PROPERTY BOOM

Run­down houses for the needy fetch mil­lions in Auck­land property boom, writes Emma O’Brien in Welling­ton

Bangkok Post - - BUSINESS -

Home prices in New Zealand are go­ing through the roof.

Even with its mould-streaked bath­room and kitchen with­out a sink, the du­plex in bay­side Auck­land at­tracted a fren­zied bid­ding war. Now it’s one of the city’s new­est mil­lion-dol­lar gov­ern­ment-built houses. The two-bed­room brick cot­tage on Kerr Street on the city’s in­ner north shore fetched NZ$1.04 mil­lion (US$685,000) at an auc­tion in Septem­ber, net­ting the ven­dor, New Zealand’s gov­ern­ment, dou­ble a val­u­a­tion used for taxes.

Long sym­bols of eco­nomic dis­ad­van­tage, homes built by the state last cen­tury for low­in­come ten­ants are on a tear, thanks to their typ­i­cally gen­er­ous land sizes and prox­im­ity to the city.

The chang­ing for­tunes of th­ese mod­est dwellings — loved and de­rided by New Zealan­ders for their func­tion­al­ity over style — re­flect a fer­vour that has spurred Auck­land’s big­gest property boom in two decades.

The av­er­age house price in New Zealand’s largest city is now higher than Lon­don’s.

“It’s like the su­per­mar­ket be­fore it closes on Christ­mas Day — ev­ery­one thinks they had bet­ter get in or they will miss out,” said Carol Wet­zell, a real­tor at Bar­foot & Thomp­son in Devon­port, the agency that sold the 82-year-old Kerr Street home.

State homes, par­tic­u­larly those built from lo­cal tim­ber in a wave of gov­ern­ment-led con­struc­tion in the 1940s, are re­garded as iconic — prod­ucts of a time when the gov­ern­ment was de­ter­mined to en­sure no one lived in squalor.

Prime Min­is­ter John Key was raised in a state house in Christchurch by his wid­owed im­mi­grant mother, and the Auck­land mu­nic­i­pal gov­ern­ment plans to cre­ate a NZ$1.5-mil­lion sculp­ture of one on the city’s wa­ter­front.

Now, with house prices up 24% in Auck­land in the past year alone, the gov­ern­ment can count more than 650 state homes or “staties” worth at least NZ$1 mil­lion in its Auck­land property port­fo­lio, ac­cord­ing to data ob­tained by Bloomberg News via a free­dom of in­for­ma­tion re­quest.

Among the most valu­able listed by property re­searcher CoreLogic is a twobed­room home in the leafy, in­ner-city sub­urb of West­mere with a rot­ting clap­board fa­cade. With the prospect of sea views if ren­o­vated, plus space for a ten­nis court and swim­ming pool, it is val­ued at NZ$2.2 mil­lion.

MILD CLI­MATE

Nes­tled around two large har­bours near the top of the North Is­land, Auck­land is New Zealand’s eco­nomic pow­er­house and home to al­most a third of the South Pa­cific na­tion’s 4.5 mil­lion peo­ple. With a mild cli­mate and abun­dance of parks and beaches, the so-called City of Sails rou­tinely ranks among the world’s 10 most live­able cities.

Add to that a hous­ing short­age and a his­toric lack of bar­ri­ers to property spec­u­la­tion and the re­sult is that av­er­age house val­ues in the city have jumped 70% to NZ$1,08 mil­lion (US$711,000) in the past four years, ac­cord­ing to CoreLogic. In com­par­i­son, house prices ad­vanced only 9.9% to NZ$553,291 in the cap­i­tal, Welling­ton, and 50% to £443,399 ($678,000) in Lon­don in the same pe­riod.

Auck­land house prices are now the sec­ond high­est rel­a­tive to in­comes among de­vel­oped economies, prompt­ing the cen­tral bank to flag the prospect on Nov 11 of a “dam­ag­ing cor­rec­tion” in the mar­ket that puts the New Zealand econ­omy at risk.

“There’s an in­creased risk of a sharp cor­rec­tion given the speed at which house prices have surged in the Auck­land re­gion,” bro­ker­age First NZ Cap­i­tal said in a re­cent re­port by econ­o­mist Chris Green.

“Houses may be over­val­ued by about 57%, and the high debt lev­els re­quired to sus­tain those prices lim­its the cen­tral bank’s abil­ity to raise in­ter­est rates,” he said.

LANDED GEN­TRY

“This boom has been huge; it’s just been ex­tra­or­di­nary in terms of the scale of the price in­creases,” said Shamubeel Eaqub, an in­de­pen­dent econ­o­mist in Auck­land, who co-au­thored Gen­er­a­tion Rent, a book on the de­cline of home own­er­ship in New Zealand.

“For a young couple to buy a mod­est home in Auck­land, it’s 60% of their in­come on mort­gage pay­ments. We are go­ing to run out of fools to buy houses — it can only be the landed gen­try.”

Hous­ing New Zealand Corp, the author­ity pro­vid­ing res­i­den­tial ser­vices to the needy, owns about 65,000 houses or 4.5% of the coun­try’s res­i­den­tial prop­er­ties. With a third of the agency’s NZ$18.7-bil­lion port­fo­lio deemed in the wrong place or of the wrong type, state homes are reg­u­larly liq­ui­dated to fund new prop­er­ties.

Since 2010, 21 in Auck­land have sold for more than NZ$1 mil­lion, in­clud­ing a dozen in the past two fi­nan­cial years, ac­cord­ing to the Hous­ing New Zealand data ob­tained by Bloomberg.

QUICK COM­MUTE

“In a city where com­mut­ing by car is the norm, those in con­ve­nient lo­ca­tions — and on larger-than-av­er­age blocks — are es­pe­cially prized,’’ said Tony Tang, a property agent in cen­tral Auck­land with real es­tate firm Ray White.

Mr Tang se­cured the NZ$1.10-mil­lion sale in June of a three-bed­room for­mer state house in Mount Al­bert, less than eight kilo­me­tres from Auck­land’s cen­tral busi­ness dis­trict.

The in­vestor-owner made NZ$344,000 in 15 months with­out hav­ing to lift so much as a paint brush. Like many state houses, the home was val­ued on the land only, Mr Tang said.

“Peo­ple are sick of see­ing th­ese peo­ple in the pa­per who made a mil­lion af­ter just mow­ing the lawn three times,” said Ms Wet­zell, the real­tor in Devon­port.

Juli­ette Ho­gan says the value of her twobed­room state apart­ment in Free­mans Bay, less than two kilo­me­tres from Auck­land’s cen­tre, has in­creased by at least 50% since she bought it four years ago.

Still, cap­i­tal growth wasn’t what at­tracted her to the flat — built in the 1970s, when the har­bour­side sub­urb was still home to the de­struc­tor, a gi­ant in­cin­er­a­tor that car­bonised the city’s trash.

“I like the idea that state houses are solid and de­pend­able builds,” said Ms Ho­gan, a fash­ion de­signer who has a cloth­ing store down the street from her apart­ment.

“The neigh­bour­hood has a mixed bag of res­i­dents and prop­er­ties. Most are still owned by Hous­ing New Zealand and ten­anted. I love the di­ver­sity.”

BLOOMBERG

State houses stand in the sub­urb of Orakei in Auck­land. Built in the last cen­tury for low-in­come ten­ants, the houses are soaring in value be­cause of their gen­er­ous land sizes and prox­im­ity to the city.

Newspapers in English

Newspapers from Thailand

© PressReader. All rights reserved.