Auckland's largest real estate firm Barfoot & Thompson says price gains in Auckland over the past 10 years "have not been spectacular" and have offered investors only a "solid" return.
The firm, which accounts for around 40% of Auckland house sales, has done an "in-depth analysis" of the average sales price of three-bedroom Auckland properties. Three bedroom homes were chosen for the analysis as representing the sized house most commonly bought and sold.
"The long term trend shows that across the city as a whole, the average price for a three bedroom home has risen by 78% in the past decade, or 7.8% a year," B&T's managing director Peter Thompson said.
According to Interest.co.nz calculations this works out at a compounding growth rate of 5.94% a year.
"While this represents a solid return for those who have committed to home ownership over that period the level of increase is in line with the returns achieved from other forms of investment during a similar period," Thompson said.
"...While there has been strong capital growth, price gains have not been spectacular, particularly in the past five years."
For comparative purposes B&T used the NZX Asset Class Performance Report, showing annual returns for 10 years to June 2010. It showed that listed property returned 8.3%, corporate bonds 7.4%, government bonds 6.9%, NZ cash 6% and NZ shares 5.8%.
The B&T figures cover the 2003 to 2013 timeframe. According to the Reserve Bank's "inflation calculator" a basket of goods and services would have increased in cost by 28% (compounding inflation rate of 2.6% a year) between the second quarter of 2003 and the second quarter of this year.
Thompson said what the B&T analysis showed was significant variation in price increases across different areas of the city, "and that the price rise over the past five years is only a third of the price growth experienced between 2003 and 2008 – 17% compared with 51%".
The areas where the average price had increased the most in the past decade were Central and West Auckland.
"For the Central area the price of a three bedroom home has increased by 102% to $653,000, while West Auckland three bedroom homes have doubled in price to $449,000."
Thompson said the attraction of the Central area was its "well established infrastructure" and its closeness to the central business area.
"In West Auckland’s case buyers have recognised property in the area represented value for money, offered lifestyle choices and saw there would be improved access to the central city through the development of rail infrastructure."
However, "at the other end of the spectrum", the average price for a three bedroom home in Franklin and rural Manukau increased by 58% in the past 10 years, and now stood at $449,000.
“This area retains its rural heritage and represents lifestyle options that have disappeared from many other Auckland locations as the city has grown.
“As transport infrastructure improves between the city and the south, greater buyer attention is likely to refocused south.”
The area which has the highest average price for three bedroom homes is the Eastern Suburbs, where the price growth in the past decade has been 70%, and the average price now stands at $826,000.
"While individuals will have bought and sold properties at values with far greater variations than our sales figures show, our statistics are drawn from the sale of more than 13,000 three bedroom homes and provide an accurate overview of price movements in Auckland over the past 10 years," Thompson said.
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