An Anne Gibson penned front pager with a screaming headline in Friday’s Herald declared: Auckland House Values Soar
Of course this is based on average figures lumping together all suburbs and all price brackets. But really the data is very patchy, and only Auckland, in fact only parts of Auckland, have values returned to pre-2008 levels. I guess the editors’ desire for a catchy headline doesn’t bother with such detail. The article goes on to focus in on the best performing sector with this report from an auction house:
Last-night, the buoyant inner-city Auckland housing market continued its run of high prices…
and then Gibson quotes a QV valuer:
“Quality properties in good school zones and near the city centre remain in high demand,” said Ms Whitehead “However, there are insufficient properties coming onto the market to meet this demand,”
“In central areas, where zoning will allow, we are starting to to see infill housing sites being created, with seemingly good demand for these for these vacant sections either from spec builders or potential owner/occupiers.” she said.
My emphasis. There are two points I want to raise here represented by each one:
1. It is clear that if there is a boom it is not city wide but quite focused on the closer in suburbs. And none of the usual commentators seem to be asking why.
2. As a result and if this continues the Council can win its argument about how the city should grow by simply getting its own house in order, with regulations and zoning rules to facilitate brownfields development, and let the market do the rest.
First let’s look a little closer at the ‘boom’.
On March 5th the Herald helpfully published a round up of dwelling sales data for the whole region and beyond. What is particularly useful about this doc is that it not only separates suburbs out but also allows a longer view: giving a percentage change from Nov 2007 as well as short periods. There is some commentary as well with interviews with economists, agents, and valuers.
The more interesting numbers are the longer term ‘change from Nov 2007’ because it enables looking past short term noise, but also it shows if values have recovered back to their pre-crash level or not.
But the growth hasn’t been consistent across the top end, the North Shore in particular is missing from the figures. Although it hasn’t done as poorly as the true ex-urbia of Rodney and Papakura/Franklin or as the lower value areas as Manukau and Waitakere. Let alone the provincial towns like Hamilton, Whangarei, Tauranga- all still seriously down from 2007, despite the diary boom. But some Shore suburbs are still below the Nov 2007 figure, like Campbells Bay at -3.6%, Castor Bay -2.8%, and even the fabulous cliff top sites of Takapuna -2.4%. So there is no region or city wide boom.
Here is a list of suburbs with above or near double digit percentage growth since Nov 2007 [+9% or more]:
Epsom, Grey Lynn, Kingsland, Meadowbank, Mt Eden, Onehunga, Ponsonby, Pt Chev, Sandringham, Western Springs, Westmere.
All in the old Auckland City Council area. There are only two outliers; somewhere in Manukau called Burswood with +10.9%, and nearly in with +8.5%; Hillcrest on the North Shore. Otherwise nowhere in the rest of Auckland nor the regions are much above the 2007 price and most in fact are still way down. Pretty consistent numbers. So what’s going on?
Is Ms Whitehead’s thought about school zones right then? Economist Shamubeel Eaquab also mentions this in his interview: ‘In good school zones and other desirable postcodes, professionals…are still buying houses and paying spectacular prices.’ Well if it was all about school zones then you’d expect Kohi, Mission Bay, Orakei, Parnell, Remuera, St Heliers, and St John to be in there too wouldn’t you? No flash schools in any of the big movers above except Epsom and Mt Eden [only 2/11].
Isn’t a better explanation that the areas with the strong growth are the previously more affordable inner city areas being bid up by people for whom living closer to the centre is increasingly important? Ms Whitehead’s ‘near the city centre’ looks sharper to me as a unifying theme here than the old school zone story. It looks like urban is hip among property buyers, but why? Is it just the qualities of those inner suburbs on the old tram routes of Auckland? I think that’s part of it; they’re all leafier, more walkable, and more mixed in with other amenities like shops, cafes, and employment, than the newer more auto-dependent further out suburbs. [Here for an analysis of the difference]. But also perhaps the ever growing costs of car commuting and the poor transit options further out are also influencing this preference?
Old 'tram built' suburbs of Auckland, from Mt Eden
One odd thing about the Herald Property Report is that the CBD doesn’t seem to exist at all. Perhaps in the Herald’s view nobody lives there, or perhaps apartments are just too déclassé to be included; the Herald only sees ‘houses’ and not all kinds of dwellings? So there are no numbers for the inner city proper. But they do quote Simon Damerell of Ray Whites who says: “A good villa or bungalow or well constructed apartment in a good location will sell well”. And it seems that close to the centre is clearly an important condition, now, of a ‘good location’.
I’m calling this growing price spread between inner and outer living an indication of a big ‘Flight to the Centre’. The reversal of the 1960s and 70s ‘Flight to the Suburbs’. Even more boldly I’m calling that this is structural, a discontinuity from the last period, and important. Here is an earlier description of this as visible in Auckland. Why? Because it isn’t just in Auckland but is observable all over the world. It is looking like a real zeitgeist issue, like the decline in driving. Richard Florida of Atlantic Cities is good on this:
http://www.theatlanticcities.com/housing/2012/04/end-sprawl/1692/
Nathan Norris at Planetizen see a generational shift at work see here:
http://placeshakers.wordpress.com/2012/04/09/generation-ys-great-migration/
If this is correct the pro-sprawl agenda of ACT’s Productivity Commission is likely to end in tears. Remember Ms Whitehead saw a supply problem in a very specific market sector; the inner city. There is absolutely no chance that paving new bits of the countryside halfway to Whangarei will alter this supply, no matter how swish NZTA’s new motorways are, if few people want to live there. It seems that the agenda of this state funded lobby group is particularly backward looking, perhaps blind to the direction of the data by the groups whose interests they are serving. Or perhaps it’s that line of Steve Jobs that things ‘Have to be believed to be seen’. They, like the government, are no believers in change.
A very restrained commentary on the Prod Com’s report can be found here at architecturenow.co.nz.
The direction of the market will make sprawl developments even more dependent on state and city subsidy than usual and the salespeople will likely find themselves swimming against the tide. And of course, every auto-dependant new little nest of cul-de-sacs out on the fringes will make Aucklands Motorways clog up further. Which makes the Herald’s latest view on this issue even more confused; here in yesterday’s editorial. As a criticism of the Council’s aims what does this mean for example?:
Its overarching aim is to create “the world’s most liveable city”, an idea that commuters stuck in traffic might find bleakly amusing, particularly if they have visited Vienna, Vancouver or Copenhagen.
And any sober person who ventures into the Queen St valley after 10pm is either brave or foolhardy; stepping around puddles of body fluids and avoiding assault has become standard practice. If this is a vision of the high-density future, most Aucklanders would say you can keep it.
Residential development in Auckland is already intense: cross-lease sections have proliferated, as have apartment buildings in the CBD and inner suburbs. A profusion of shoddy apartments – including, but not limited to, those in the leaky-building fiasco – has hammered public confidence in intensive residential development.
Because in direct contrast to the sprawl boosting Productivity Commission economist Dr Rodney Dickens has this to say in the Herald document:
“Our research shows there is no shortage of sections to build on in our national and regional markets.”
But clearly there is a supply squeeze where people really prefer to be: close to the centre. Time for the Council to out-smart its opponents by helping the market build that livable city for us all.
It’s fine for the council to have a vision, but it needs to accord with that of the people who live here. It should devote itself to making public transport work – as it works in Hulse’s “modern cities” – rather than trying to make Auckland into a dense urban jungle.
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One thing annoyed me about that editorial was that they claim to know what people want yet ignore the fact that most submissions to the AK plan supported the councils approach.
Also I was talking to a colleague just the other day who said he wanted to sell his house in the suburbs and buy an apartment in town instead, one he can lock up and leave if he wants to go away somewhere.
Nice article Patrick. I can guarantee you Onehunga’s rise is due in part to its rail connection, it’s actually a nice little suburb full of old villas al la Ponsonby and yet until recently has been (still is?) very affordable. Today it’s a very easy commute into the city and pretty soon will once again have beaches within walking distance. I think it will once again become a pretty trendy suburb to live in.
Don’t get too excited: the road lobby has plans to complete the separation of Onehunga from the harbour with the unneeded ‘middle rung’. They’ve worked out that you can only get urban motorways through poor parts of town after the failure of the South Eastern nightmare. Of course all that is really needed is an upgrade of Neison St…. Know any QCs?
http://greaterakl.wpengine.com/2011/11/22/the-proposed-“middle-rung”/
Yeah I was aware of that motorway – which up until a month or so ago I assumed would keep itself hidden. Although Nick Smith was talking it up a couple of years ago so it’s clearly been making it’s way through the MoT. That aside I was more meaning the remediation that will be taking place next to the existing motorway – beaches, cycle paths – will never return the suburb to what from old images I saw was a pretty special area, but will at please reconnect the township to the water.
How does one go about getting these motorways stopped – I guess some reading up on the eastern motorway is in order. Admittedly, I don’t know too many lawyers who would be willing to do the work pro bono.
Great article. If you’re gonna buy a house in the suburbs make sure it’s close to a train stop.
Be good to see more ferry sailings come into PT. None in the weekend for Pine Harbour at all!
My first comment (MP of Epsom) on that editorial opens “The price of houses in Papakura and Pukekohe has little bearing on the price of houses in Ponsonby and Parnell. The latter have exclusive schools, are close to the city, and have good links to public transport.”
Regarding schools, the Grammar Zone is far from the only home of good schools in the general area. There are many good schools in the suburbs that are seeing value increases. Selwyn has actually become somewhat desirable, St Joseph’s (opposite Selwyn) has had a good name for at least a couple of decades, Gladstone Primary, etc. Don’t mistake “Grammar Zone” for the only part of Auckland that has schools parents will fight to enrol their children, because it’s absolutely not. What is obvious is that “Grammar Zone” is not the only factor that will attract big prices otherwise, as you say, the usual suspects should have been seeing the same kinds of stratospheric growth.
What is surprising is Meadowbank, because it’s extraordinarily poorly connected to public transport relative to the others, and is a relatively long way from town. The attraction can only be Meadowbank Primary and the generally nice area, because the rest of the check boxes have big, black crosses
Got an email from a friend today, so lovely and angry I’ve just got to share:
“Story of New Zealand. Went up to Scandretts Regional Park yesterday, and driving through Snell’s Beach is like having thorns poked in one’s eyes. It is so ugly—the ordinary made so manifest that it’s almost aggressive: fuck you and your thoughts that we should make a pretty little town. How can people create places like that?”
Also getting lots of confirming tweets and messages from city dwellers about this post. I’m telling them that they’re the crest of a wave….
I think a huge part of the problem in NZ is that houses are two things over and above being a dwelling. They are an investment and a status symbol. These help to drive prices through the roof. Property investment is low risk/high reward driven partially by favourable taxation laws. This breaks the fundamental principle of investment. That low risk should attract low reward and high risk should attract high reward. When investors buy houses they are less concerned with the initial price rather they are more concerned with the capital gains. This gives people with equity in property a massive advantage over first home buyers. First home buyers are required to save money, this is money coming from their income. Property investors get money from the capital gains of their existing properties. Thus if the market rises so does the value of their capital and their buying power remains relatively stable. For the first home buyers they are now required to save more of their income simply to keep up. This leads to a situation where investors are able to easily keep up with the market while first home buyers must save more to stay in the game. Houses are also a middle class status symbol in NZ. This leads to people buying bigger and flasher houses simply to accumulate a higher status. I first noticed this in Tokyo. It was impossible to say what areas were rich and which were poor. They all pretty much looked the same. What was striking was the fashion. Then it clicked because everyone lives in an apartment and meets friends in restaurants/bars etc the status symbol had become clothing. In NZ we use our houses in such a way. It’s amazing how much extra we are willing to pay for things that we often barely use quarter acre sections, seperate dining rooms, spare bedrooms.