Housing affordability: The no-go areas for first-home buyers – What We Know!

By Catherine Smith, OneRoof reporter

The housing market increase has irrevocably modified the face of New Zealand’s greatest cities, turning beforehand reasonably priced suburbs into no-go areas for many first house patrons.

New evaluation
of home worth inflation within the nation’s seven major centres between January 2020 and January 2022 exhibits an explosion within the variety of $1 million-plus suburbs.

Don’t miss the OneRoof Property Report in tomorrow’s Herald

Of the 646 suburbs that make up Auckland, Christchurch, Dunedin, Hamilton, Queenstown, Tauranga and Wellington, 203 had a mean property worth of $1m or extra in January 2020.

By January this yr, the variety of $1m-plus suburbs within the seven cities had grown 100 per cent to 406.

Outdoors of the main metro areas, the variety of $1m-plus suburbs in New Zealand grew 413 per cent from 95 to 488.

The analysis, by NZME-owned property itemizing website OneRoof.co.nz and its knowledge associate, Valocity, additionally exhibits a pointy lower within the general variety of New Zealand suburbs with a mean property worth of lower than $500,000: from 975 to 434.

Within the main cities, the variety of sub-$500,000 suburbs dropped 82 per cent, from 84 suburbs to simply 15, with most of these in fringe areas with few facilities or companies.

OneRoof editor Owen Vaughan stated the analysis highlighted the rising inequality in New Zealand’s housing market.

“Between January 2020 and January 2022 the nationwide common property worth jumped 45 per cent, from $760,000 to $1.103m. Some cities had home worth progress of greater than 50 per cent, and even these left behind by the increase, like Dunedin, registered a degree progress that will be, in years earlier, classed as robust.

“The housing frenzy of the previous two years, fuelled by low rates of interest and FOMO, has radically altered the panorama for patrons and sellers, with typical costs within the majority metro suburbs now nicely above $1m.”

Vaughan stated the town most affected by the increase was Wellington, the place the share of suburbs with a mean property worth of lower than $1m fell from 78 per cent (44 suburbs) in January 2020 to 12 per cent (seven suburbs) in January this yr.

Tauranga had the subsequent greatest fall in sub-$1m suburbs: 86 per cent of the town (20 suburbs) was within the worth bracket in 2020 however by 2022 that had fallen to 34 per cent, or eight suburbs.

The variety of sub-$1m suburbs in Auckland fell from 123 (44 per cent) to 26 (9 per cent) over the identical interval, whereas the variety of suburbs within the $1.5m-plus band exploded from 57 to 149.

“Extra worrying for Auckland was the change in home costs in South Auckland, the place incomes are decrease and housing inventory is usually decrease grade. In January 2020, there have been 10 South Auckland suburbs with a mean property worth of lower than $700,000. In 2022, the most affordable suburb has a mean property worth of $738,000 and most have been closing in on $1m.”

The least modified by the increase was Dunedin, the place the general common property worth grew 33.4 per cent over the 2 years, from $568,000 to $758,000 and the variety of sub-$1m suburbs fell 14 per cent, Vaughan stated.

“The analysis additionally discovered Christchurch to be nonetheless comparatively reasonably priced, in comparison with the opposite main metros, however the alternatives for first-home patrons to enter the market at a low worth level are shrinking, with the variety of suburbs with a mean property worth of $500,000 or much less falling from 46 in January 2020 to eight in January 2022.”

Vaughan stated Hamilton’s general common property worth grew 46 per cent over the two-year interval, from $643,000 to $939,000, “and whereas the majority of the town (27 suburbs) nonetheless sits within the sub-$1m bracket, no suburb has a mean property worth of lower than $500,000”.

“Queenstown stays the nation’s costliest housing market. Previous to Covid’s arrival, 22 suburbs in Queenstown-Lakes (70 per cent) had a mean property worth of greater than $1m, 9 of which have been above $2m. By January 2022, simply two suburbs had a mean property worth of lower than $1m, whereas the $2m-plus membership has grown to 13.”

Valocity head of analysis Wayne Shum stated the expansion over the 2 years was fuelled by record-low mortgage charges and the suspension of the loan-to-value ratio restrictions after Covid-19 hit in March 2020.

“The speed of home worth progress over the previous two years was extremely uncommon. Earlier than Covid, it had taken New Zealand’s property market nearly 5 years to realize the identical quantity of worth progress, with Canterbury and West Coast taking greater than a decade to match their progress ranges.”

Nevertheless, Shum stated that housing market was unlikely to see the identical quantity of progress in 2022. “As inflation begins to chew and mortgage fee rises, we’re more likely to see the expansion fee average to degree seen pre-Covid. And anticipate to see some worth softening in some areas or inside some property sorts.”