The housing market boom has irrevocably changed the face of New Zealand's biggest cities, turning previously affordable suburbs into no-go areas for most first home buyers.
New analysis of house price inflation in the country's seven main centres between January 2020 and January2022 shows an explosion in the number of $1 million-plus suburbs.
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Of the 646 suburbs that make up Auckland, Christchurch, Dunedin, Hamilton, Queenstown, Tauranga and Wellington, 203 had an average property value of $1m or more in January 2020.
By January this year, the number of $1m-plus suburbs in the seven cities had grown 100 per cent to 406.
Outside of the major metro areas, the number of $1m-plus suburbs in New Zealand grew 413 per cent from 95 to 488.
The research, by NZME-owned property listing site OneRoof.co.nz and its data partner, Valocity, also shows a sharp decrease in the overall number of New Zealand suburbs with an average property value of less than $500,000: from 975 to 434.
In the major cities, the number of sub-$500,000 suburbs dropped 82 per cent, from 84 suburbs to just 15, with most of those in fringe locations with few amenities or services.
OneRoof editor Owen Vaughan said the research highlighted the growing inequality in New Zealand's housing market.
Wellington was most affected by the boom, where the share of suburbs with an average property value of less than $1m fell from 78% in January 2020 to 12% in January 2022. Photo / File
"Between January 2020 and January 2022 the nationwide average property value jumped 45 per cent, from $760,000 to $1.103m. Some cities had house price growth of more than 50 per cent, and even those left behind by the boom, like Dunedin, registered a level growth that would be, in years previous, classed as strong.
"The housing frenzy of the past two years, fuelled by low interest rates and FOMO, has radically altered the landscape for buyers and sellers, with typical prices in the majority metro suburbs now well above $1m."
Vaughan said the city most affected by the boom was Wellington, where the share of suburbs with an average property value of less than $1m fell from 78 per cent (44 suburbs) in January 2020 to 12 per cent (seven suburbs) in January this year.
Tauranga had the next biggest fall in sub-$1m suburbs: 86 per cent of the city (20 suburbs) was in the price bracket in 2020 but by 2022 that had fallen to 34 per cent, or eight suburbs.
Tauranga saw the next biggest fall after Wellington in sub-$1m suburbs. Photo / File
The number of sub-$1m suburbs in Auckland fell from 123 (44 per cent) to 26 (9 per cent) over the same period, while the number of suburbs in the $1.5m-plus band exploded from 57 to 149.
"More worrying for Auckland was the change in house prices in South Auckland, where incomes are lower and housing stock is typically lower grade. In January 2020, there were 10 South Auckland suburbs with an average property value of less than $700,000. In 2022, the cheapest suburb has an average property value of $738,000 and most were closing in on $1m."
The least changed by the boom was Dunedin, where the overall average property value grew 33.4 per cent over the two years, from $568,000 to $758,000 and the number of sub-$1m suburbs fell 14 per cent, Vaughan said.
"The research also found Christchurch to be still relatively affordable, compared to the other major metros, but the opportunities for first-home buyers to enter the market at a low price point are shrinking, with the number of suburbs with an average property value of $500,000 or less falling from 46 in January 2020 to eight in January 2022."
Vaughan said Hamilton's overall average property value grew 46 per cent over the two-year period, from $643,000 to $939,000, "and while the bulk of the city (27 suburbs) still sits in the sub-$1m bracket, no suburb has an average property value of less than $500,000".
"Queenstown remains the country's most expensive housing market. Prior to Covid's arrival, 22 suburbs in Queenstown-Lakes (70 per cent) had an average property value of more than $1m, nine of which were above $2m. By January 2022, just two suburbs had an average property value of less than $1m, while the $2m-plus club has grown to 13."
Queenstown remains the country's most expensive housing market. Photo / 123RF
Valocity head of research Wayne Shum said the growth over the two years was fuelled by record-low mortgage rates and the suspension of the loan-to-value ratio restrictions after Covid-19 hit in March 2020.
"The rate of house price growth over the past two years was highly unusual. Before Covid, it had taken New Zealand's property market almost five years to achieve the same amount of value growth, with Canterbury and West Coast taking more than a decade to match their growth levels."
However, Shum said that housing market was unlikely to see the same amount of growth in 2022. "As inflation begins to bite and mortgage rate rises, we are likely to see the growth rate moderate to level seen pre-Covid. And expect to see some value softening in some locations or within some property types."
