Nationwide average house prices are still sitting about 15% below their 2021 peak, falling during 2022 and 2023 as mortgage rates rose, and then largely tracking sideways over the last 2½ years. The hardest hit areas have been in the Wellington Region, with prices across Lower Hutt, Wellington City, Upper Hutt, and South Wairarapa all still down at least 25% from their peaks. But not everywhere has suffered the same rollercoaster house price ride over the last six years.
In fact, 13 local authorities currently have house prices at all-time highs, and all but two of those areas are in the South Island. The predominant themes across these areas include the agricultural-led economic recovery, rebounding international tourism, and areas with relatively affordable housing – with the latter factor meaning that rising mortgage rates had a less dramatic effect on debt servicing costs relative to incomes.
But not all the areas with resilient house prices have also proven to be good long-term property bets. Chart 1 shows the total increase in house prices for these 13 areas since the end of 2010, when house prices bottomed out following the Global Financial Crisis. For example, areas on the West Coast have performed relatively well over the last few years, but their longer-term growth has lagged well behind the nationwide average.
Among the stronger recent performers, one area continues to stand out: Queenstown-Lakes. Prices in the District slumped 8.0% in the first half of 2020 as COVID-19 hit, the borders shut, and Queenstown-Lakes’ tourism-dependent economy was thrown into turmoil. That ground was more than recovered over the next 18 months as prices surged 52%. But the eye-catching aspects of Queenstown-Lakes’ housing market, as shown in Chart 2, are that it is one of only two areas, along with Southland District, to continually maintain positive annual house price growth since 2021, and it has recorded the largest total lift in house prices since nationwide prices started tracking upwards at the end of 2010.
Soaring house prices might be good for people who own property in the town, but housing affordability in Queenstown has long been seen as problematic, particularly for the town’s lower-paid retail, hospitality, and tourism workers. At a level of over 12 times average household income, house-price-to-income ratios in the District are now almost double the nationwide average of 6.4 times income. The release of further land for residential development, along with substantial ongoing investment in infrastructure to service the growing resident and visitor population, can’t come quickly enough for an area that risks becoming a victim of its own success.
