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Is 2016 The Year Of Regional Growth?

Campbell Venning writes about the impact of Auckland house prices and mass migration to the regions.

By: Campbell Venning

1 December 2015

In July of this year regions finally got some positivity from the Prime Minister. When John Key announced incentives for potential migrants to head south of the Bombay hills at the National Party annual conference he pretty much hit the ‘go button’ on regional growth.

In doing so, Key put the final stamp on regional growth in the real estate markets by not only encouraging migrants to head South, but very nearly ordering them to.

The regions have been flat-lining for a very long time in the face of low interest rates and lack of new supply. The ludicrous average house price in Auckland (not including apartments, they are still semi-sane) means he didn’t have a choice in the matter, which is what the Reserve Bank had been hoping for all year.

So, we get the green light in July and BANG - regional growth overnight. First up are Queenstown, Hamilton, Tauranga and Wellington - all of which are still on the up and up.

And I boldly predict that come the New Year, New Plymouth, Napier, Palmerston North and other similarly populated centres will follow.

Typically, population growth in New Zealand goes from north to south - it’s a bizarre thing. The only anomaly here is Christchurch and Queenstown – the former due to its unique circumstance and the latter for its international reputation as a top tourist destination.

Immigrants who have initially moved to Auckland are looking for somewhere more affordable to live. They typically have kids at university in Auckland or family living there and want to live somewhere within driving distance. Sometimes they will buy a house in a region that is at a drive-able distance to Auckland, and rent a little apartment in Auckland for their working week.

We are also seeing some Aucklanders who will work in the city during the week and commute to regional areas, come the weekend. Their cost of living can be half of that of living in Auckland if they choose to live in Hamilton, or a third if they choose Rotorua.

Affordability is the biggest reason for Aucklanders departing for the regions. The cost of living is so high. I’ve seen many astute people taking the capital gain made on their Auckland property to the regions. While there are a number of people choosing to commute, it’s not yet a lifestyle that is overly popular as broadband and direct flights are not yet up to scratch to facilitate this choice. But once flights and fibre-optic internet connections are in place, there may be a bigger drive for Aucklanders to move.

The estimated 90,000 new immigrants, natural population growth and the Kiwis coming home who need to be housed each year in this wonderful country, will further put Auckland’s housing stock under the pump. Add the threat of ISIS and the current global refugee situation and you have a number of reasons to argue that New Zealand will be under serious immigration pressure over the coming years. This means it is certain regional growth is set to continue.

I am fortunate enough that my businesses take me all over New Zealand and through my travels I will be keeping you up to date in this column as to each of the regional centres over the coming months.

Campbell Venning has been investing in property for over 20 years and is a director of Positive Real Estate, a New Zealand and Australian business that educates customers in long-term, low-risk investing as well as providing a licensed real estate agency exclusively for their clients. Visit wwwpositiverealestate. co.nz to find out more.

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