OneRoof: Tauranga’s housing affordability takes huge hit

The housing market boom has changed Tauranga’s face, turning previously affordable suburbs into exclusion zones for first-time homebuyers, new reports show.

$ 1 million in Tauranga real estate, according to Bay experts
The “norm” that an agent has now exceeded $ 2 million in entering the city’s luxury home market.

A new analysis of home price inflation from January 2020 to January 2022 shows that the total number of suburbs of New Zealand with an average wealth value of $ 1 million or more has skyrocketed from 298 to 894.

The boom had a dramatic impact on Tauranga. In Tauranga, the number of suburbs over $ 1 million has increased from 3 to 15, covering 66% of the city.

A study conducted by NZME-owned real estate listing site OneRoof.co.nz and its data partner Valocity and published in the OneRoof Property Report puts pressure on the city’s affordability.

OneRoof editor Owen Vaughan said the housing frenzy over the past two years has fundamentally changed the situation for buyers and sellers, supported by low interest rates and fears of oversight.

“Between January 2020 and January 2022, just before Covid’s attack, Tauranga’s average wealth increased by 53.2 percent to $ 1.24 million.

“This is one of the country’s fastest growth rates, with housing in the city now $ 430,000 higher than it was two years ago.

“Our research shows that there is pressure on the bottom of the market.”

In 2020, Tauranga’s cheapest suburban Parkvale had an average real estate price of less than $ 500,000. In addition, the average real estate prices in the six suburbs range from $ 500,000 to $ 600,000, within the reach of most first-time homebuyers.

“Currently, Parkvale has an average real estate price of $ 770,000, one of eight suburbs in the less than $ 1 million price range.”

Mr Vaughn said rising interest rates would put pressure on those who bought at high market prices last year.

“Many homeowners will be pleased that the value of their greatest asset has increased, but the bottom of the ladder has been lifted and many have stretched themselves to create stressful levels of debt. I have no choice but to undertake it. “

Three years ago, $ 1.25 million to $ 1.5 million was considered entry-level to the top end of the city’s luxury and ambitious housing market, said Jason Eves, a partner at Oliver Road Estate Agent. Said that.

“The entry point is now $ 2 million north.”

According to Eves, significant market growth from January 2020 to 2022 has already exceeded $ 1 million in one of the regions with the highest median home prices in Tauranga and Western Bay.

“Tauranga is one of the most desirable areas to live in, with growth and popularity as a hub for many business sectors, allowing competition for local housing assets and traditionally high value suburban supply. Above and increasing. Below value. “

According to Eves, the proportion of real estate at the top of the market has steadily increased over the past two years, with most of Tauranga’s market above median home prices.

“Given $ 1 million, generally speaking, the purchasing power and importance of the past is no longer there. Does this arbitrary number represent a meaningful threshold between the average and the ambitious? The question arises. “

Anton Jones, Managing Director of the Tremains Bay of Plenty, said Tauranga’s $ 1 million market is currently “normal.”

“It used to be unheard of in some respects, but now it’s commonplace. Unfortunately, many can’t afford it.

“Obviously, that means everyone pays more somewhere along the line.”

Heath Young, CEO of the real estate group that runs Eve and Baileys, said Rotorua and Tauranga have undoubtedly experienced significant price increases over the past two years.

“This has been fueled by low borrowing costs and helplessness … [of] New housing that meets the supply of people moving to the area. “

Young said the government has the opportunity to be wise about how to deal with some of the recessionary risks associated with Covid-19.

“The government not only spent a lot of money, but also released printed money, quantitatively mitigated billions of funds to the banking system at record low rates, and gave confidence to the economy. . Housing growth over the last two years. “

Mr Young said what the government could do was allocate some of that money to the local council for infrastructure to partner with local private developers to open new housing supplies.

“This is done on the condition that some of this new supply is limited to the first homebuyer.

“This has greatly helped unlock the new housing supply that these regions are desperately needing, providing first-time homebuyers with high-quality, cost-effective options and more normalized homes. It has effectively created a rise in prices. “

According to data, the city most affected by the boom is Wellington, with suburbs with an average wealth value of less than $ 1 million from 78% (44 suburbs) in January 2020 to 12% (7) in January. Suburbs) decreased. 2022.

The number of suburbs under $ 1 million in Auckland decreased from 123 (44%) to 26 (9%) over the same period, and the number of suburbs in bands over $ 1.5 million surged from 57 to 149.

Dunedin was the least changed by the boom, with overall average real estate prices increasing 33.4% from $ 568,000 to $ 758,000 and the number of suburbs under $ 1 million decreasing by 14% over the two years.

Wayne Shum, head of research at Valocity, said two-year growth after the hit of Covid-19 in March 2020 was fueled by the suspension of record low mortgage rates and loan-to-value ratio restrictions. I did.

“The rate of increase in home prices over the last two years has been extremely unusual. Prior to Covid, it took almost five years for the New Zealand real estate market to achieve the same amount of value increase, and Canterbury and the West Coast matched it. It took more than 10 years. Their growth level. “

However, Sham said the housing market is unlikely to achieve the same amount of growth in 2022.

“As inflation begins to bite and mortgage rates rise, growth is expected to be moderate to the levels seen before Covid, and to some extent in some locations or some real estate types. The value is expected to soften. “