Property boom leaves the poor behind - Immigration to Blame?

Ian Simpson

People in poor areas are not getting the benefits of Auckland's property price boom, while home sellers in blue-chip suburbs have been raking in increases over the past six years.

A breakdown of Auckland into four groups of suburbs with similar property values by economic consultants Covec revealed the rich were getting a lot richer in the property boom.

But the poor, while not getting poorer, were not getting much richer either.

The analysis showed median property prices in blue-chip areas - including Kohimarama, Mission Bay and Remuera - had increased by 34 per cent since 1998, from $320,000 to $430,000.

The middle two groups also fared well, increasing by similar percentages.

But those in poor areas or on the urban limits, including Glen Eden, Papakura and Henderson, could boast only a 17 per cent increase, from $180,000 to $211,000.

Consultant Shane Vuletich said residents of lowest-price areas were being "done over twice".

"Their house value is quite low and their capital growth is quite low too."

Mr Vuletich said the consistency in the increase in the top three price areas had come as a surprise.

"We had a suspicion the blue-chip areas might have appreciated more in percentage terms than other areas. But we were quite surprised to see the top three groups moved by about the same. What it shows is that the market is consistent and fairly even across most of Auckland, but the outer areas do not have a similar growth rate."

Mr Vuletich said the biggest movers over the six years were the Gulf Islands, including Waiheke and Great Barrier, where median values went from $197,000 to $336,000, a 71 per cent increase.

The islands went from being the 20th most-expensive suburb to the 11th most expensive.

But the inner city had moved from 7th to 15th, largely because of new apartment blocks.

"So people can get into the city more easily now. That's if they don't mind living in a box."

Another "anomaly" was in the Panmure and Ellerslie area, which had not shown a marked increase, rising from $249,000 to $258,000.

"It doesn't seem to have grown nearly as much as anywhere else, which implies it is a good investment target for developers or residential property investors," said Mr Vuletich.

"It did start shooting up a bit in the last few months of 2003, but there is still probably a good opportunity to get in because it is still reasonably close to the city."

The research paper suggested first-time home buyers considering buying in cheaper areas might be better off waiting to save a larger deposit for a house in a better area.

But Real Estate Institute president Graeme Woodley said it was not advisable for people to hold off on buying.

"Even in those poor areas, properties have gone up in the last year or so by about 10 to 12 per cent, I would guess. If people buy in a poor area there would still be some capital appreciation, which they won't get if their money is just sitting in the bank. They would be better to buy and sell again in 12 months."

He suspected wealthier New Zealanders returning home from overseas and migrants were behind the higher increase rates in the top areas.

Mr Vuletich said poor people would probably be unable to get into the top groups.

To move from the lowest-price area to the second-lowest would require an extra $7000 for a 10 per cent deposit.

Mr Vuletich warned that people in poor areas could find it difficult to break into the top three where the value increases were better because of the difficulty in getting a mortgage on a lower income.

The research estimated a household would need a pre-tax income of $47,000 a year to be able to take out a mortgage on an average house in the lowest price area.

For mortgages on property in the top bracket, household income would need to be $86,000.

The report says that in the 2001 census, half of Auckland households had an income of less than $50,000.

"This means that about half of all households in the Auckland area would not have been able to make the mortgage payments on a house in the lowest price area over the past six years."

A spokesman for Housing Minister Steve Maharey said low income earners would also not be able to pay the mortgage on a more expensive home, even if they had the deposit.

Housing New Zealand offered loans to get low-income earners into their own homes. There was also a pilot project in conjunction with Kiwibank to get "modest income earners", earning up to $50,000, into their own homes. Kiwibank was expected to approve 1800 loans as part of the initiative to ensure home ownership remained within reach of low and medium income earners.

However, Housing NZ was always careful to ensure that people targeted in these initiatives did not get into homes they could not afford.

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