Tony Alexander: Who wants prices to rise?
Auckland may lead the pack but survey shows owners want a slow-down
Back in 1961 Auckland accounted for 21 per cent of New Zealand’s population. Now it is sitting at about 34 per cent, with not much population growth outperformance in recent years as people have shifted to the regions for more affordable housing.
The strong rate of population growth in Auckland hasn’t always been matched with strong growth in the number of houses being built. As a result, we have seen some periods when property prices in our biggest city have risen at a far faster rate than in the rest of the country.
For instance, from 1995-1996 Auckland house prices on average rose more than those elsewhere by 10 per cent, then 11 per cent. Then some catch-up occurred with Auckland lagging 5 per cent in 1998 before roughly level-pegging or a little bit higher or lower through to 2011.
But in 2012 Auckland prices rose 6 per cent more than in the rest of New Zealand, in 2013 9 per cent, 2014 9 per cent, and 2015 16 per cent. Since then, from the start of 2017 to the end of 2020, Auckland prices have risen 10 per cent while a 40 per cent gain has been recorded elsewhere.
The pattern is one of Auckland often leading, then the rest of New Zealand catching up — but not as much. The result is that since 1992 average Auckland have prices have risen 640 per cent, while they have risen 420 per cent elsewhere.
In the early 1990s, when Auckland was shooting ahead, someone coined the term “Jafa”, referring to “just another f***ing Aucklander”. The term was probably motivated by some envy about Auckland’s housing market and the resulting focus on developments. The view developed that housing is all Aucklanders think about and all they want is for their property prices to keep rising. But is it true? No.
Each month since May last year I have invited the now 18,000 subscribers to my weekly Tony’s View publication to indicate whether they plan to spend more or less on various things in the near future and what those things are. I sometimes add an extra question — and did so two weeks ago. Specifically, I asked people what pace of growth they would like house price inflation to slow to. I won’t go through all the detail but what I can do is calculate the average pace of house price growth people want for each region. Top of the list is people in Marlborough. They would like house prices to rise by 9.3 per cent a year. In Otago outside of Queenstown Lakes people would like 8.3 per cent per annum increases.
Auckland comes next at 6.7 per cent, Canterbury 6.5 per cent, Queenstown Lakes 6.5 per cent, then the nation overall 6.4 per cent. Excluding Auckland, a 6.2 per cent rise is desired. Taranaki lies at the bottom with just a 5.2 per cent gain favoured.
The interesting thing beyond Auckland not sitting at the top of the list is this. Aucklanders favour a pace of increase slower than the 7.7 per cent they have averaged since 1992. The rest of New Zealand wants a pace slightly faster than their 6.2 per cent average.
In which region is the greatest change desired? Marlborough, with a 3.3 per cent acceleration wanted, then Otago outside Queenstown Lakes (largely Dunedin) with a 1.7 per cent p.a. acceleration desired, followed by Canterbury people wanting a 1.1 per cent a year speed-up.
For the analysts out there, note that there is no observable tendency for regions with the slowest house price gains historically to want the biggest acceleration from 1992-2020’s numbers. A desire to “catch up” is not apparent.
Aucklanders favour a pace of increase slower than the 7.7 per cent they have averaged since 1992.