New Zealand’s largest city has an average house price of over $500,000 USD. Have prices gone too far?
By Peter Gilmour, REAL Trends chief foreign correspondent
New Zealand is one of the world’s most open economies with years of unbroken economic growth boosted by strong personal consumption and low inflation. In its Q3 2016 Global House Price Index, Knight Frank reported that New Zealand recorded a year-on-year house price growth of 13.5 percent, second only to Turkey in the 55 countries surveyed. By comparison, the United States placed 24th in the survey with a year-on-year house price growth of 5.5 percent.
Facts about Auckland
New Zealand comprises many islands with approximately 70 percent of its 4.7 million people living in urban areas on the North Island. Auckland, the largest city, is situated on the North Island and is the most expensive housing in the country with an average house price of over $500,000 USD, as reported by the Global Property Guide website. Ten years ago, the average house price was half of this amount, and for the outlay, you may not even get views of the water. Over 70 percent of New Zealand’s population consider themselves of European decent with the largest minority being indigenous Maori, who account for around 15 percent of the population. Farming and commerce are the major employers in the local economy.
In the aftermath of the Brexit vote, Immigration New Zealand reported a spike in queries from British nationals registering their interest on immigrating. Ten thousand inquiries were received in 49 days—more than double the inquiries received in the same period the previous year.
Why is Auckland so popular? It all comes down to jobs. New Zealand’s most global city attracts those who want to get ahead in their careers, and once employment is found, few want to leave.
Foreign Investment Booming
Also, foreign investment is booming. According to Corelogic, 37 percent of buyers in 2012 were investors, whereas today’s investors make up over 50 percent of all homebuyers, a large percentage of whom are Chinese. Rental prices continue to rise, and many locals are choosing to relocate to more affordable parts of the country and enduring a long commute into the city.
The New Zealand government is urgently looking at ways to find a solution to the crisis. These include fast tracking consent on new housing projects, making investors put down 40 percent of the purchase price in cash, offering locals cash incentives to move out of the city and strengthening of money laundering laws to prevent the stashing of ill-gotten gains in New Zealand property. Time will tell if these measures will be successful or if Millennials will lead the charge to work remotely and inject new talent into regional centers around the country.