APIA Blog

RSS Feed

Ed McKnight: You can't just buy and hope

Friday, July 24, 2020

IMAGE CREDIT: UNSPLASH

Some property commentators (and investors) look at the data the Real Estate Institute release and proclaim that it doesn’t matter where you buy … properties go up roughly the same amount no matter what the region.

One economist released a fantastic piece of analysis that showed over the last 28 years, Gisborne house prices went up at the same rate as Auckland house prices.

And that is absolutely true when looking at the data from a regional level.

However, you’re not investing in an entire region. You’re not investing in one town. You’re investing in one specific property, within one suburb, within a town that’s within a region.

It’s of no comfort that the median house price doubled in 10 years if it takes 18 years for the property you invested to double.

The trouble with blanket average analysis is that it masks the enormous variation in capital growth that happens within regions.

For instance, over the last 20 years, the fastest-growing suburb in the Wellington Region, Cannons Creek, grew by 9.43% per year. That means house prices doubled roughly every 7.6 years.

On the other hand, the slowest growing suburb, Wellington Central, only grew by 3.81% each year. That’s 18.9 years on average to double in value.

Had Wellington Central house prices grown at the same rate as Cannons Creek, property owners there would be $859,553 richer.

What does this tell us?

Where you invest matters. You can’t just buy property anywhere and hope.

To get a sense of the trends, we’ve recently been crunching data to identify trends in where property prices have increased the fastest around cities. Take a look at the map of Christchurch below, which shows capital growth by suburb.

The redder the dot on the map the hotter the property market in terms of capital growth.

Which Christchurch suburb's house price grew the fastest?

We’ve also created these maps for Auckland, Wellington and Hamilton.

What we observe above is the same trend that appears across the four major NZ cities.

Property prices tend to grow more slowly in the very middle of the city due to the higher number of apartments, which don’t tend to appreciate as quickly.

Property prices in city-fringe suburbs tend to appreciate more quickly. This is especially true in traditionally affluent suburbs like Saint Mary’s Bay in Auckland and Fendalton in Christchurch.

Interestingly we see the inverse trend when it comes to average gross yields. That means high growth suburbs tend to have poor yields and vice versa.

Taking a look in Christchurch, some suburbs on the outskirts of the city, like Islington and Templeton have experienced mediocre capital growth over the long term, but have relatively high yields.

Which Christchurch suburbs have the highest yields?

Though bear in mind there are some suburbs that buck the trend.

If you’d like to explore this data yourself, you can play around with the interactive maps for free on the Opes website. They are available for Auckland property market, Wellington property market, Christchurch property market and Hamilton property market, with both gross yields and capital gains by suburb.



ABOUT THE AUTHOR

Ed McKnight

Ed is the Resident Economist at Opes Partners Limited as well as the host of the Property Academy Podcast

 

 

 

 


Recent Posts


Tags

letting fee tenancy tribunal insurance clnz fixed-term tenancy cgt re agent bond form management boarding house travel bubble Level 4 early termination short-term rental ocr cat property value speculator apia building How to smoke alarm recycling equity beginner investor bankruptcy interest rates productivity interest only market ring-fencing first home buying renovation mortgage property apprentice ventilation off the plan gluckman report Case study Gluckman election2020 brightline partners scotney williams asbestos HSWA meth contamination buying rules property management covid-19 sale and purchas Editor's Choice Investment tip retaliatory notice auckland council banking development rta Sponsored post extractor fan trespass unitary plan tenancy services anz cash-flow Market report return rental wof inflation debt to income advice housing bubble heater television wealth creation trademe kiwibuild auckland tenant finance LIM rta reform Standards New Zealand ird tax subdivision shortland chartered accountants trust capital gain quiet enjoyment yield tenancy issues warren buffett short term rental privacy business worksafe warm up new zealand insulation interest limitation bond CCC skill shortage structure shower dome rent wins TCIT inspection daikin termination damage housing package HHGA RBNZ positive cash flow housing affordability commerce commission p lab water bill Zodiak Management twg report letting Tribunal case study maintenance sublease initio interest deductibility house prices winz robert kiyosaki Question and answer property rental market heating airbnb Guest blog will opes partners financial advisers act CoreLogic watercare parry v inglis rent control nzpif rent arrears negotiation Q&A mindset meth legal cost lvr legal income reserve bank Must knows investor relationship Jeff Bezos bad tenant education market rent property cycle DTI Investor story minor dwelling Landlording heat pump Property (Relationships) Act property maintenance barfoot and thompson anti-social behaviour debt enforcement Holler personal growth rent increase principal and interest equity sale and purchase HHS Kris Pedersen Mortgages and Insurance buyer's agent Must know investment strategy landlord data security election 2017 rtaa2020 khh RTAA 2019 ask an expert government holiday house buying

Archive

Introducing Our Partners
Principal Sponsor - Kris Pedersen Mortgages & Insurance logo Gold Sponsor - Barfoot & Thompson logo Gold Sponsor - CoreLogic logo Property Apprentice logo The Insulation Warehouse logo The Renovation Team logo The New Zealand Property Investors' Federation logo