Auckland is patchy, and elsewhere it's worse. Everywhere, demand is measly in a buyers' market. Bruce Morris reports.

What an odd residential real estate market we have at the moment - some bits sliding away to where the sun don't shine as others draw prices around the levels hit at the peak of the boom in 2007.

Parts of Auckland breeze along wondering what much of the fuss is about, and the right houses in the right location of the city fringe are drawing huge interest and big prices. But faraway suburbs (and some not so faraway) are wondering when they'll stop drifting. Meanwhile, in Wellington, it's all about drift.

Coastal is having a terrible time, as explained on earlier pages, though top quality on the seashore seems to be holding up reasonably well if it's handy enough to the big smoke. Out in the provincial cities, some are doing better than others, which is not to say that any of them are doing especially well.

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Welcome to the grind of 2010. Depending on where you live, your economic certainty and size of the mortgage, you may be cruising along happily, or having sleepless nights.

Whatever your position, you are unlikely to be as asset-rich today as you were in 2006 or 2007. All the signs are that New Zealanders have cut back on spending and chiselled away at their debt, but house prices everywhere are down on their highs and, if inflation is taken into account, the slide is substantial.

Overall, Auckland prices have dropped just 2.7 per cent since the peaks of 2007. That doesn't sound so bad and, compared to all other areas, it isn't so bad, putting an average house in an average suburb at around $438,000, as opposed to the $450,000 peak.

But the erosion of personal wealth is plain when inflation is taken into account. Today, that $450,000 should have grown to $475,000 if the price had kept pace with the purchasing power of the dollar. Strictly speaking, the true value has fallen almost 12 per cent.

And that's in the part of the country that's doing best.

Down in Wellington, $420,000 would have bought you an average place in the central city at the end of 2007 and tracking inflation should have had it around $450,000 in October. But QV's data shows values have dropped around 6.5 per cent, suggesting that house is now worth something like $393,000.

Tauranga is one of the worst hit. Using QV's house price index as a guide, a property bought there three years ago for $400,000 might today sell for $354,000. But the original purchase price would have grown to $434,000 by now if the property had kept pace with inflation.

For people happy in their homes, on top of the mortgage and intending to stay put for years, these things don't matter so much, though a decline in paper wealth will hardly have them clicking their heels and planning an add-on bedroom or new drapes and carpet.

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Besides, it's no big deal for people who bought well before the market peaks in one of the country's biggest property booms. They saw home ownership as a longterm thing and they're still doing OK, even if prices have come back.

On top of that, of course, homes are for living in and enjoying. Leave the fretting to the sharemarket investors checking the business section each day to see how the rollercoaster is faring.

But many of those caught up in the hype of the market - perhaps investors and first-home buyers - have lost their equity, or much of it. Some have been ruined in mortgagee sales, and many others are probably wishing they had kept flatting.

Those who felt they missed the boat by staying renting between 2004 and 2007, when prices were charging ahead, are now in good positions if they salted away their extra cash and built up stronger deposits. Even a 5 per cent bank term deposit has kept them ahead of inflation and, meanwhile, prices have come back. Who said paying rent was "dead money"?

The quarterly tables of North Island house values published today show a clear disparity between Auckland and the rest.

Go back a full two years - when the market was well into its general decline - and you'll see a sea of red right across rural areas and the provincial cities when prices then are put against values to the end of September.

The message there is clear: many of those areas got well ahead of themselves in the boom, with demand fuelled by investors chasing cheap property and panicked first-home buyers seduced by the argument that if they didn't get in then, they'd never be able to afford a home.

When the economy soured - threatening job security and drying up easy finance - demand disappeared and prices began to slide. The change to investor tax incentives kept the pressure on and there are no signs in the regional areas of a bottoming out in the overall drift.

The latest surveys show homes are now as affordable as they were in June 2004, as a combination of falling prices, rising wages and tax cuts bite. But homes here are still expensive on an international basis when put alongside household income, so no one should be betting on real term capital gain in the next decade.

AUCKLAND
THE QUARTER CLIMBERS % UP

1 Clendon Park 7.7%

2 Lynfi eld 6.3%

3 Belmont 5.0%

4 Manurewa 4.8%

5 Mangere Bridge 4.7%

6 Manurewa East 4.5%

7 Three Kings 4.4%

8= Epsom and Stanley Point 4.3%

10 Pt England 4.2%

* List shows the areas recording the biggest house price gains in the three months September 30, 2010 Source: QV's E-Valuer.

* From the New Zealand Herald's quarterly 'Property Report' - a guide to house prices and great places to live.