Skip Auckland, investors urged

ANZ has released its latest Property Focus report, which notes that affordability is worsening, debt servicing is becoming more difficult and nationwide consent issuance is flatlining, although it is picking up in Auckland.

The bank’s chief economist, Cameron Bagrie, said it seemed likely that  regional New Zealand house prices could be set to outperform Auckland’s over the next few years.

Auckland’s prices have been rising at a rate that far outpaces the rest of the country.  Prices are up more than 20% in Auckland compared to 2014, according to REINZ, and just under 12% in the rest of the country.

But prices looked to have come off the boil in the most recent monthly statistics, dropping 2.6%, and Bagrie said the market conditions were right for a regional price boom.

In the early 1990s, the median Auckland house price was 30% higher than the median New Zealand price. Now it is two-thirds higher.

“It’s like a rubber band, Auckland values versus the rest of New Zealand. You can’t indefinitely stretch the rubber band before you see a snap back. Auckland will level out and the rest of New Zealand will play catch up a bit,” Bagrie said.

He said the new lending rules to be introduced on November 1 would hasten that.

Auckland investors will find it hard to get a loan with equity of less than 30% and there is already anecdotal evidence of landlords looking for rental properties in smaller centres instead.

Bagrie said capital would start to flow out of Auckland to housing markets in other parts of New Zealand.

“If I was going to talk about getting bang for my buck in the next five years I’d look outside Auckland.”