Sales records in 325 suburbs smashed
Intense pressure in the housing market has led to price records being set in 325 suburbs around New Zealand in recent months, new data shows.
Property website Homes.co.nz analysed the last six months of sales and found that about a third of the country’s suburbs had hit records.
Homes.co.nz chief data scientist Tom Lintern said prices at the moment were as high as they had ever been.
‘‘A combination of low interest rates, low supply and a fear of missing out are driving prices to values that would have been unbelievable even a few months ago.’’
The results didn’t come as a big surprise given how the market had been trending, he said.
The most records were set in Dunedin, where 11 suburbs hit new highs.
Three Dunedin suburbs – Vauxhall, Waldronville and Bradford – set records of more than $1.4 million while prices in another three – Ocean View, Glenross and Tainui – topped $1m.
These prices were significantly above Homes.co.nz’s median estimate for the city, which was $568,000 in March.
Lintern said that, again, recent trends meant the Dunedin results were not a surprise.
‘‘It’s been a bit of a rock star market for some time, with growth of about 20 per cent per annum in recent years.
‘‘It came off a lower base than other major centres, but sale prices are now head and shoulders above what they were.’’
Dunedin real estate agent Joe Nidd, from Nidd Realty Ltd, said high numbers of people were moving back to Dunedin.
That was pushing the market along as there was immense competition among buyers.
‘‘Low interest rates are contributing to outlier offers which are way beyond the competition and which are surprising everyone,’’ he said.
‘‘It’s because people are desperate to secure a property after missing out previously and the relatively low finance available makes people feel more comfortable about paying higher prices.’’
Unless there was a significant change on the supply side prices would keep rising, Nidd said.
‘‘The Dunedin council’s secondgeneration district plan is progressing so there is change on the horizon, but any real increase in supply is a long way down the track yet.
‘‘Adding demand side measures, like the reinstatement of the LVRs, into the equation will just be a bump in the road and won’t make much difference to the market.’’
The highest price paid in New Zealand in the past six months was $10.8m for a Paritai Drive address in Auckland in September.
Some 21 years ago I came back from my OE and settled in Wellington. I was lucky enough to land a good job paying $60k a year. A whopping amount it seemed to me.
A few years later I bought my first home. A three-bedroom California bungalow in Strathmore for $135,000. I had a $35,000 deposit so signed up to a $100,000 mortgage. A few years later I sold it for $165,000 and thought I’d done bloody well.
Last week that same house sold for $1.4 million. And to my untrained eye it looked substantively the same as when I sold it about 15 years ago.
That pleasant but far from flash house had increased in value 10.5 times over 15 years. That’s a gross return of around 40 per cent a year.
It’s far from normal. Late last year my old mate Bernard Hickey shocked the country with the news that the average house in Wellington had gone up $2436 per week in 2020.
I was speaking to him this week and he’d run the numbers for the past three months. What he found was that based on CoreLogic data, Wellington house prices increase $5772 per week. Gobsmacking.
More broadly, while the collective wage bill for New Zealand last year was $170 billion, the value rise in real estate was $200b. In other words, Kiwis earned more from their homes last year than they did their day jobs.
And although Reserve Bank Governor Adrian Orr’s new loan to value ratios for investors will help things, many of the banks have been building this into lending for a while now. So it’s unlikely to bring dramatic change.
While there has been plenty of handwringing about what this escalation of prices means for the housing crisis, I’ve been scratching my chin about the implications for personal saving and personal wealth for New Zealanders.
Historically our personal wealth has plotted a two-peak graph – kind of like a two-humped camel.
We start working in late teens or early 20s, then save like mad to try to get enough deposit to buy a house. This is our first wealth peak.
Then our liquid wealth falls like a stone as we set ourselves the job of paying back the loan, ideally with a partner to help share the load.
Eventually we pay back the loan and then start saving for our retirement. Slowly our wealth grows, augmented hopefully by some good financial planning advice that sees us across multiple asset classes and economies, until we hit 65 and retire. This is the second wealth peak as we slowly start to draw down on our retirement savings.
The current Covid-19 fuelled house price explosion is going to smash this twopeak model.
Firstly, it’s going to take a lot longer for people earlier on that graph to earn enough money for a deposit. Some of them never will and those people need to start putting together a life plan that ensures they will be able to rent for its entirety.
Secondly, those who are between their first and second peak, typically the parents of adolescents and teens, will be facing the reality that their kids will never be able to afford a house if the current $5000 a week price increases continue.
Accordingly, those parents decide to buy a second house, either for the kids to occupy when they get older, or as a marker in the market for them. And then, if they can, they do it again.
The impact of this is to introduce one or more additional peaks and troughs into their wealth timeline, with their liquid wealth dropping again as they finally start saving for retirement.
The consequence of this is that when they reach retirement age they will have less liquid money, be more heavily concentrated in one asset class and quite likely face immediate pressure to downsize their house.
The New Zealand financial planning industry need to get their heads around both of these new trajectories, both the rent-forever scenario and the multi-peak scenario, and how to tailor individual wealth plans around each.
But there’s a bigger problem here and that’s the extent to which New Zealanders will have all their eggs in one basket.
Even kindergarten-level portfolio managers understand that good wealth management is about good diversification, spreading your monies across the four main multiple asset classes and multiple countries.
Having all your eggs in one basket, in one country, at the bottom of the South Pacific and in the middle of the seismic ring of fire is the opposite of risk diversification. It’s risk concentration.
A long time ago I worked with Gareth Morgan as he spun up his investment company. One day he wrote on the office wall ‘‘Don’t lose the bloody stuff’’ and it became the guiding principle of his approach to investing people’s money.
If New Zealand property goes down the toilet one day, a lot of people are going to lose all the bloody stuff.
In a major investment move, Porirua-based iwi Nga¯ti Toa Rangatira has taken a majority stake in the Whitby Lakes Retirement Village.
The multi-million-dollar transaction sees Nga¯ti Toa Rangatira (Nga¯ ti Toa) take a two-thirds shareholding in Aegis Retirement Living, the newly created entity owning the retirement village in the Porirua suburb of Whitby.
The remaining one-third will be held by the original developer of the village, Sandy Foster,
Foster was one of a group of shareholders who bought the original village site adjacent to the Whitby shops in 2009. Over the last decade, 61 stand-alone villas and 71 apartments have been built at the village, which is currently home to 180 residents. The fully occupied village is regarded as one of the premier retirement villages in Wellington’s northern suburbs.
Foster will continue as chief executive of Aegis Retirement Living. He is also chair of the New Zealand Housing Foundation.
Leon Grandy, general manager of Innovations and Investment for Te Ru¯ nanga o Toa Rangatira said that the organisation’s strategic objectives directly align with the investment in Aegis Retirement.
‘‘One of Te Ru¯ nanga o Toa Rangatira strategic objectives is to protect and grow the economic base of Nga¯ti Toa to provide ongoing opportunities for wha¯ nau wellbeing and growth,’’ Grandy said.
‘‘Nga¯ ti Toa are mana-whenua in Porirua and as such, the land is culturally significant to the iwi. Nga¯ ti Toa is interested in utilising the land it already has, and acquiring more within their rohe, to provide income and benefits to their people.’’
Te Ru¯ nanga o Toa Rangatira Board Chairman and kaumatua, Dr Taku Parai said the investment enables the iwi to look to the future. ‘‘We are keen to learn and develop a greater understanding of the retirement living sector and Sandy’s knowledge and experience in the housing sector means that we have a partner with whom we can do a lot.’’
‘‘We are excited by the potential of the investment and partnership. We would also like to acknowledge the residents and management of Whitby Lakes Retirement Village for their warm welcome.’’
Foster is equally enthusiastic about the partnership.
‘‘The investment by Nga¯ ti Toa will enable us to pursue the construction of a care facility at Whitby Lakes, so that our residents don’t need to move offsite if they need care,’’ he said.
‘‘It will also enable us to identify other sites for retirement villages in the area, or partner with other investors with similar objectives to us.’’
‘‘We are excited by the potential of the investment and partnership. We would also like to acknowledge the residents and management of Whitby Lakes Retirement Village for their warm welcome.’’
Te Ru¯ nanga o Toa Rangatira Board Chairman and kaumatua, Dr Taku Parai
It wasn’t easy for architect Max Edridge to convince Greytown residents that their community had potential way beyond their imagination and to become the destination that the town is today.
Max Edridge moved to Greytown with his wife Dinah almost 30 years ago and established his practice there. His vision for the town saw fiery public meetings but he and Dinah led by example. They purchased a corner block of land on SH2 opposite the town hall and in 1995 relocated two buildings, stables and a small church, from Huka Village at Taupo.
That corner development became Greytown’s heart and led to the heritage revival that has transformed it into a tourist destination and a thriving, prosperous community.
Now the corner, with the original buildings, and a third housing Greytown’s leading restaurant, Pinocchio, is being marketed by Gollins Commercial for sale by tender with a closing date of March 30.
Max Edridge died in 2013 but Dinah Edridge and family still own the property so rich in memories and evidence of the accuracy of Max’s vision. In addition to the restaurant, previously Salute for many years, the tenants are fashion designer Nicola Screen and Minx Shoes.
Agent Chris Gollins said that he is anticipating strong interest in the offering which has a net rental of just $75,000 over the three tenancies of 295 square metres in total. putting it within reach of most investors.
‘‘This property drips with
appeal. It and The White Swan are what most New Zealanders have in mind when anyone mentions Greytown. With a repaint completed just this week it’s a chocolate-box property.’’
Gollins said that the land area is
979 sqm but a brick paved area of 180 sqm on the corner was voluntarily covenanted by the Edridges to prevent any development. This area has now become the town square, with large oak trees providing welcome shade from the
Wairarapa sun.
Gollins Commercial has 19 commercial property sales in the thriving Wairarapa in the past year, but Gollins said that 83-87 Main Street is particularly special.
‘‘The Wairarapa communities owe so much to Max and Dinah’s determination and passion. All towns have benefited but Greytown the most. To have been selected to facilitate the transfer to only the second ever owners is definitely a privilege.’’