Where to for Auckland property prices

The latest issue of Property Focus published by the ANZ Bank has some interesting things to say about the Auckland property market. Here are the key points.

  • Since the 1970s the annual nominal house price growth has averaged 9% in Auckland, versus around 7% for the rest of the country. This, they say, is likely (in part) to reflect Auckland’s stronger population growth and geography. Property prices follow people so it’s logical that those areas gaining population are going to have rising property values, at the expense of those areas with population loss. In Auckland much of the population increase is driven by long term permanent migration. Migrants  have not settled in the regions to the same extent.
  • While Auckland house prices have outperformed the national average, the ANZ says there are times when Auckland can underperform too. “We appear to be entering such a stage…With rental yields in Auckland sitting just above 3%, money is invariably attracted to higher-yielding alternatives. There may always be a gap between Auckland and the rest of New Zealand yield-wise (on the back of better expected capital gains in Auckland). However, that gap has boundaries and a stretch point. We appear to be hitting that point at present, just as we did in 2003.” In other words, they expect regional property prices to perform better than Auckland in the next cycle. That’s a significant prediction, and one that already appears to be ringing true given the recent rise in property values in Northland and the Bay of Plenty.
  • Auckland’s property prices have what they call a “ripple effect” with those regions closest to Auckland being the most affected, although the direct impact is not as strong as one might expect.
  • Prices in Auckland are more responsive to changes in general economic conditions. The regions are more sensitive to the economic drivers based around their dominant industries.
  • When measuring the impact interest rates have on property prices they say the peak effect occurs 9 to 12 months after the interest rate change. In other words, the uplift in property prices from the recent mortgage rate cuts will be most noticeable in the middle of next year.

All this points to a good 2016 for regional property prices.

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