Buyers back, prices flat
Real estate is back in the record books.
After half a decade of bust following the frenetic madness of the housing boom, New Zealand residential property is reaching new heights.
In November, sales volumes across the country were at a five-year high and the Real Estate Institute of New Zealand figures put the national median house price at $383,250 - the most it has ever been.
But the national median, driven as it is by a central Auckland and Christchurch boom, does not mean things are on the up in Taranaki, even if it's beginning to look that way.
"I would say for a start no values have gone up yet, says New Plymouth Harcourts principal John Christiansen. "I wouldn't expect to see too much change in the short term,"
Last month the median house sale price in New Plymouth city from REINZ figures was $309,600. In Hawera it was $205,000 and in Stratford $185,900.
Quotable Value figures are calculated as values, not sale price, and give a slightly different result. The average house value in New Plymouth district as of November was $324,197, South Taranaki $186,539 and Stratford $196,938 - all still less than the 2007 peak.
"There are more buyers than sellers but that isn't pushing prices up," Mr Christiansen says. "People have mentally accepted these are what values are and they are values not looking to go anywhere anytime soon."
An oil boom, a natural disaster, Government initiatives to increase the supply of housing, other initiatives to decrease its cost could all change this outlook but the impact of such factors are impossible to predict, Mr Christiansen says.
Here is what is known: Population growth drives demand and demand drives up property prices. Taranaki's population, like so many other provincial areas, is stagnant.
"The overall picture in Taranaki is pretty much a flatline in terms of future population growth," says Natalie Jackson, professor of demography and director of Waikato University's National Institute of Demographic and Economic Analysis.
"However, all the growth you do get will be at 65 plus. All other age groups are in, or will be in, decline."
Taranaki is just one of the regions that is ageing massively and it's mostly to do with the loss of young adults, she explains. Those people are chasing the jobs in Auckland and there is very little that can be done to stop that movement.
"People will tell you the young always left the regions but in the past some went back because the jobs were there for them. The jobs aren't there for them now."
In New Plymouth, the percentage of residents over 65 years old will increase from 16 per cent now to 21 per cent by 2021 and 27 per cent by 2031.
The ratios for the rest of Taranaki are likely to be even greater.
The impact this has on the property market is well understood. A surge in the supply of larger properties on the market as retirees look to downsize to move into smaller homes or retirement villages, may outstrip demand.
Theoretically this could drive prices down, at the very least make larger homes more difficult to sell.
"Internationally this is a predicted phenomenon, although it has not as yet been evident in Taranaki," says TelferYoung valuer Mike Myers.
Right now the New Plymouth valuer is predicting property prices will indeed increase, if only at the rate of inflation.
"The best-guess scenario is we are back to the days of slow steady growth. Probably two to three per cent a year with small localised spikes off that base," he says.
The one thing that could change that is an influx of people and they could already be on their way.
Over the next two years, close to 100 oil and gas exploration wells are likely to be drilled in Taranaki - an unprecedented number. As a measure of what that means, nine of the top oil and gas companies in Taranaki say they'll need a total of 303 extra people in the next 12 months and their recruitment goals are the tip of the iceberg of demand for workers such exploration will create.
"If they do find employees locally, they are often pulling them out of other companies, leaving gaps. So it's safe to say most of those positions will need to come from outside Taranaki," says Sheree Long, general manager of Petroleum Skills Association.
But those highly paid positions are often temporary and everything could change in two or three years. The 303 people needed in the next year dwindles to just 186 in the next three to five years. So while oil and gas can bring the people needed to create growth, they might not necessarily stay, a phenomenon demographic forecasts take into account.
"It's really difficult to make accurate assumptions of the number of people you might need," Ms Long says.
"At the end of the day you don't know if you are going to make a discovery, you don't know what is around the corner. And a lot depends on the regulatory environment and what is happening there. But saying that, I would suggest that that number needed for the next three to five years is very understated."
Oil is also behind another trend, says New Plymouth District Council consents manager Ralph Broad. In a city with a historical distaste for small sections, some are cottoning on to the benefits of smaller, central locations.
"With increasing transport costs, people are asking how they can limit what they spend. Can they live closer to work. Can they work from home. Technology is such that now having an office, or needing to go into an office, is not necessarily a given.
"Those same transport costs, or expected costs, are also seeing people move back into the centre of cities. They're asking what effect could peak oil have and how do I live to get around it," Mr Broad says.
Hawera-based realtor Selwyn Metcalfe sees a similar trend in South Taranaki where easy-care sections and low maintenance homes are trumping the quarter acre weather board stereotype.
"I think it comes down to recreation time. People want time to take their kids to sports, engage in their own interests," he says.
Like Mr Christiansen and Mr Myers, he sees South Taranaki property prices increasing with inflation, with retiring baby boomers one of the factors keeping small-town prices modest.
"There has been a slight exit of people moving to New Plymouth, simply because of more retirement village properties there. I think that will slow down the growth in the house market," he says.
"I don't see any great growth in property here moving upwards. Just a slight upward trend as opposed to a sharp upward trend in the cities."
Taranaki Daily News