The NZ Market

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Southern property outshines Auckland

SUNDAY , 01 FEBRUARY 2004

By KYLIE SMITH
Forget booming Auckland house prices, the real star of the property market in the past five years has been the South Island, with buyers doubling their money in Central Otago, Queenstown and Nelson.

House prices in the Central Otago area – including Wanaka, Alexandra and Lake Hawea – have soared 132% since December 1998 and the median price is now a whopping $278,000, figures from the Real Estate Institute of New Zealand (REINZ) show.

The beautiful scenery and skiing are not the only factors attracting buyers to the area, says REINZ Central Otago spokesman Ross Rainsford: It’s also the slower lifestyle.

“People just love it, they don’t miss the hustle and bustle of cities.”

REINZ national president Graeme Woodley said he was not surprised at the surge in South Island real estate, led by “resort-type” areas such as Queenstown.

“Areas that look over water, whether it is lakes, rivers or sea, have created huge demand,” he said.

Cashed-up migrants and returning Kiwi expats had led the real estate buying charge. And house prices wouldn’t drop as the boom slowed, though the rate of growth would, he said.

“While we have still got net positive migration and low unemployment, it will be a pretty reasonable year.”

But Bank of New Zealand chief economist Tony Alexander warned investors the property market was reaching the end of its cycle and was likely to grow only 5%-10% more before flattening.

“I think it has fairly much done its dash. Now is the time to rationalise,” he said. Investors could expect prices to start falling by about 5% by the end of this year.

Some over-hyped sectors of the market, especially in Auckland, could drop by as much as 40%.

However, owner-occupiers who were not planning to sell and buy had little reason to worry, Alexander said.

The REINZ figures show investors in Central Otago, Queenstown, Motueka, Nelson and Richmond have, on average, doubled their money since 1998. Queenstown median prices rose from $192,300 to $437,000, while Motueka jumped from $123,800 to $271,000.

The two North Island areas among the top 10 were the Gulf Islands and Manawatu.

Prices in the Gulf Islands jumped 99%, from a median of $195,200 to $388,500 over the period, while in Manawatu, median prices rose from $65,000 to $124,500.

District by district, Nelson/Marlborough outclassed the nation’s big cities, with a 104% rise, from a median of $140,000 to $286,000 in five years.

Otago was the next-best performer, jumping 62%, from $94,600 to $153,300.

By comparison, Wellington prices rose 40%, from $172,000 to $240,500, and Auckland 39%, from $233,300 to $325,000.

The Waikato district was the nation’s poorest real estate performer, showing a median price rise of 25%, from $153,900 to $193,000.

Property owners in King Country, including Taumarunui and Turangi, fared particularly badly, suffering a 16% dive in median prices, from $76,000 to $64,000.

Mark Winter, REINZ district president for Waikato, Bay of Plenty and Gisborne, said the figure was not a good reflection of the district’s “outstanding” growth of the past two years.

“If you look at the supply and demand factor, the number of houses built has been proportionately greater.

“That has probably worked to stop values going up so much.”

The drop in prices in King Country could be attributed to the rural recession, the remoteness of the towns and the population drift towards cities, he said.

Hawke’s Bay, including Bay View, Wairoa and Whirinaki, showed the single biggest fall in prices of 33%, attributed to a quiet month in which most properties sold were at the lower end of the market.

REINZ Hawke’s Bay district president Simon Tremain said the December 2003 median price of $72,000, down from $108,300 five years earlier, was a statistical anomaly and followed a general trend of rising prices.

Prices in the nation’s top district, Nelson/Marlborough, were led by the picturesque port town of Nelson, according to REINZ district president Darryl Marshall, who said newcomers sought to get away from big city crowds.

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