Infometrics chief forecaster Gareth Kiernan Photo: RNZ / Rebekah Parsons-King
House sellers have in recent years been able to bank capital gains of 100 percent or more, even when they have only owned a house for five years.
Gareth Kiernan, chief forecaster at Infometrics, has looked at the capital gains made over the five-year period from 2017 until the end of last year.
He found overall possible gains peaked at 66.5 percent for five yeas to the end of 2021.
But there was significant regional variation.
Auckland started the period with a gain of almost 90 percent in the five years to March 2017, while the gains in other parts of the country over that period were much lower.
"Auckland was very much the leader in terms of the market's rebound after the Global Financial Crisis, underpinned by a shortage of new housing, strong population growth - especially once immigration got going - and a solid economic performance.
"Gradually the housing market boom rippled out to surrounding areas such as Hamilton, other major centres, and then other provincial and rural areas as people looked elsewhere for more affordable housing and/or better lifestyle options."
In June 2021, someone who had held a property for five years would have banked a gain of almost 117 percent in Palmerston North.
In March that same year, someone who had owned for five years in Napier would have seen their value rise by 113 percent.
"It's essentially just a timing issue, in my view," Kiernan said.
"For whatever reason, the likes of Napier and Palmerston North missed out on the price surge during the early part of last decade's boom - maybe their economy or labour market weren't performing as strongly. However, as housing became less affordable in larger urban areas, people decided to live, or invest, in provincial centres more, bidding up prices and leading to a catch-up in the relativities.
"People's change in thinking during Covid around remote working probably also favoured provincial centres to some extent."
Kiernan said the rapid house price rises in recent years had changed the picture for anyone thinking about getting into the market now.
He said, in data going back to the 1990s, the 66 percent increase in the five years to December 2021 was only beaten by people buying between 2000 and mid-2003.
The largest five-year national gain was 102 percent between June 2002 and June 2007.
"The average five-year capital gain over the last 35 years has been 33 percent, which equates to 5.8 percent per annum.
"So yes, those figures reinforce that the housing boom between the GFC and Covid was extraordinarily large and long - reinforcing the idea that, given incomes have failed to keep pace, we have a housing affordability problem."
He said the increases could only be seen as positive by people who already owned houses.
"There's essentially now a whole generation of younger people who've had to abandon or revise their housing expectations. Signing up to a massive mortgage looks much less attractive if you can't be sure of capital gains going forward, and if the government is successful in its efforts to improve the supply of land and associated infrastructure for housing, it's difficult to see why people might take the punt right now."
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