Small pockets of prime real estate continue to perform, says Bruce Morris.
If you can afford the $1.75 million to buy an "average" house in Auckland's Herne Bay, you probably sleep relatively easy even when the world is turning upside down.
Sure, Herne Bay - the country's most expensive suburb - doesn't entirely escape when house prices everywhere are sliding. But buy quality in a quality area and your wealth should remain intact if you have the financial ability to ride out the storm.
Herne Bay (and adjoining St Marys Bay) are out of the reach of most people, but they are small enough pockets of prime real estate to draw constant demand, even in a buyers' market.
Take, for example, 10 Salisbury St, a five-bedroom, double-gable villa built around 1900 and sitting on 1255sq m, which went to auction just before Christmas.
Apart from an early alteration to accommodate an inside toilet, followed by a new roof and spouting about 30 years ago, the villa was in original condition - with all the glory and headaches that entails.
The feedback to Barfoot & Thompson's Bob Gordon, who handled the sale, was that a quality makeover would cost around the $1 million mark, give or take $100,000.
So who buys a house that needs $1 million of attention before it becomes home?
The interest, in a flat market across Auckland and a depressed one over much of the country, was typical for Herne Bay, though hardly spectacular. A series of open homes drew 160 groups, bringing six bidders to the auction and a final price of $2.5 million - right on the CV.
While the uncharitable would call the property an old dump barely worth resurrection, others were a little surprised the sale didn't top $3 million. But it wasn't a bad price at all for a property that last changed hands in 1954 for £8000 ($16,000).
On the Reserve Bank's infl ation calendar, that $16,000 back then would buy goods worth $773,000 today. So, setting aside the costs to sell and the limited maintenance through last century, the real term capital gain over 56 years was a bit over $1.7 million.
Not bad at all - and an endorsement of location as a key driver of real estate value.
Suburbs such as Herne Bay, St Marys Bay and Parnell are now firmly established as Auckland's premier innercity suburbs, well clear of the other high-rollers on an average value basis using QV's E-Valuer. They are helped to that status by their compact nature; the bigger the suburb the more difficult it is to sustain an average level above the $1 million mark, which is why Remuera and Takapuna - where some of Auckland's highest-value sales are recorded - feature lower down the list.
At the other end of the scale, Wellsford took a hammering in the December 31 quarter to drop nearly 13 per cent in average value, pulled down to $232,000.
Otara, traditionally the lowest-priced city suburb, found new interest to bound up 5.8 per cent to an average of $256,000, putting it ahead of Clendon Park (down 4.6 per cent to an average value of just under $243,000 at year's end) in the list of cheapest Auckland areas.
AUCKLAND'S HIGH ROLLERS
Herne Bay $1.754 (up 1.1%)
St Marys Bay $1.326m (up 0.1%)
Parnell $1.236m (down 1.1%)
Takapuna $1.079m (up 0.7%)
Stanley Pt $1.072 (down 0.1%)
Remuera $1.048 (up 1.2%)
Epsom $1.026m (down 1.8%)
Mission Bay $1.015m (up 0.5%)
Devonport $965,444 (up 0.2%)
Ponsonby $923,222 (up 3. 9%)
* List shows the Auckland city suburbs recording the highest E-Valuer
estimate of average value at December 31, 2010, with rise/fall compared to the previous quarter. Source: QV.
* From the New Zealand Herald's quarterly 'Property Report' - a guide to house prices and great places to live.
