Why Auckland’s growth is wavering
House prices are opening cracks in New Zealand’s biggest city as more people opt to get out of town
We’ve all heard the story. Auckland is growing. Every 13 minutes someone new arrives in Ta¯ maki Makaurau. A city perched between two abundant harbours with expansive, glistening sea views, plentiful jobs and higher pay. What’s not to like?
Well, according to recent figures by Treasury, for some 75,000 Aucklanders since 2013, that is not enough. The number of people leaving Auckland for other parts of New Zealand is now so large, it offsets all natural growth from Aucklanders having children.
The city’s expansion has been reduced to the whims of international migration, while existing residents vote with their feet. The trend is likely to persist.
As Auckland flight gains momentum, it leaves many of us to ponder the sort of life a small New Zealand city might entail.
The arithmetic might go something like this. Moving out of Auckland almost certainly comes with a lower wage, but if you’re not working in financial services on Queen St or rushing around the trading floors, the difference is not as large as you might think.
For many public sector positions, there might be no difference at all. But to make the comparison simple, let’s use the Statistics New Zealand average after-tax household income of $66,000 for Auckland and $55,000 for Napier.
First, there are housing costs. The median house price in Auckland is $852,000. Assuming you have managed to cobble together that 20 per cent deposit, you’re rewarded with annual mortgage repayments of around $44,000. Meanwhile, a median house price of $495,000 in Napier means $21,000 in repayments with the same deposit.
That’s not a fair comparison, though. The median-priced threeto-four-bedroom house in Auckland means living in the outer suburbs. In Napier you might expect a family-sized, refurbished home, a stone’s throw from the beach.
What about transport costs? Both households probably need two cars, but Aucklanders are likely to drive for longer, spending more on fuel. Estimates suggest an annual household cost of about $13,500 in Auckland and $11,000 in Napier. But Aucklanders will probably squirm at that as well, since it overlooks those long hours spent in traffic. That leaves the average Auckland household with a paltry $8500. The Napier household has $23,000.
But we’re not done yet. Napier is cheaper to live in. A flat white coffee in Auckland can set you back $5 or more. Not so in Napier.
The New Zealand Immigration cost of living calculator suggests areas outside of Auckland and Wellington in the North Island are about 15 per cent cheaper, so to compare apples with apples, we can think of our Napier household as having around $27,000. For Tauranga the number is $18,000.
Faced with such daunting arithmetic, Auckland flight is no surprise. What is surprising is why more have not left. For many, family and community ties can delay the decision. But financial stress is stubborn, leaving ever more Aucklanders facing a difficult question: “Can I afford to stay?”
None of this is good for New Zealand. The internal migration out of Auckland is a significant economic cost. Auckland is the most productive city in the country. It benefits from an employment density that is unmatched elsewhere in the country. If all of New Zealand was as productive as Auckland, New Zealand’s GDP would be 13 per cent higher. Auckland flight leaves the country poorer and less competitive.
Many of the cities we compare ourselves with have avoided this. Brisbane lured a net 12,000 people from elsewhere in Australia last year, Melbourne sucked up 10,000.
For New Zealand’s other cities, Auckland’s persistently high house prices are a towering opportunity.
Each year, thousands of educated, working-age Aucklanders start the search for a new city. These people could be the engine of new ideas and economic prosperity for those lucky enough to attract them.
If the first two decades of the 21st century have been about Auckland’s growth, the next two could signal the rise of our smaller cities.
For Auckland, the loss of its residents has been hidden by the sustained influx of international migrants.
The challenge is straightforward. Auckland must beat the smaller cities at their own game. It needs an unwavering focus on competitiveness, prioritising housing choices in the places people want to live.
Improving transport infrastructure and continued optimisation of land use regulations are two powerful levers to reinvigorate the urban proposition that led to Auckland’s success in the first place.
Doing so will create a city for the Aucklanders of today, as well as those we welcome from abroad.