At the same time as being by far the country’s largest metropolitan city, Auckland has developed into an international city with a population in excess of 1.42 million, and growing.
It is this, more than any other reason, that supports the year-on-year growth in property prices. Simply put, the population that is coming to Auckland for employment and lifestyle reasons is growing quicker than available accommodation. It is putting pressure on available housing stock, and competition means higher prices.
But population growth is only part of the story. Within all big international cities, a great deal of economic wealth is created, and greater opportunities exist for people to get ahead based on personal effort.
Many of those with the means are prepared to spend their disposal income on their lifestyle, and that includes their homes.
SEE ALSO: What’s your house really worth?
A casual glance through the promotional material of properties for sale shows just how far lifestyle expectations have changed in recent decades. Four bedrooms, en-suite, separate family room and lounge, easy flow indoor/outdoor living, extensive decking and double garaging are for many the norm.
The fixtures and fittings being put into modern homes are world class.
Many of the new homes being built, particularly in the inner suburbs ringing the central business districts and along the coastal fringe, would include such features as standard to maximise the high value of the land.
Whereas at one time older, standard three bedroom houses were available in these desirable locations, they are now becoming rarer as they too are being transformed into modern, luxury homes. It is resulting in entire locations becoming high value areas.
It is a myth, however, to say that only the wealthy can afford to buy a house in Auckland. In broad terms nearly a third of all the homes Barfoot & Thompson sells in Auckland are priced at under $500,000. They are located in the outlying suburbs to the south, west and north of the city.
While these properties are by New Zealand standards some distance from the central city area, they are well located to work opportunities, good schools, transportation corridors, and community facilities.
Understanding what drives Auckland property prices is a necessary counter to those that claim Auckland property is overvalued. Auckland property prices are what they are because people are prepared to pay, and a large enough number of them have the ability to meet the asking price.
Trying to control or manipulate the housing market where currently seller and buyer reach mutual agreement on price will not work.
Unless there is a major, unforeseen economic downturn on the horizon, then over the next 12 months we can expect a continuation of what has occurred over the past year, which is modest, gradual increases in prices.
The economy is looking stable, Westpac’s economists are not seeing any short term increases in mortgage interest rates, and there are no signs that Auckland’s population growth is going to slow.
While the recent General Election led to some marking time in house sales through August and September, and property activity through to the end of the year is likely to be more active than usual as we catch up on those lost two months.
The election of a National led Government will over time see changes that will lead to a greater number of homes being built as more land is released for housing, planning and resource costs are curbed, and construction continues to go up as well as out. These changes will take time to work their way through the system.
Auckland’s future direction is now well and truly set. The country’s political and economic direction is settled for the next three years, and within that finalisation of Auckland’s Unitary Plan and public transport direction will become clearer.
Within that it is important decision makers continue to focus on the needs of those with limited resources. The Government and Council does have a number of initiatives it is working on, and the faster it puts those plans into place the better.
What we must never lose sight of is the need for us to ensure that those with the commitment to buy their own home, and who are prepared to make the sacrifices necessary to achieve it, are not be forgotten.
SEE ALSO: What’s your house really worth?
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