Property gains for coast and regions
Low interest rates are predicted to give the housing market a boost in many areas, as investors who cannot get a return from money in the bank look for other places to put their cash. Rising rents add to the appeal. But while some areas are predicted to keep increasing at rates of more than 10 per cent, others are tipped to experience flat house prices for some time to come.
Experts say, if you want to buy for capital gains, there are a few places to look.
Bindi Norwell, Real Estate Institute chief executive
Gisborne and Manawatu/ Whanganui.
‘‘Over the last few months we’ve seen significant median price growth in the middle of the North Island and the bottom of the South Island,’’ Norwell said.
‘‘When predicting which areas across the country are likely to have strong price lifts, we can look to areas that have a significant housing shortage, regions that still have an injection of funds to be spent from the Provincial Growth Fund, a lack of listings and price growth relative to other areas as strong indicators.’’ Cameron Bagrie, economist at Bagrie Economics
Whanganui.
‘‘I think the outperformers will be the ones with 7 per cent-plus [rental] yields and house price-toincome ratios of less than five. There aren’t many out there, but there are some.’’ Gareth Kiernan, chief forecaster at Infometrics
Whakata¯ ne or Ha¯ wera.
‘‘Over the next year, I’d most expect the fastest house price growth to occur in provincial pockets which have been late to the housing boom and are still playing catch-up to Auckland and other parts of the country where prices have increased more rapidly over previous years,’’ Kiernan said.
‘‘Having said that, this expectation is dependent on economic activity and incomes in these areas holding up. Scope for capital gains could easily disappear if export prices and the international economy worsen by more than expected. There is also the risk over a timeframe longer than 12 months that any near-term house price increases reverse out once the boom peters out – house prices in many provincial areas were hit harder and for longer in the wake of the GFC than house prices in the cities.
‘‘I also wouldn’t completely ignore Auckland, despite the fact that house prices there are currently falling.
‘‘Although the rate of residential building might finally be starting to shrink the city’s undersupply, there is still a persistent shortage of housing, and low mortgage rates and further easing in the loan-tovalue restrictions have the potential to temporarily rekindle buyer demand and house price inflation.’’ Glen McLeod, Edge Mortgages
Nowhere.
McLeod said a Reserve Bank requirement for banks to hold more capital would make it harder to access borrowing, which could mean prices would drop. But if banks relaxed servicing rules, as they had in Australia, and low interest rates continued, that could push prices up.
‘‘We are also going into an election year which can drop confidence ... At the end of the day it is so hard to pick. I am weighted towards house prices being stable with little or no capital gain.’’ John Bolton, Squirrel Mortgages
New Plymouth, Palmerston North, Napier, Wellington and Christchurch.
Bolton said any market where the debt-to-income ratio was lower than the average would have potential for growth.
Areas where incomes were strong but house price inflation had not been as hectic would be particularly likely to experience further increases, he said. Liz Koh, financial adviser
Coastal areas.
‘‘Baby boomers are retiring in droves to the retirement hotspots, that is, warm coastal areas such as North Auckland, Tauranga, Napier, Ka¯ piti Coast and Nelson,’’ Koh said.
‘‘These areas could well see a population increase. There are roading changes which could lead to shorter commuting times in some areas – Ka¯ piti Coast is a good example of this with the opening of Transmission Gully and the Peka Peka to Otaki expressway in 2020/2021.
‘‘Areas north and south of Auckland will also benefit from this. In terms of economic growth, tourism is now our number one export and still growing, so areas like Queenstown should stay above the national trend... Industry development should also be taken into consideration – for example, areas where there is to be a big investment from the Provincial Growth Fund which could give a boost to employment.
‘‘Those who are looking to invest in property should be researching the local factors in each area to find the hotspots going forward.’’