From $460k deposit to $12.7m: Why these Auckland house prices have soared

Friday, 6 July 2018

Aucklanders have reaped huge equity gains on their houses since 2010, according to homes.co.nz data (file photo).

Aucklanders who have owned their houses since 2010 have reaped billions in equity gains over eight years, emphasising the growing gap between those who own property and those who don't.

Auckland homeowners have made $164 billion in home equity since 2010, according to a data model from homes.co.nz.

Dr Tom Lintern, the chief data scientist for homes.co.nz, said most of the equity gains occurred in the lead-up to 2015 when price growth reached peaks of 20 per cent per annum.

Thirty-nine per cent of Auckland's total housing stock has been bought or sold since January 2010 in a property buying frenzy that saw prices rise by 91 per cent.

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Economist Cameron Bagrie said the rapid rise of house prices after 2010 was part of a property cycle seen throughout New Zealand's history.

'You go gangbusters for six to seven to eight years and then you tend to slip into a bit of a halt.'

In 2010, one five-bedroom property in St Georges Bay Rd, Parnell sold for $3.1m.

Economist Cameron Bagrie thinks investors are not likely to see the kind of capital gains they saw after 2010.

Today it is estimated to be worth $10.3m, $7.3m more than its 2010 sale price.

A home price model developed by homes.co.nz, based on sales data, showed how the rapid growth in property prices since 2010 had translated into equity gains for property owners.

Two houses in Remuera, another in Takapuna, one in Saint Heliers and another in Whangaparaoa may have seen gains of up to $12m on deposits of less than $1m.

The model estimates how much an owner's equity might have increased had they bought their property using a mortgage with a 20 per cent deposit.

Under this model, residents of Saint Mary's Bay, Herne Bay, Whitford, Coatesville, Dairy Flat, Westmere, Wainui, and Shamrock Park saw the largest equity gains.

Lintern said those lucky enough to own their own home saw their largest asset grow by hundreds of thousands of dollars in every city in New Zealand.

'Coming to the end of a property cycle, it is staggering to see some of the capital gains that many homeowners have received.

'Those without a home have seen prices get further and further out of reach.'

The owners of a home in Tindalls Bay Rd, Whangaparaoa could have bought the house with a $460,000 deposit in 2012, but their equity would have grown into $12.7m if the house were sold today at the expected market price of $14.5m.

Another in Lake View Rd, Takapuna would have needed a $147,000 deposit for a $735,000 mortgage in 2004, but equity in the house would have grown by $10.23m since. The same house would need a $2.9m deposit today.

Bagrie said buyers needed to have a 'fair chunk of change' to get into the property market today compared to 2010.

'It's basically forced out first-home buyers. If you're not on the property ladder you need to get that deposit.

'It's created a housing affordability crisis, it's contributed to income inequality, it's made places hellishly unaffordable for big sections of the population.'

However, those who invested in property now were unlikely to see the same equity gains over the next few years, Bagrie said.

'There's a big fundamental paradigm shift going on across the market.

'The property market now, I don't think, is going to get the turbo-charged capital gains we've seen for the past four to five years.'

Auckland Council released figures on Monday showing the quality of houses Aucklanders could afford at their income levels had fallen across all income groups on the back of rising house prices.

Auckland Council chief economist David Norman said most of those house price gains had come after 2012.

In that year, a household earning the median income could afford 48 per cent of the houses in Auckland with a 20 per cent deposit.

Five years later they could afford just 18 per cent of houses in the market with a much larger deposit in dollar terms.

'They're feeling that pain of getting cut out,' Norman said.