The housing frenzy has radically altered the housing market and piled even more pressure on buyers
New Zealand’s big cities now have twice as many suburbs with typical house prices greater than $1 million than they did at the start of the COVID-19 pandemic, a new report has revealed.
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In January 2020, 203 of the 646 suburbs that make up Auckland, Christchurch, Dunedin, Hamilton, Queenstown, Tauranga, and Wellington had an average house value of $1 million or more.
But in just two years, that number has doubled, with 406 suburbs in the seven main cities now having values of $1 million-plus, data by property website OneRoof and analysts Valocity showed.
OneRoof editor Owen Vaughan said the research shows how fast the nation’s cities are transforming and the growing inequality this is leaving in its wake, NZ Herald reported.
“The housing frenzy of the last two years, fuelled by low interest rates and a ‘fear of missing out’ among buyers has radically altered the housing market, with typical prices in the majority of metro suburbs now well above $1 million,” Vaughan told the publication.
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Many Kiwis had already been finding it increasingly hard to afford to buy prior to the pandemic, with national home ownership levels steadily falling over the past three decades.
The dramatic housing boom through the pandemic had piled even more pressure onto buyers, said Wayne Shum, Valocity head of research.
Between January 2020 and January 2022, the nationwide average property value skyrocketed 45% from $760,000 to $1.1 million, Valocity data showed. In some cities, the price jump was by more than 50%, while even in places where prices didn't rise as fast, such as Dunedin, the growth was still strong.
“Before COVID, it had taken New Zealand's property market almost five years to achieve the same amount of value growth, with Canterbury and West Coast taking more than a decade to match their recent growth levels,” Shum told NZ Herald.
Across the nation, that meant that from the 298 $1 million-plus suburbs two years ago, the number has grown to 894 now.
Vaughan said the booming market has left first-home buyers in Auckland with scant choices. In January 2020, 123 of the city's suburbs, or 43%, had average house prices under $1 million. But now, the number has gone down to just 26 suburbs, or 9%, with average prices under $1 million.
Meanwhile, the number of suburbs in the $1.5 million-plus band has exploded from 57 to 149.
“More worrying is the change in house prices in South Auckland, where incomes are lower and housing stock typically lower grade,” Vaughan told NZ Herald. “In January 2020, there were 10 South Auckland suburbs with an average property value of less than $700,000. In 2022, the cheapest suburb has an average property value of $738,000 and most were closing in on $1 million.”
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Arguably most affected by the boom were Wellington first-home buyers. In January 2020, 78%, or 44, of the city's suburbs had average house prices below $1 million. Now there’s just 12%, or seven suburbs, below $1 million, the report said.
Also hit hard was Tauranga's affordability. From 86%, or 20, of its suburbs having average values below $1 million two years ago, it became just 34%, or eight suburbs, now.
The least changed by the boom was Dunedin. The city's average house value grew 33% over the two-year period, from $568,000 to $758,000, while the number of sub-$1 million suburbs fell 14%.
“The research also found Christchurch to be still relatively affordable, compared to the other major metros, but the opportunities for first home buyers to enter the market at a low price point are shrinking," Vaughan told NZ Herald.
From 46 suburbs in Christchurch with an average property value of $500,000 or less in January 2020, it had gone down to eight two years after.
Hamilton's overall average property value saw a 46% rise in the two years, and while most of its suburbs were priced below $1 million, there are now no longer any suburbs with prices less than $500,000.
Queenstown remains the country's most expensive housing market.
“Prior to COVID’s arrival, 22 suburbs in Queenstown-Lakes – or 70% – had an average property value of more than $1 million, nine of which were above $2 million,” Vaughan told NZ Herald. “By January 2022, just two suburbs had an average property value of less than $1 million, while the $2 million-plus club has grown to 13.”
Better news for buyers, though, was that the housing market was unlikely to see the same amount of growth in 2022.
“As inflation begins to bite and mortgage rates rise, we are likely to see the growth rate moderate to levels seen pre-COVID, and expect to see some value softening in some locations,” Shum told NZ Herald.
