Houses are cheaper outside Auckland but here's what you should know…

Tuesday, 28 May 2019

Here's how to get on top of your mortgage.

A three-bedroom house for $320,000. An apartment on the waterfront for $250,000.

If you live in Auckland, some of the house prices in the parts of the country look like something from a different time.

This week, Stuff reported on a family who lived in a housebus for four years while they saved to buy a house.

But when they did, they were able to purchase without a mortgage.

* Here's why you should (or maybe shouldn't) buy a house

* Buying your childhood home is an emotional stake in the past**

It might have made some buyers in the biggest city wonder whether they should be looking elsewhere.

Bindi Norwell, chief executive of the Real Estate Institute of New Zealand, says it's not just Auckland that people are leaving in search of more affordable housing.

Economist Cameron Bagrie, of Bagrie Economics, said many people underestimated how much migration from Auckland there had already been.

'I think we are going to be surprised when we get the census figures how many people have left Auckland and gone to the regions,' he said.

'I think the housing shortage figures of 60,000 for Auckland are far too high. Regional migration trends are helping solve Auckland's shortage.'

So, is it really a good idea?

At the moment, it's still cheaper to buy outside Auckland.

Massey University's Housing Affordability report shows houses on the West Coast of the South Island are the cheapest in the country.

There, compared to incomes, houses are 2.7 times more affordable than the national average.

Southland was the next most affordable region.

'Affordability is one aspect of home ownership. But it's a big one,' Bagrie said

'With Auckland houses selling around nine times household income and some regions such as Southland under five, there is strong incentive to move if you want a house - and small or no mortgage.'

But what about capital gains?

Israel and Lisa Calder with their sons, Ronin, left, 3, and Titus-Asher, 5, bought their first home with no debt.

House prices do tend to rise everywhere over time, and Bagrie expects the regions to 'play catch-up' to Auckland.

Westpac agrees. Its economists predict Auckland will have no price growth this year, while the rest of the country has price rises of 8 per cent.

Next year, it predicts prices in Auckland to rise 5 per cent and the rest of the country to lift 9 per cent.

ASB expects an even clearer divide - its economists expect Auckland to have no real price growth through until 2022. But it says Wellington will lift 7.5 per cent this year and 9.3 per cent the following year before levelling off.

Outside the main centres, it says prices will rise 7 per cent and 9.3 per cent this year and next, respectively.

But still, house prices outside Auckland always seem to lag.

While ASB's prediction would take the median Wellington house price to $661,000, it still would not catch up to Auckland's $850,000.

That's not a problem if you're moving away for good, but if you want to shift back to Auckland at any stage you might need other investments to help you keep up with the city's prices.

And work…

Unless you plan to buy a non-Auckland house as an investment, you need to shift your life there, too.

'There's certainly a case to be made for buying in the regions if prices are lower and that means you can buy a house with little to no mortgage, or even if your deposit is minimal, however, buying in another area only makes sense if it's the right move for the person more broadly,' said Infometrics economist Brad Olsen.

'A cheap house might be great, but if the person moving can't find a job in their new town, or can't find a job that they get paid enough to pay their mortgage, the overall effect of the move would be negative - most people will still have a mortgage of some size – the Southland family example of living in a bus for years I would think of being more exception rather than the rule.'

Bagrie said it was often what people had to give up when they moved to a smaller centre that was a sticking point.

'Although technology is making working remotely easier.'

Last year, Northland wage and salary earners were getting a median $940 a week. In Auckland, it was $1466, Canterbury $1280 and Waikato $1178. Wellington topped the table with $1611 a week.

Real Estate Institute chief executive Bindi Norwell said her members were still seeing people moving out of Auckland for affordability reasons.

'While Auckland's median house price has remained relatively stable over the last three years hovering around the $850,000 mark, homes are still proving to be too expensive for many – particularly first-home buyers.'

She said there was a similar pattern in Wellington.

In the central city, the median price is now $737,500.

'Traditionally those who couldn't afford in Wellington City looked to Lower Hutt where median prices have reached $592,000, but now they may even look to Upper Hutt where median prices are a slightly more affordable at $545,000 or even Masterton where median prices are at the $365,000 mark.

'Some agents are even reporting similar stories in Tauranga, where median prices around the $660,000 mark are causing locals to now look to Rotorua ($450,000), Te Puke ($556,000) or Matamata ($468,000) for larger sections and more affordable prices.'