburbs as pre-pandemic

Independent economist Tony Alexander gives his predictions for the NZ property market in the year ahead. Video / NZ Herald

New Zealand's big cities now have twice as many suburbs with typical house prices greater than $1 million than they did at the start of the Covid pandemic in what is being described as a cruel blow to first home buyers.

New analysis shows 203 of the 646 suburbs that make up Auckland, Christchurch, Dunedin, Hamilton, Queenstown, Tauranga and Wellington had an average house value of $1m or more in January 2020.

Yet that number has doubled in just two years, with 406 suburbs in the seven main cities now having values of $1m-plus, according to data by property website OneRoof and analysts Valocity.

The research shows how fast the nation's cities are transforming and the growing inequality this is leaving in its wake, OneRoof editor Owen Vaughan said.

"The housing frenzy of the last two years, fuelled by low interest rates and a 'fear of missing out' among buyers has radically altered the housing market, with typical prices in the majority of metro suburbs now well above $1m," he said.

Prior to the pandemic, first home buyers and many other Kiwis had already been finding it increasingly hard to afford to buy with national home ownership levels steadily falling over the past 30 years.

The dramatic housing boom through the pandemic had piled even more pressure onto buyers, Valocity head of research Wayne Shum said.

Between January 2020 and January 2022 the nationwide average property value jumped 45 per cent from $760,000 to $1.1m, Valocity data showed.

In some cities, prices jumped by more than 50 per cent, while even in places where prices didn't rise as fast, such as Dunedin, the growth was still strong.

"Before Covid, it had taken New Zealand's property market almost five years to achieve the same amount of value growth, with Canterbury and West Coast taking more than a decade to match their recent growth levels," Shum said.

Across the nation - both in the cities and out – that meant the number of $1m-plus suburbs grew from 298 two years ago to 894 now.

In Auckland, the booming market has left scant choices for first home buyers, Vaughan said.

In January 2020, 123 of the city's suburbs - or 43 per cent – had average house prices under $1m.

Now there are just 26 suburbs - or 9 per cent - with average prices under $1m.

At the same time, the number of suburbs in the $1.5m-plus band has exploded from 57 to 149.

"More worrying is the change in house prices in South Auckland, where incomes are lower and housing stock typically lower grade," Vaughan said.

"In January 2020, there were 10 South Auckland suburbs with an average property value of less than $700,000. In 2022, the cheapest suburb has an average property value of $738,000 and most were closing in on $1m."

Overall, Wellington first home buyers were arguably most affected by the boom.

In January 2020, 78 per cent – or 44 – of the city's suburbs had average house prices below $1m.

Now just 12 per cent – or seven suburbs – are below $1m.

It's not just Auckland's traditionally wealthier suburbs that now have sky high house prices with many homes in the city's south now having values above $1m. Photo / 123rf

Tauranga's affordability was also hit hard.

Two years ago, 86 per cent – or 20 - of its suburbs had average values below $1m.

Now just 34 per cent or – eight suburbs – are sub-$1m.

The least changed by the boom was Dunedin, Vaughan said.

The city's average house value grew 33 per cent over the two-year period, from $568,000 to $758,000, while the number of sub-$1m suburbs fell 14 per cent.

"The research also found Christchurch to be still relatively affordable, compared to the other major metros, but the opportunities for first home buyers to enter the market at a low price point are shrinking," Vaughan said.

The number of suburbs in the city with an average property value of $500,000 or less fell from 46 in January 2020 to eight in January 2022.

Hamilton's overall average property value grew 46 per cent in the two years and while most of its suburbs had prices below $1m, there are now no longer any suburbs with prices less than $500,000.

Queenstown remains the country's most expensive housing market.

"Prior to Covid's arrival, 22 suburbs in Queenstown-Lakes – or 70 per cent – had an average property value of more than $1m, nine of which were above $2m," Vaughan said.

"By January 2022, just two suburbs had an average property value of less than $1m, while the $2m-plus club has grown to 13."

In better news for buyers, Shum said the housing market was unlikely to see the same amount of growth in 2022.

"As inflation begins to bite and mortgage rates rise, we are likely to see the growth rate moderate to levels seen pre-Covid, and expect to see some value softening in some locations," he said.