Article: Property Investment

Record Property Prices And A Load Of Rubbish with Frank NewmanRecord Property Prices And A Load Of Rubbish with Frank Newman

The June issue of ANZ Property Focus had a section called “Who’s hot and who’s not”. Northland was included, in the ‘what’s hot’ section. This is what they had to say:

The Northland region REINZ House Price Index (HPI) is on a steep incline reminiscent of the 2004-2006 period, when the Northland market last outperformed Auckland. In May, annual HPI growth topped 21%, the highest annual growth of any region. For comparison, house price indexes in regions outside of Auckland grew 12% in the year to May, and nationally they lifted 8%.

Median house price growth is bettering the national average, having lifted 24% versus 12 months prior (New Zealand 9%). The region’s median house price is quickly closing in on the national median, having surged 8% over the previous three months, more than double the national growth rate. Cheaper valuations and access to Auckland warrant a degree of catch-up in Northland, though regional incomes arguably don’t.

Sales volumes have fallen markedly since the middle of 2016, and are down 27% in the last year (on a three month average basis). However, Northland sales have stabilised over the last three months.

Houses are selling quickly; at around 40 days, the median time to sell is much faster than the 100 days it took at the end of 2010.

Other comments of note include:
“The clear take-away is that Auckland is bearing the brunt of the recent slowdown in housing market activity, with numerous other regions still performing well and playing catch-up…that will persist if the 2005-2007 experience is repeated. Capital (and people) naturally flow to regions where valuations look more attractive and the gap between Auckland house prices and the rest of the country is extreme…There is still daylight between the median sales price in Auckland and the rest of New Zealand; that’s a huge incentive to buy somewhere outside of Auckland if you’re an investor, and cash up and move if you’re retiring.”

Things are certainly on a roll in Northland and Whangarei in particular. The north has a lot going for it as a lifestyle destination. More people are now recognising that, including well-healed immigrants with significant discretionary spending power.

Whangarei made national headlines last week for its environment; well, for the trashing of the environment by people dumping rubbish on the roadside. The illegal dump reported in the news story had some eight tonnes of waste which cost $30,000 to recover. The total annual cost to the council to clean up illegal roadside dumping is around $200,000.

Of course the workers and council staff featured on the news said the right things and condemned those responsible as despicable and vile individuals; locals most likely it was surmised. And then there were the images of council workers searching through rubbish bags for evidence that would lead to the identification of those responsible.

Of course it is totally wrong for people to tip rubbish on the roadside. But it was also totally predicted before user pay charges came into effect on 31 October 2005. Until then the costs of solid waste disposal costs were collected as a fixed uniform charge (around $100 if I recall correctly) included in the rates bill. The user pay charges were pushed through the council of the day under a waste minimisation ideology and to encourage recycling - which had been introduced earlier that year.

Opponents of the scheme pointed out that charging at the “tip face” would result in significant volumes of waste being dumped on roadsides or in private landfills, with negative environmental consequences, and add unnecessary administrative costs (about $1.5m a year at the time - and considerably more today).

All of those predictions have proved to be the case: more rubbish is being dumped into the environment, the financial cost to ratepayers is higher, and transfer station hours in rural areas have been reduced.

The user charges regime for waste is a nice ideological idea but it is a disaster when those paying can avoid the cost by avoiding the council’s waste collection scheme. The trouble is that some of those who promoted the introduction of the scheme in 2005, are still sitting around the council table today, and will never admit that their pet project has not worked. For that reason ratepayers are going to be stuck paying more for their waste disposal than they should, and we will continue to read stories of illegal dumping and see images of the rubbish police searching other people’s waste. Perhaps its time to reflect on the way it used to be before the waste minimisation ideologues had their way.

Frank Newman is the principal of Newman Property Consultancy. He is the author of numerous books on investment matters. For questions or comment about this article contact .(JavaScript must be enabled to view this email address)

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