Auckland house prices are nearly back to the levels of 2007, but the provincial cities and towns continue to struggle, writes Bruce Morris.
When John Banks wounded those beyond the Bombay Hills and Waiwera with his observation that there are two types of New Zealanders - Aucklanders, and those who want to be Aucklanders - he was stirring. But those fixated with the more material things of life know there is some truth in his barb.
Forget about the motorway jams, noise and living on top of your neighbours, if life is at least partly about growing personal wealth, Auckland is the place to be, with Wellington back a bit and then daylight between the capital and the provincial cities and towns.
Nothing new in that really, though all the evidence is the gap is widening and will continue to do so. That's the way it works all over the world, as people gravitate to the big cities for the opportunities they provide, creating demand that puts pressure on land and prices.
The small rural towns - and to a lesser extent the provincial cities - can't hold on to many of their young people because there are not the jobs to keep them. Over time, a declining population has an inevitable impact on their house values.
So while there is still plenty of uncertainty in the New Zealand residential property market, it's no surprise Auckland is holding up pretty well while its provincial sisters remain locked in the drop-and-drift pattern that's plagued them since 2007.
The QV data of this quarterly's Property Report reveals the overall decline across the North Island. But for a snapshot of the cities, QV's national house price index gives the clearest picture of the price change from the peak of 2007 to the end of April (with the movement over the past year in brackets):
* Auckland: down 2.3% (-0.5%)
* Whangarei: down 19.3% (-5.2%)
* Hamilton: down 12.1% (-3.5%)
* Tauranga: down 12.1% (-1.7%)
* Rotorua: down 12.4% (-1%)
* Wellington: down 6.3% (-3.4%)
That is a graphic illustration of the power of Auckland in sustaining price gains through hard times - and almost as powerful an indicator that prices do not always shift up as real estate moves through its cycles.
As one provincial city valuer noted last month: "I'm afraid I can't avoid a shiver when young people tell me they're anxious to get on to the property ladder, almost at all costs - as if the only path on a ladder is up. With that sort of naïve attitude, it is no wonder that so many people, panicking in a market that became quite irrational, bought too high and have since found that you can slide down a ladder, too."
The Whangarei couple who bought four years ago for $320,000 on a $280,000 mortgage now have a property that may today be valued at $260,000, and face tough years ahead before they can recapture their equity. Inflation, meanwhile, is also gobbling away at their prime "asset".
In Auckland, the situation is not so worrying, although a rash of mortgagee sales in the past three years shows what can happen if people over-stretch themselves in a hyped-up market helped along by investors ignoring the fundamentals. Within the wider city, there will be people like that Whangarei couple, especially in some of the more modest suburbs, but most have kept their heads above water as prices have come back.
It's difficult to offer a crisp overall assessment of what's happening out there because the picture can vary tremendously, even within suburbs. While the coastal holiday market is still deathly, suffering from an overhang of sections and a slow economy strangling disposable income, Hamilton and Tauranga are at least showing stabilising signs.
But like Rotorua, Whangarei and the other North Island provincial cities and towns, they are still doing it tough, with nothing to suggest things are going to get easier any time soon. The gap between them and "middle Auckland" can only grow wider.
As always, the best indicator for life in the market is the number of sales, backed by the average time taken to sell a house. On that basis, it hasn't been a bad start to the year in Auckland, with 2437 sales in March (with an average deal signed in 34 days) - the highest monthly performance since the market peaks, but well down on the 4078 sales of May 2003 and the astonishing 21 days-taken-to-sell indicator of four months later.
A more modest April suggested the city wasn't on the edge of a fresh spurt but rather, as one senior agent had it, "a return to a sensible, cautious market where people take care to do their research and offer fair value to a vendor who accepts a realistic price".
In many cases, that doesn't yet mean prices above those that might have applied in 2006 and 2007, but generally offers won't be too far away, with some nudging ahead of those four-year-old levels.
All agents and valuers report more discerning buyers who are taking their time, gathering reports and bargaining hard. There's often strong competition at the first-home-buyer level, but only for homes that tick most of the boxes.
In all suburbs - in Auckland and the provincial cities - buyers can afford to be choosy because prices are not galloping away and there is no need to rush. If a home is not well-presented or has "deficiencies" - perhaps a shabby interior and lack of sun, or on a main road position and missing a second bathroom - buyers will move down their list to find what they want. Or they will expect the vendor to be realistic about the price.
That approach seems so logical, yet in the mad days of the boom, pressured buyers paid bells-and-whistle prices without getting the accessories. Often do-up prices were very close to the renovated product.
"This is a discerning market now," says another senior Auckland agent, "and that's very healthy for all of us. We are very close to a normal market, in parts of Auckland at least, where supply matches demand and over time we might see gentle appreciation.
"That surely is preferable to the irrational behaviour of the last boom where, because it went on so long and was stirred by irresponsible banks and silly media reports of properties gaining $10,000 a week, people felt they just had to get in before it was too late."
The trouble then, of course, was that too many people got in much too late, pushing prices beyond realistic levels, helped by the free-and-easy banks into somehow believing the surge would run forever.
They learnt a lesson and many lost a lot of money; others are riding it out, letting time rebuild their equity.
The new wave of buyers seems a more cautious breed, accepting that ladders can bring you down as well as take you up - and, absorbing the lessons of the past, searching for value with their eyes wide open. That's no bad thing.
THE QUARTER CLIMBERS % UP
1 Fordlands +7.4%
2 Otumoetai +2.8%
3 Raglan +2.6%
4= Pauanui and Ruakaka +2.3%
6 Nawton +2.0%
7 Ohope +1.9%
8 One Tree Pt +1.7%
9= Springfield and Mangawhai Heads +1.6%
THE QUARTER SLIDERS % DOWN
1 Matarangi -9.9%
2 Ngaruawahia -7.8%
3 Kaikohe -7.6%
4 Te Kuiti -7.1%
5 Whangarei Heads -7.3%
6= Enderly and Koutu -5.9%
8 Utuhina -5.8%
9 Waihi -5.7%
10 Pukehangi -4.5%
THE QUARTER CLIMBERS % UP
1 Snells Beach +4.5%
2 Wellsford +4.2%
3 St Johns +3.4%
4 Pt England +3.7%
5 Northcote +3.6%
6= Highland Park and Westmere +2.7%
8= Mt Eden, Glendene and Glen Innes +2.6%
THE QUARTER SLIDERS % DOWN
1 Manurewa East -8.0%
2 Otara -6.7%
3 Herne Bay -4.7%
4 St Marys Bay -2.8%
5= Favona and Gulf Harbour -2.7%
7= Kohimarama and Pukekohe -2.2%
9= Ellerslie and Army Bay -2.1%
* Lists show the areas recording the biggest house price rises - and drops - in the three months to March 31, 2011. Source: QV's E-Valuer.
* From the New Zealand Herald's quarterly 'Property Report' - a guide to house prices and great places to live.