Hot housing market spreads out

Aucklanders are beginning to pack up and move. Photo / Thinkstock

As Auckland values continue to rise rapidly there is increasing speculation about if and when this will spread to other parts of NZ.

This is partly based on the fact that in the past when Auckland has changed value the rest of the country has done likewise, and partly based on high Auckland values making purchasers consider other locations.

There are many ways this spread from Auckland could occur. One is people who work in Auckland seeking to live further away and commute. This would affect the fringes of Auckland, maybe as far away as Hamilton, but not far beyond that. Then there are people retiring, cashing up their Auckland property and moving to other locations. Then there are working-age people moving for lifestyle reasons. Again this could be anywhere -- but job options will be a limitation here -- so it could mean Tauranga, Hamilton and Hawkes Bay.

Then there are investors. With rental yields very low in Auckland, investors may be seeking rental yields elsewhere in the country. There are anecdotal reports of this in Hamilton and Wellington.

One potential sign of this Auckland spread would be values increasing in these other areas. Values in Tauranga have been accelerating for several months and there are early signs that other areas may be on the way up too: Hamilton, Waikato District (from the south edge of Pukekohe to the north edge of Hamilton), Western Bay of Plenty and Hastings.

A normal precursor to increasing values is an increase in sales activity. Many parts of the country have seen a resurgence in sales activity in the past six months after a weak year.

Tauranga has been stronger than most, which may in part explain the increase in values there. There has not been the same sustained sales activity in areas surrounding Auckland or the other areas mentioned above. But there are signs that things may be changing in the last few weeks.

Most of the major banks order valuations, either electronic or by registered valuers, through our valuation ordering service. The number of valuations ordered in this way correlates closely to subsequent sales activity, and so is a great lead indicator.

This valuation activity has been very strong in recent weeks in Tauranga and Hamilton, but also now in Coromandel, Hauraki, Matamata/Piako, Taupo and Hastings. Clearly this is a development we will keep a close eye on.