Anyone who thought all the money in real estate was being made in the cities was wrong. House prices in New Zealand's provincial towns are booming.
The median price has more than doubled over the past five years in six of the towns surveyed by the Herald on Sunday, and in blue chip areas such as Tauranga, Papamoa and Coromandel, prices have crept right up there with Auckland's.
New monthly figures released by the Real Estate Institue (REINZ) last week show that North Island towns, including Rotorua (up 12.2 per cent) and Wanganui (up 18.5 per cent), have sold well in the past year, leaving fewer bargains for those wanting to cash up their mortgage- ridden city dwelling for a cheap place in the country.
New Plymouth City recorded a remarkable 178 per cent price increase over the past five years, winning the award for best year-on-year growth. But local experts say the province has just been in catch-up mode, and the increases can't be sustained.
REINZ branch president Sandy Smith said prices were now plateauing. The area was very affordable between 1995 and 2002, she said, with little movement in the city's median house prices - then ranging from $95,000 to $110,000 - but after the terrorist attacks of September 11, ex-pats returned home, and a strong rural sector, combined with oil and gas exploration ventures, boosted the economy and median house prices (which now stand at $295,000).
Filming The Last Samurai, with Tom Cruise, also helped change perceptions of the region, Smith said. "We have completely risen over the last four years, totally against the pundits [predictions] saying it's a boom and bust. I think we've been found, rather like Gisborne. The regions are getting more popular because it's the best place to live; the infrastructure in Auckland and the manic kind of lifestyle is not for everybody."
Gisborne's house prices have surged off a low base early this decade. In July 2002, the median price was just $94,000, but last month it was almost $210,000, and over the past five years prices have jumped by almost 141 per cent.
Last month, only two houses sold for less than $125,000 in Gisborne and two sold for more than $600,000. The city had been discovered as a nice place to live, said Philip Searle, REINZ district president for the region. "Gisborne had a lot of negative perceptions; people were saying the freezing works might close down, Watties might close down, and if that ever happened, it would kill Gisborne. But eventually they did close down, and everything carried on. And it's given people confidence in the future."
Two new hotels have been built in the past three years, plus 60 to 70 apartments. "Three years ago there was almost none."
Searle said he was struck by how many people who decided to settle permanently in Gisborne in the last couple of years had absolutely no connection to the area. Its attractions included the best weather in New Zealand, sandy white beaches and a low median sales price of $209,500 last month. "You'd probably pay the equivalent of $400,000 to $450,000 (for a house) in Auckland."
He predicted continuing steady growth for the region, noting that Gisborne rarely experienced the booms and busts of other provinces.
Last month's figures did show a cooling off of activity in Auckland, where the median sales price increase dropped from 11.4 per cent in the year to June, to just 4 per cent in the year to July. But big new cities such as Papamoa - home to acres of palatial beachfront homes - and thriving centres such as Tauranga recorded increases of 9.3 per cent and 13.4 per cent respectively.
Property developer Olly Newland said part of the region's popularity could be attributed to investors moving to snap up houses in smaller regions where it was more affordable.
"I think we're having investors going to the smaller centres and pushing the prices up there because they look like a bargain if you compare them to the middle of Auckland."
Newland said most regional areas had experienced a big catch-up.
"Property price rises around the country are not a steady thing. It's like a bubbling mud pool - a bubble here and a bubble there - and a flat period in the middle."
He said he expected that smaller towns which have had huge rises would level off, as buyers found it uneconomical to buy there, "when you might as well come back to a main centre which is pumping". Auckland might have experienced relatively small growth, he said, but it was still the biggest market in the country.
Central Wellington fared miserably over the 12-month period, registering -10.8 per cent growth, the worst performer for 2005-2006 on our list. The city also came in as the second worst performer in the 2001-2006 period.
Wellington REINZ president Euon Murrell said Auckland's market was a rollercoaster, "while ours has a consistency, if you look at the number of sales during that period".
Sales were down in winter everywhere, he said, "and we've had our coldest winter for a number of years. It's certainly not doom and gloom and despair in Wellington. We're still selling properties and there's still a demand".
Massey University property studies professor Bob Hargreaves said Wellington had already experienced its property boom, and this was reflected in its moderate statistics. He said it had taken time for New Zealands prolonged property boom to flow through to the provinces.
"The rates of increase have been quite different in the last little while. The market in Auckland has tended to cool off, and the same is true in Wellington. But while some of the provinces are coming in strong, actually they were a lot later in starting on the upward trajectory."
He said investors were now looking for yields rather than capital gains from their purchases. "You tend to find the yields are higher on rental properties in some of the provincial areas because the relativity between rents and house prices is a lot better from a yield-investment point of view."
Prices were still edging up, but volumes of sales had decreased, and it took longer to sell a property, suggesting that "we're probably at or past the peak, certainly in some places".
Hamilton may have been through its boom, but it also experienced a resurgence of interest last month, with an increase in the June median price ($299,750) to $310,000 in July. Over the past five years, Hamilton's homes are up a healthy 87.9 per cent.
House prices soaring in the provinces
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