The head of the country's largest real estate company believes Auckland house prices have risen to a frightening level and sees more apartments as the solution to the region's housing needs.
In a Double Shot interview with interest.co.nz, Harcourts chief executive Hayden Duncan described Auckland as the problem child of the housing market.
The average price of homes sold in Auckland by Harcourts last month was $721,553. (Our story on Harcourts' latest monthly sales figures is here).
"There's no doubt that's a frightening number," Duncan said.
"It's not being driven by cheap money, it's not being driven by reckless borrowing, it's not speculation," he said.
The main driver was the region's population growth, coming both from within New Zealand and overseas, which was putting pressure on an "under invested property market," he said.
He saw the solution as more intensive residential development rather than building more houses further out into the countryside.
We have to go up, we can't keep going out, he said.
Duncan said there was no question that Aucklanders would buy apartments, if the market could provide them.
Reviewing property sales around the rest of the country, he said there was an ongoing imbalance of demand and supply in Christchurch, although new stock was coming to market as earthquake damaged homes were repaired and new homes were being built.
"The rebuild of Christchurch has been slower than Cantabrians would have liked.
That doesn't seem to be changing, the pace is pretty consistent," he said.
While the Auckland and Christchurch markets faced challenges, the Wellington market was remarkably stable.
"If you are concerned about [housing] values in Christchurch or Auckland and you still want to live in a main centre in New Zealand , then Wellington is the place to go," Duncan said.
The average price of homes sold by Harcourts in the Wellington region in June was $350,078, less than half the average Auckland price.
The market in Wellington and many of the provincial centres had been hard hit by the introduction of restrictions on high loan to value ratio (LVR) residential mortgages last year, whereas they had not had much of an impact on the Auckland and Christchurch markets.
In Auckland in particular, investors had moved into the market and filled the gap left by buyers of lower priced homes who didn't have enough money for a 20% deposit.
"Wellington was one of the losers in that because they didn't have that supply and demand pressure, so first home buyers were hindered in their efforts to get onto the property ladder and there wasn't the demand form investors that we saw in the heated markets.
"It's probably just a well balanced market really," Duncan said.
In most provincial towns the housing market was still tough, he said.
Most provincial towns and cities were reliant on the rural sector and since the Global Financial Crisis, farmers had been more conservative with their money.
"I think our farmers, after the GFC, have really focused on debt repayments and even with strong milk prices, I don't think there's been a lot of that money flowing out into the communities, or not as much as we would have seen prior to 2008," Duncan said.