Everybody talks about the housing situation in Auckland as if it is the only one in the country, but New Zealand property has far more to it than just the City of Sails. We spoke to regional mortgage adviser Paul Davey back in February, asking his thoughts on the regional property market.
Now, after a few months of new loan-to-value ratio restrictions, official cash rate cuts and, of course, the Auckland Unitary Plan, we return to Paul to pick his brains about the market outside of Auckland.
In many ways, real estate in places like Tauranga, Hamilton and the other southern regions are continuing much as described in February. However, Paul explains that people are starting to feel the strain of the continued glut of increased property prices.
"The desire for people to buy property is still definitely there. But that desire for many people has almost turned into desperation," Paul explains.
"As a consequence of that, we're getting a lot of people who are applying to get mortgages who are really just overextending themselves."
Paul goes on to describe how he is now seeing a lot of disappointed people coming in who are realising just how far property prices have gotten away from them. Areas that were traditionally considered entry-level areas are now beyond the price range of most first-home buyers.
"There are a lot of people out there that think that they can or should buy a home, but it's reached the point now that they just can't. Their income is just not high enough, their deposits are certainly not high enough - I very, very rarely see applications from people buying homes in Hamilton, Tauranga and the surrounding areas with deposits of greater than 20 per cent."
What's the solution? Paul suggests that it should be a priority to encourage businesses to move out into the regions. After all, one of the main problems with affordability is the fact that wages have not kept up with property value growth, and that makes it difficult to service a mortgage.
If businesses instead can be given a good enough reason to move their offices to places like Hamilton or Tauranga, their workers won't have to worry about buying in the Auckland isthmus just to be able to continue going to work.
"[Auckland staff] are screaming out 'Hey, we won't get paid enough because houses here are so expensive'. It costs them 60 to 70 per cent of their take just to put a roof over their head - that's just crazy," Paul explains.
"What's stopping [that business] from saying sod it, let's move to Rotorua. Our employees can move to Rotorua, we can pay them the same but it costs them 40 per cent of their income to put a roof over their head."
He says that this shift is already starting to happen on some levels, but he thinks that the local councils need to do more to provide a good business environment to encourage this move. It isn't just good for economic growth, but for solving the housing affordability issue as well.
From this point onwards, Paul describes that he thinks there will be a price slowdown overall, due to the new edicts from the Reserve Bank and tightening credit criteria. There is a light at the end of the tunnel.
"Supply will iron out the demand issue. We're not going to continue seeing this massive price appreciation," he concludes.
Times seem to be difficult for those in the regions, but this dark cloud is starting to pass overhead, according to Paul. There is still plenty of room for homebuyers in the Waikato and the Bay of Plenty - you just need to get the right advice.
You can get that from the regional team right here at Squirrel. We know there is a world of property outside of Auckland, with its own unique challenges and environment. Mortgage advisers like Paul can help you make the most of your options - the right expert team on your side is now more important than ever.
Here's hoping those businesses start springing up soon!