COMMENT: One of the interesting features of the current, hot, property market is the extent to which house prices are holding up in the regions. While Auckland prices are following the general trend of the past four decades, we’re at a point in the cycle where we might expect regional prices to have flattened off – but they haven’t.
No doubt some of that is related to the weird environment created by the Reserve Bank response to Covid – but perhaps there’s also a change taking place in the regions themselves as part of a fundamental realignment in the demographics of our nation.
For many, it’s now possible to live in a provincial city or town while operating a business in Auckland or Wellington – and, as some of my readers will know, that’s a decision which I made toward the end of last year when I moved back to my hometown of Napier after over 20 years of living away.
In many respects, Napier is the perfect example of what’s happened to many regional cities over the past three decades – and that change didn’t happen by accident.
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Back in the early 90s the city was facing a formidable challenge. It was losing its young people to Universities and careers in bigger cities (or overseas) and wasn’t replacing them. To be fair, under the leadership of then Mayor Alan Dick, the city had already recognised the issue and was in the process of making changes which included embarking on a program to upgrade its amenities. But it wasn’t enough to stem the tide and a report, commissioned in 1991, warned that the city population could drop by as many as 10,000 people over the following decade.
As a young, newly elected councillor with a background in marketing, I was able to convince the council that its investment was going to be wasted if it wasn’t coupled with a promotional program to showcase Napier as a tourist and lifestyle destination. That initiative, which I had the great privilege of leading, became the NapierLife program and, over the next few years, it boldly promoted Napier to (mostly) Aucklanders. It built on the cities Art Deco credentials and the fledgling Mission Concert and leveraged the regional wine industry to create an image of a confident city, on the move, and proud of its traditions.
Ashley Church: “Napier is the perfect example of what’s happened to many regional cities over the past three decades.” Photo / Ted Baghurst
Thirty years on, and with the advantages of good transports links and the levelling effect of ultrafast broadband Napier is now a vibrant, growing, city. In addition to being a popular tourist destination, it is also a magnet for entrepreneurs, families and professionals looking for a better quality of life without having to sacrifice the style and appeal of bigger cities.
It would be arrogant, of course, to suggest that those early promotional efforts were singlehandedly responsible for Napier’s change of fortunes over that time. Since the 90s the city has leveraged its well-planned cityscape, stable workforce, and the surrounding regional economy to turn itself into an extraordinarily attractive place in which to live. But it’s worth noting that Napier has also developed a distinct image in a way that other regional New Zealand cities, which faced similar issues in the 90s, have been unable to do – and the seeds of that lie in the branding and promotional work that we did almost 30 years ago.
But what does it all mean for house prices in the Bay in 2021? Is Napier going through the same evolution that Tauranga once went through and which led to that city becoming a hub for industry, families and retirees seeking a better way of life? The answer is almost certainly yes, although the tyranny of distance means that the speed of that change will be slower for Napier.
According to the latest Oneroof-Valocity House Value Index figures, Napier's average property value has risen 33% in the last 12 months, from $651,000 to $871,000 - a gain of $220,000. Prices in the city vary dramatically. Eight of the city’s 18 suburbs have average property values of more than $1m but it’s still possible to buy for much less than that, with Maraenui, the city’s most affordable suburb, sporting an average property value of $585,000.
Since the end of the first national lockdown property values Napier have grown at a similar rate to those in Tauranga, whose average property value hit $1.115m this month. The fact that Napier’s average property value sits below the $1m mark and is significantly below the $1.415m average property value in Auckland makes Napier a particularly attractive destination for Aucklanders.
And Napier isn’t alone in that regard. New Plymouth, Timaru, Nelson, Palmerston North, the Wairarapa and other towns are all seeing sustained growth in their house prices as professionals, retirees and businesses are seeing the huge lifestyle and cost advantages of being based in our thriving regional cities.
What this ultimately means for the property market, only time will tell.
- Ashley Church is a property commentator for OneRoof.co.nz. Email him at [email protected]
