Report backed by First Mortgage Trust
In the November issue of Regional Property Insights, independent economist Tony Alexander, with the support of First Mortgage Trust, looked at the long-term trend in prices for each region versus the country as a whole, to provide valuable perspectives for property purchase and divestment decisions.
Below is a breakdown of the property markets, examining their long-term trends, recent growth patterns, and the factors influencing their current dynamics.
Northland
The Northland property market has demonstrated robust growth since 2016, with a minor pause in 2021. Prices surpassed the long-term trend, echoing Auckland’s market strength.
Alexander (pictured above) said the region, especially Kaipara District, stands to benefit from the retiring Baby Boomers and the anticipated entry of Gen X from 2030 and probably sooner.
Auckland
Auckland’s house prices surged post the Global Financial Crisis, plateauing from 2017-2019. Recent growth exceeded most NZ regions, fuelled by an ongoing migration boom that is expected to persist through 2024, potentially leading to Auckland's average price level moving closer to the long-term trend.
Bay of Plenty
Bay of Plenty’s prices, which previously rose above average, are now tracking the NZ average, suggesting potential underperformance due to the distance away from the trend. Territorial authorities exhibited varying degrees of alignment with the trend.
Waikato
While average Waikato house prices remained above average, a correction is evident. Some areas, such as Otorohanga, South Waikato, and Waitomo, showed prices well above trend levels.
Gisborne
Gisborne’s house prices soared from 2016 to 2021 and have since tracked the national trend. They may now be relatively exposed to increasing city prices, though, propelled by the migration boom, coupled with the reversal of some of the pandemic-induced internal migration effects and heightened caution following recent climate events.
Hawke’s Bay
Hawke’s Bay’s outperformance ended in 2022, and future price appreciation is uncertain due to changing population growth rates, low export prices, and climate factors. Correction in Napier is already underway, while Hastings may be influenced by internal migration related to retiring Baby Boomers.
Manawatu-Wanganui
Average house prices in the region are slightly above trend, with a slow easing for the past couple of years. This somewhat below-average price performance is expected to continue. The most significant relative price correction observed thus far is in Ruapehu District.
Taranaki
Taranaki's relative gain in residential property prices from 2017 was smaller than other non-Auckland North Island regions.
Alexander expected the impetus for correction to be relatively small; but with the region unlikely to experience the same migration-driven population growth as the main urban areas of NZ, he said some degree of price underperformance might still occur.
“The location is after all relatively affordable, and first-home buyers will likely place greater emphasis on this a year from now,” he said.
Wellington
Wellington is currently at the forefront of the housing price cycle. With listings down 30% from a year ago, and unlike most other non-Auckland regions, prices are not exceeding the trend. No territorial authority in the Wellington region exhibits prices well above the trend.
Nelson, Tasman, Marlborough
The three top of the South Island unitary authorities did not experience a significant increase in prices compared to the rest of the country, especially Auckland, since 2016. They do not appear poised for a substantial correction, if at all, particularly in the case of Tasman.
West Coast
Prices on the West Coast of the South Island experienced a notable increase relative to the rest of the country during the pandemic. However, no specific territorial authority appears to be at risk of a significant price correction.
“While the migration boom will generate extra price pressure in the cities, the tourism upturn will be positive for West Coast house prices,” Alexander said. “Of relevance will be how much Christchurch house prices rise in the next couple of years as any strong growth will likely cause some young buyers to look at the likes of the coast.
Canterbury
Canterbury, mainly Christchurch, has scope for outperformance in the current upward cycle, considering the biased downward trend line post the 2011 earthquake.
Dunedin City/Otago
Like many areas in the South Island, Dunedin's property prices seem in line with the long-term trend. Despite limited potential for significant out-performance, the city may experience a lag in this cycle due to the impact of increased inward migration, with a possible catch-up later for affordability reasons. Apart from perhaps the Clutha District to a minor extent, other parts of Otago don't appear vulnerable.
Queenstown Lakes
Alexander said decisions based on price trends in the Queenstown Lakes District carry higher risk due to specific factors influencing the real estate market, such as fluctuations in migration, tourism, and property regulations. Despite well above-average price growth since 2021, the trend may not sustain, given population growth challenges. The area’s positive price outlook is tempered by high entry costs compared to New Zealand standards.
Southland
Southland's prices have consistently risen above the NZ average since 2017, and there’s no clear sign of a change. While a relative correction might be likely, factors like tourism recovery and migration could sustain some strength. Potential buyers and sellers should consider these factors along with the region’s resilience to certain economic challenges. All three districts in Southland have prices above trend, although not significantly so.
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