February 11, 2018

A Result Of The Feeding Frenzy

A weekend topic on one place with one article from The Spinoff in New Zealand. “The mass migration has ended. Gone are the convoys of removal vans thundering down the Southern Motorway, and the scenes of Aucklander vs Aucklander vs Aucklander mayhem in Tauranga auction rooms. Gone too, as a result of the feeding frenzy over Tauranga real estate, is any semblance of home affordability in this city by the sea.”

“Hana Chadwick works in recruitment in Auckland, and – these days – none of her candidates want to move to Tauranga. They’ve heard what’s happened, or they’ve looked at properties online and figured it out. Tauranga house prices are now within cooee of Auckland’s – but Bay of Plenty pay rates remain dire. ‘Really?’ they say, when Chadwick quotes a pay scale tens of thousands below their Auckland income.”

“The latest instalment of the comprehensive Demographia International Housing Affordability Survey has outed Tauranga as the least affordable city in New Zealand – and the 12th least affordable of 293 cities worldwide. Tauranga is keeping company at the extreme end of the table with notoriously unaffordable cities such as Hong Kong, Sydney, Los Angeles and Honolulu. The survey works on the premise that a house which costs three times your household income is ‘affordable,’ while five times is ’seriously unaffordable.’ Auckland came in at 8.8 times; Tauranga at 8.9. The survey, from September 2017, placed the median Tauranga house price at $617,000 and the median household income at $69,100.”

“1st Call Recruitment general manager Angela Singleton says many candidates consider a 10% pay cut justifiable for all the lifestyle advantages Tauranga offers. But not 25%. Candidates have started to say no to Tauranga. ‘They never used to say that because they used to be able to buy a house in Papamoa for half a million, and it was a really nice home. Now it’d be $800,000.’”

“Singleton says when the minimum wage rises 75c to $16.50 in April, Bay businesses should raise their pay rates – and charge-out rates. She says a Tauranga builder charges around $1800/m2 while an Auckland builder charges around $2800/m2. ‘Tauranga needs to decide whether it’s going to remain rural or start playing with the big dogs. It’s a bustling city. Tauranga businesses need to start charging city prices.’”

“A Housing Demand and Need survey showed median house prices rose 464% in Tauranga in the 26 years from 1991 to 2017. Over the same period, household incomes rose just 128%. The report says while Tauranga’s affordability challenges have developed over many years, the situation accelerated with the recent surge in house prices and rents.”

“Economic confidence in the Bay of Plenty has fallen sharply since September 2017. Back then, 37% of households in the Westpac-McDermott Miller Regional Economic Confidence survey expected the economy to improve. By the end of 2017, that figure had fallen to 13%.”

“Realty Group CEO Simon Anderson says Tauranga house prices began to surge in 2015 and hit a feverish peak around October 2016. By the start of 2017, the Government’s Loan to Value ratio (LVR) restrictions were making an impact. Throughout 2017, the number of houses sold each month fell back 20-25 percent to what Anderson describes as more of a ‘normal market.’ House prices also eased back in 2017, but are still much higher than before the boom.”

“Anderson says the growth in Tauranga between 2015 and 2017 was the result of ‘trickle down’ from Auckland, where overseas investors had ignited the market. At one point, 40 percent of people attending Tauranga open homes were Aucklanders. Auctions often came down to three or four Auckland buyers battling it out. ‘It was seen as cheap, at that time, by Aucklanders.’ That has changed. There’s now less of a gap between what you’d get for your money in Auckland and what you’d pay for a comparable home in Tauranga. ‘It’s probably not much of an advantage for Aucklanders to come here now.’”

“Unfortunately, Tauranga’s property boom has done more than turn off prospective employees and skew the housing market: it’s forced some families on to the streets. Jan Tinetti, Labour list MP, was principal of Tauranga’s only Decile 1 primary school before entering politics at the last election. In 2015 and 2016, she saw countless families in the Merivale School community slip in to homelessness.”

“Tenants were evicted so rentals could be sold to investors. The new owners might let the property for a short time, then tenants would be on the move again as it went back on the market at an inflated rate. Many houses were left vacant to, as one investor told Tinetti, ‘protect’ the investment. Some houses were renovated and long-time Merivale locals were refused tenancies in the gentrified properties.”

“The 2013 Census found there were just over 50,000 dwellings in Tauranga city; of which almost 4500 were unoccupied. In Mount Maunganui North, where there are more holiday homes, unoccupied dwellings represented 32% of all dwellings. The next Census is scheduled for March this year, and is likely to show significant demographic and housing changes for Tauranga.”

“The housing boom is softening – values on estimate websites drooped throughout 2017. But rents, which rose markedly during the boom, remain high. So families sleep in their cars or in tents parked on friends’ lawns. Tauranga City Council estimates there are 400 homeless people living in Tauranga.”

“Not that long ago, Tauranga was a sleepy idyll. Houses were relatively cheap and many people worked night shift in the kiwifruit season to bump up their modest wages. Now, the landscape has changed. ‘It’s unaffordable for the middle class,’ Tinetti says. ‘But when you’re not even middle class, it’s horrific.’”