Sun, jobs keep house prices on the rise

* Where house prices rose fastest (1981-2004). Adjusted for inflation. Herald graphic

House prices - inflation adjusted - dropped in 10 out of 73 regions nationally during the past 23 years but the areas with big increases followed the sun and jobs. The warmer the area and the more people, the higher the price rises.

To lose money, buy southern South Island or rural North Island areas where population is falling and with dubious job prospects.

To make money, buy in large northern cities or hot holiday spots.

A report out today from Arthur Grimes and Andrew Aitken of Motu Economic and Public Policy Research shows that buying in a sunny, hot area of the country reaped rewards.

Of the regions where prices fell, the report said: "Each of these areas tended to experience population stagnation or decline and low economic growth over much of the past two decades.

"Strongly performing areas are dominated by the major urban centres and vacation destinations."

The report was commissioned by the Government's Centre for Housing Research, Department of Building and Housing and Housing NZ Corporation and used data from Quotable Value.

Nationally, house prices rose 105 per cent in the 23 years from a 1981 median of $112,000 (in today's dollars) to $230,000 by 2004. On average, 267 houses were sold every quarter.

The big price jump happened in the 1992-2004 period when the median rose 74 per cent, compared with a more restrained increase in the previous decade.

Areas of fastest growth for new houses were Auckland with 676 average quarterly building consents in the 23 years, Christchurch (498), Manukau (482), North Shore (329), Tauranga (303), Waitakere (302), Rodney (234) and Wellington (225).

The areas of slowest building activity were Kawerau (one consent on average a quarter), Wairoa and Waimate (four each), Stratford and Waitomo (five each), Rangitikei, South Waikato, Mackenzie and Kaikoura (each with six).

The report pointed to price rises continuing at least until 2008 and said regions which could keep construction and land prices under control would see robust new housing developments.

"If high house prices - that is poor affordability - is a concern, a key policy focus has to be on ensuring that construction costs and land costs are kept to a minimum consistent with other objectives, for example, ensuring adequate building standards and ensuring appropriate land uses for the community," the report concluded.

"In turn, this requires a planning and regulatory process that is conducive to the development or residential land or of in-fill subdivision of existing land and to the construction of new dwellings."

It called for the nature of these regulations to be the subject of a further report.


True value of town not in property prices

They might have a dismal track record on the property values scale but residents of some of New Zealand's least-popular regions stoutly defend their districts.

While those posh areas of Queenstown and Auckland have surged ahead in property values in the past 23 years, showing a 200 per cent-plus rise in house prices, Kawerau, South Waikato and Gore have the dubious distinction of showing negative property value growth of between 40 and 31 per cent after prices are adjusted for inflation.

But that doesn't mean they're not great places to live.

"Best town in New Zealand," said Kawerau plumber Ian Robertson, who bought his first home in the town in 1959 and which is now valued at around $180,000.

House prices had jumped in the past three years, the 73-year-old said, and then there's the great outdoors and beautiful lakes.

"The media have misrepresented Kawerau. We've got the best drinking water in the country and it's a great place to bring up kids."

Kawerau real estate agent Ross Hughes, who lives in Whakatane, said retirees were flocking to the place.

"Prices have doubled in the past three years. I would tend to question that statistic," he said.

South Waikato resident Dianne Turco also defended her district, where house prices have dropped 35 per cent in the past 23 years.

In the nearby village of Arapuni, known for its swing bridge over a hydro-electric power station on the banks of the Waikato River, houses sold for as little as $40,000 just two years ago. But that figure was now closer to $200,000, she said.

Prices had doubled or trebled in the town of Tokoroa with a new 20-home subdivision under way.

"There's a lot of people coming to places like Arapuni and getting back in touch with nature. It's absolutely gorgeous," she said.

Gore resident Pam Young shifted to the North Island a few years ago but decided it was too hot and moved back home. She's lived in the town since 1943 and wouldn't live anywhere else.

"I love it. My son lives on the outskirts of Gore and he wouldn't move for anything," the 62-year-old said.

She bought her first home for £1750 but you would need $200,000 these days, she said.