QUEENS SHOULD’VE BOUGHT IN TOWN

PROPERTY’S BIGGEST WINNERS AND LOSERS SINCE 2000

In hindsight, it's easy to see where easy money could be made. At the start of the new Millennium, Queenstown was a popular tourist destination but was yet become a home to international billionaires, Hollywood directors and Silicon Valley escapees.

The median price for property in Queenstown at the end of 1999 was $195,000. In Auckland it was $235,000, a tad lower than the $236,000 Wellingtonians had to stump up for a home. Flash forward to 2019 and that $195,000 investment in Queenstown — equivalent to the deposit many Auckland buyers face pulling together — has shot up 396 per cent, with Queenstown’s median price now $966,500. The city's property market is without doubt the biggest winner — so far — of the 21st Century.

The last 20 years in New Zealand real estate have been tumultuous. The country has experienced a leaky homes scandal, a market slump, several devastating earthquakes and rocketing house prices that have benefited those that own but alienated those that don't.

OneRoof and its data partner Valocity tracked median prices for every New Zealand territorial authority over the last 20 years. The figures show how much the course of the country's property market has changed -—and indicate where the next boom towns are to be found.

Nationally, the median house price has risen 242 per cent since the end of 1999. Every region has enjoyed a lift. Some, like Queenstown, have done better than others.

According to the data, the region that has seen the biggest percentage increase is Mackenzie. Twenty years ago buyers in the region could pick up a home for $71,500. Now they'd typically have to shell out $435,000 —an increase of 508 per cent.

Mackenzie, home to Aoraki/ Mount Cook National Park and ski-fields that are every bit as stunning as those in neighbouring Queenstown Lakes, is OneRoof's pick for further big increases in property values.

It has all the elements to be the next Queenstown -—a solid economy, relative affordable housing and scope for largescale development.

Visitors to Lake Tekapo and Twizel will have seen a marked

“The region that has seen the biggest percentage increase is Mackenzie.”

“The housing market has just been one of many asset markets affected by global drop in interest rates over the past 30 years. “

increase in residential construction, and it doesn't take a much imagination to envisage a transformation on a par with Queenstown's and house prices to match.

OneRoof editor Owen Vaughan says: “Everybody is looking for the next Queenstown and Mackenzie could well be it. Although the area lacks an all-important airport, it is still well connected, with Christchurch just several hours' drive away. Those that buy into the area now could well be sitting on a million dollars or more by 2040.”

The OneRoof-Valocity data illustrates the big changes in New Zealand's major metros. Valocity director of valuation and innovation James Wilson says: “Over the last 20 years the market has shifted from one of comparatively even values across the main urban centres to one where there are significant variations.”

At the start of the century, it cost as much to buy a house in Auckland as it did in Wellington — and prices tracked upwards at a similar rate until just before the GFC, when Auckland surged ahead.

Between 2009 and 2014, Wellington prices stagnated, while Auckland's rocketed. Auckland's median house price now sits at $830,500 —an increase of 253 per cent on 1999 — while Wellington, which sits close to the bottom of the growth table, has a median house price of $750,000, a rise of 217 per cent.

Overseas money

Further down the table is Christchurch, where the median house price grew 185 per cent in the last 20 years, while sitting at the bottom is Wairoa, in Hawke's Bay, which has seen house prices rise 128 per cent.

Wilson says: "In the year 2000, all of our main urban metros had median values that sat within a $200,000 band of each other. In 2019, the largest difference in median prices — between Queenstown and Dunedin — is well over half a million dollars.

"This disparate growth can mostly be attributed to the fact that our wealthiest urban markets — Auckland and Queenstown — have been exposed to international drivers, such as increased immigration and overseas money, more than any other market in New Zealand."

A number of other factors have influenced the housing market over the last 20 years: the 2007 Global Financial Crisis saw house prices tumble and New Zealand’s official cash rate fall from 7.5 per cent in September 2008, to 3.5 per cent in early 2009.

Other factors include changes in immigration and home-ownership rules, the Christchurch and Kaikoura earthquakes, which damaged tens of thousands of homes, and the leaky homes crisis, which has cost the country billions of dollars. Through it all, New Zealand’s housing market has continued on an upwards trajectory.

If you bought and sold in the last 20 years it's highly likely you came out smiling, unless you’ve been stuck with a leaky home.

LeAnne and Jon Taylor are coasted the wave of falling prices after the GFC, then lucked in with not only the Auckland housing boom but the new Auckland Unitary Plan.

They bought and sold at the right time then left Auckland for Katikati, in the Bay of Plenty, where they own a home and have just bought a cafe´.

Boom profits

LeAnne says she and Jon are born-and-bred Aucklanders who met overseas then, like thousands of young couples, came back and stayed with mum and dad to save for their first home, a “bog-standard, three-bedroom, rectangle box” in Glen Eden, which they bought in 2004 for $215,000.

In 2007, the GFC struck and in 2008 New Zealand property prices fell sharply. So in 2009 LeAnne and Jon decided to keep their first house as a rental (selling later for $420,000) while buying another home in Glengarry Rd for $400,000.

The Glengarry Rd property had the 2000sq m they wanted for their three children and the animals. Life was peaceful — then along came the Unitary Plan which freed up land to be developed.

Suddenly, LeAnne says, they had construction right at their window.

They decided to move to Katikati, where LeAnne’s parents were living, and in 2015, at the height of the Auckland housing boom, listed their Glengarry Rd property. It sold within a week to a developer for $1.18m — nearly $800,000 more than they had paid.

Rate cuts

Westpac’s chief economist Dominick Stephens says the main driver for such big price rises in New Zealand homes over the past 20 years is a global drop in interest rates, coupled with immigration.

Over 20 years ago the oneyear fixed mortgage rate in New Zealand was over 10 per cent, but now we are looking at under 4 per cent, he says. “That’s more than halving what it costs to service a mortgage.”

Stephens says that at least from World War II through to the late 1980s, interest rates were on a slow rise — but they have been falling ever since.

“The New Zealand housing market has just been one of many asset markets affected by global drop in interest rates over the past 30 years. “

When interest rates fall people find it cheaper and easier to borrow money and buy assets, and people with money are happy to accept a lower yield on investments.

“Both of those things mean higher prices relative to rents or relative to incomes, and I think this has driven asset prices of all stripes up around the world.”

The end result of the property market over the past 20 years has been a random reassignment of wealth from non-home owners to home owners, which “I think rightly has created lots of social concern”, Stephens says.

While hefty prices in Auckland have kept some out of the property market altogether, others have moved to cheaper regions to get on the property market. Still others have made gains on their Auckland properties and have moved out to smaller towns.

David Norman, Auckland Council’s chief economist, says population growth is undeniably the fundamental driver in Auckland's housing market. “It’s no surprise that through our two periods of most rapid population growth in the last 20 years — early 2000s and most recently 2013 to 2016 — we saw the fastest growth in house prices.”

One of the ways the Auckland market differs from the rest of New Zealand is because of its dominant role in net international migration, Norman says.

“Unlike the rest of New Zealand, which saw negative net external migration between 2011 and 2013, Auckland did not. We are the gateway city for new migrants and typically attract more than half of them, even though we’re about 35 per cent of the total population of New Zealand.

“What we see is that as house prices in Auckland increased, many people here, often closer to retirement, have taken their house price gains and moved mostly to other parts of [the country] where house prices are more affordable.”

Easier lifestyle

Among those who cashed in and moved out is Kirsty Cooper, who bought a threebedroom state house in Auckland’s Avondale with a friend in 2011 for just over $400,000 .

They stayed there for a couple of years, before deciding they could make more money by renting out the house and renting themselves. Then in 2015, when prices were strong, Kirsty’s friend bought her out. “I came out of it with almost an extra $100,000. That’s not bad at all. Some people don’t earn that much working.”

Kirsty and her now husband Scott set their eyes on Dunedin. They couldn’t believe the prices: “We were looking at places that would have been a million dollars in Grey Lynn that were $250,000 at the time.”

Once they moved to Dunedin they “went a bit ridiculous. We ended up buying a big old brick villa on 1600sq m of land. It cost $436,000. They later decided it was too big and sold it for more than $600,000. Now they’ve bought a cottage in Opoho for $500,000.

Kirsty says: “Our lifestyle is definitely better down here than we would have been able to have up in Auckland.”

If the last 20 years have been tumultuous, Stephens says the next 20 are unlikely to be anywhere near as dramatic. What happens in the years ahead will depend on interest rates, he says. If they go up house prices could fall, but if they stay where they are prices could rise some more.

He thinks interest rates will stay relatively low, however, and predicts they will lift again in five or ten years’ time – so there could be a period of modest house price decline in the mid-2020s.