New Zealand: Property Prices

Overview

In general, property prices in New Zealand are slightly lower than in most of Western Europe due to its small population and relatively low demand, low cost of land and generally low construction costs. There is, however, a huge gulf between Auckland and the rest of the country. Property is much more expensive there, mainly because most of the best paid jobs are to be found there. Auckland also has one of the best climates in New Zealand and prices are further inflated as it’s the first choice of the majority of immigrants. Wellington is the country’s second most expensive area for property purchase. Price variations are less marked throughout the rest of the country.

After some years of large annual increases in house prices, 2005 has seen a relative slowdown in the property market, although certain commentators dismiss this as a blip. In summer 2005 (winter in New Zealand), there’s was little consensus regarding what the market would do. The national average house price in New Zealand in December 2004 was $260,000, increasing to $265,000 in January 2005, but at the time the second figure was released, the president of the Real Estate Institute advised caution because reduced sales volumes and decreases in prices in some regions indicated that the market would begin to turn. For example, in the Auckland Metropolitan area, prices fell from $355,000 to $340,000 from December to January, while in Auckland City, the average fell from $412,500 to $385,000. In Wellington, price falls were much more modest, down from $276,250 to $275,000, but in Hawke’s Bay, for example, the average price rose, from $225,000 to $245,050.

By spring (northern hemisphere) 2005, areas that had seen some of the largest price increases in previous months, e.g. Nelson and Tasman, began to see falls. The Bank of New Zealand economist predicted that a housing downturn was imminent, and when it arrived, prices would drop between 5 and 10 per cent over a two to three year period. The Reserve Bank was more precise, predicting that average house prices would fall 4.8 per cent in 2006 and a further 1.9 per cent in 2007 (after having risen 56 per cent between 2001 and 2004).

But in summer (northern hemisphere) 2005, figures showed that the national average house price had risen to $275,000 (after a record figure of $280,000 in March and a fall to $272,000 in April) surprising many economists who thought that a downturn was about to begin, following April’s fall. Prices had fallen slightly in a couple of regions, but in most they had continued to rise, with a notable narrowing of the gap in prices between urban and provincial areas. This last trend was put down to jaded city dwellers escaping to life in the country.

Apartments are often as expensive as houses and townhouses (or even more so), as they are invariably located in city centres, whereas most houses are in suburbs or the country. Advertised prices are usually around 3 to 8 per cent above a property’s true market value and substantially above its rateable value.

When calculating your budget, you should also allow for lawyer’s fees and bear in mind that banks charge a mortgage processing fee equal to 1 per cent of the mortgage amount and require a deposit (usually $500 minimum) on application.

© Survival Books Limited 2006

“Buying a Home in Australia & New Zealand” 1st Edition, Graeme Chesters.
Reproduced with the permission of Survival Books Limited.

Further information on this topic can be found in “Buying a Home in Australia & New Zealand” 1st edition, by Graeme Chesters.

For extensive information about buying a property in Australia & New Zealand, you can purchase this book at www.survivalbooks.net