Owning a house, or two, or ten, has been the easiest path, with the least effort, to wealth accumulation in New Zealand.

Historically, no other investment returns more bang for your buck than house ownership, with none of the risk associated of investing in the stock market, or the financial sector.

In the ten years to 2014, New Zealand’s total housing assets increased by $240 billion, compared to increases of $135 billion for farms and businesses, and $139 billion for financial investments. [Reserve Bank 2015]

Currently, the main focus is on Auckland property, where values have risen on average 52% in the last three years, compared to 11% nationwide. [Reserve Bank 2016]

The median Auckland house value in February 2016 was $928,912 (QV), making it the fifth least affordable city in the world to buy a house. [Demagraphia]

In Hawke’s Bay the last housing bubble occurred between 2002 and 2007, which, according to Quotable Value (QV) figures, saw prices roughly double across the region, with some pockets, like the most sought after areas of Havelock North, increasing even more.

After experiencing very little movement, and decline in some areas, since the global financial crisis in 2008, Hawke’s Bay house prices are on the move again.

“The Auckland boom effects the whole country and there’s a trickle down element, with the provinces more attractive to investors, because of the deposit ratio imposed by the Reserve Bank in Auckland.”


In the year ending January 2016, house values in Hastings District increased by 8.3%, and in Napier City by 6%, the biggest increases since 2007. Sales volumes for the same period were up 28% and 29% respectively. [QV]

Rob Douglas, Managing Director of Added Valuation, says: “The signs were there in early 2015, and what we’re seeing now is properties coming and going off the market very quickly due to perceived lack of lists, but I think the reason is strong demand.”

Douglas believes lack of supply was a major contributor to the last boom, whereas today’s signs of increase in values “are being driven by affordability factors, most of all interest rates, which are incredibly low on historic trends, with a high degree of certainty.” [Mortgage available at writing: 4.85% fixed for three years.]

Planning Manager with Napier City Council, Richard Mennuke, recognises that at the start of the last boom in 2002, there was a supply shortage. “That is when Council realised they had to do something about supply, and that has been addressed.”

Indeed, from 2004, nearly 1,000 sections have been made available, mostly in the greenfields subdivisions of Te Awa, Knightsbridge, and Parklands. Similarly in Hastings, subdivisions at Arataki, Frimley, and Tomoana have released even more land, and supply exceeds demand.

Rob Douglas, Added Valuation

Mennuke’s area of responsibility is Napier, yet he speaks for the whole of Hawke’s Bay when he says, “When you look at the base population figures it’s not really changing. There is growth, but it’s nothing like Auckland whose housing problems have a lot to do with rampant population growth.”

But Richard Mennuke isn’t interested in ‘chasing shadows’ and ‘emperor’s new clothes’ arguments about what drives the property market. As an urban planner his focus, as he settles into his role after a year in the job, is ensuring Napier has “high quality housing, because people will want to settle here if our housing is of the highest standard overall, and then everyone in the community benefits.”

It is Rob Douglas’s observation that Hawke’s Bay’s current property surge was, “led by investors because they saw the opportunities first. It’s in the key investor markets where we’re seeing the greatest amount of growth in those low-priced value ranges.”

And he points out that in Flaxmere, “when the market rises you get value increases proportionally more than anywhere else. So [the investor] gets capital gain and they also get good returns.” Currently around 6-7% net.

There is risk however. “I’ve seen properties totally trashed with even the hot water cylinder ripped out.”

The pattern Douglas has seen in the last year, initiated by investors buying at the lower end, “is a flowing up effect,” where sellers move on to buy in the $300,000 and above range. “And the last market to move was the higher price band of $500,000 to $2 million price range. If the market’s rising the perception is you don’t have to worry if you pay too much.” He points out that the buyers in the upper-value range are owner-occupiers rather than investors.

Quotable Value Manager, Bevan Pickett, hasn’t the data to comment on how investors are influencing the market, but his observation is that: “Prior to the 2000 boom a lot of people, who were content with their lot, living with their nuclear family, going to work, caring for their home property, saw all this money being made physically, and on paper, and they wanted some of that.”

But warns Pickett: “Even last year we were seeing people who lost money on purchases made in 2006/7. Now we’re finding properties that have been on the market for years are finally selling.”

In the year ending January 2016, house values in Hastings District increased by 8.3%, and in Napier City by 6%, the biggest increases since 2007.

Are the Aucklanders coming?

Statistics of occupier verses investor purchases are not available in Hawke’s Bay, but they are for Auckland. In 2015, 41% of house purchases were by investors (CoreLogic) and the power of the Auckland investor frenzy to colonise the rest of the North Island is perpetrated in the media.

Recent newspaper headlines have proclaimed, ‘Aucklanders descend on local property’ and, ‘Aucklanders’ eyes on buying Bay property,’ and, ‘Aucklanders heat up housing market.’

The truth of these alarmist headlines about Aucklanders driving up Hawke’s Bay house prices probably has more to do with newspaper advertising revenue, and their client’s desire to fuel the market, than reality. What is being encouraged is the perception that a price surge is underway, and you better get in quickly, or you’ll miss out.

“Perception is critical,” says Rob Douglas, “I think it’s what drove the value growth from 2005 to 2007. The initial growth was pent up demand, 2002 to 2004, being the strongest years. As a young valuer then, I expected the market to peter out, but it carried on for a couple of years, because it is perception that drives the market once it starts growing.”

As for the perception “Aucklanders (are) butting into the market” in the current house value surge, Douglas says, “the vast majority of investment purchasers are Hawke’s Bay people.”

Bevan Pickett concurs, yet he’s sure “the Auckland boom affects the whole country and there’s a trickle down element, with the provinces more attractive to investors, because of the deposit ratio imposed by the Reserve Bank in Auckland.” From October 2015 investor purchasers of Auckland residential property were required to have deposits of 30%.

“… the vast majority of investment purchasers are Hawke’s Bay people.”


Generation rent

As investors owning a house or two or ten proliferates, occupier ownership is declining. From a peak of 73.5% in 1991 to 64.8% in 2013, this figure is expected to fall even more as house prices increase, putting home ownership out of the reach of many. On an individual basis, rather than households, just over half of all New Zealanders now live in rented houses. [Statistics NZ 2013]

Highlighting the widening gap is that of the 486,000 additional dwellings added to New Zealand’s housing stock since 1991, just 37% are owner-occupied while 63% are rented. (Statistics NZ 2013)

Generation Rent by Shamubeel and Selena Eaqub, paints a bleak picture for younger generations, pointing out that if house price increases, compared to household income increases, continue at historical rates, by 2031 mortgage payments will be more than a young couple’s income.

Generation Rent begins: “Owning one’s own home has been a rite of passage for generations of New Zealanders. Home ownership has long offered financial
security and played a central role in our national identity.”

With the ‘right of passage’ to home ownership out of sight for so many, mostly young adults and especially Auckland residents, a radical shift in how renting is perceived could redress the imbalance.

In Germany, the most successful European economy, house prices haven’t increased since 1990. 60% of homes are rentals, and house price booms are regulated out of the economy by ensuring an ample supply of land for new housing, and restrictions on credit (bank value-to-loan ratio mortgages are capped at 60%).

Most significantly, in paying rent and behaving well, a German tenant has security of tenure. They can only be evicted if, on the rare occasion, the landlord needs the accommodation for his family, or the building is being demolished. And rents are regulated.

Under current New Zealand law, The Residential Tenancies Act, a landlord is required to give 90 days notice to end a tenancy, and 42 days if they sell the property with vacant possession, even if the sale is to a fellow investor. And the market determines the rent.

If the die is cast, and we’ve given birth to ‘Generation Rent’, a redressing of tenants rights is sorely needed, so that being a renter is not just okay, but desirable; an attractive alternative to ownership.

As noted above, 60% of German households are rentals. The housing stock is mostly high quality, and owned largely by municipal corporations and property companies, who are regulated to provide a high standard of comfort and amenity to their tenancies.

In contrast, 35% of New Zealand households are rentals, the housing stock is often poor quality, some owned by the State, but mostly by individuals, who are not regulated from renting out houses that are cold, damp, and cripplingly expensive to heat.

Maureen Mua champions the Maraenui Suburban Revitilisation Project

Suffer the little children

The dire state of some rental houses in New Zealand was highlighted when in June 2015, Coroner Brandt Shortland, referenced a ‘cold damp’ state house contributing to the death from pneumonia of toddler Emma-Lita Bourne.

As a paediatrician, Hastings-based Children’s Commissioner, Russell Wills, has hands-on knowledge of the consequences that ‘cold, damp, crowded housing’ has on children’s health.

He told The Listener in 2014: ‘What you get with that is a very high acute workload, particularly with respiratory, skin and gut, infections, with all the complications that go with those.’

That poor quality housing has in impact on health, particularly children, is unequivocal, thanks largely to the work of Philippa Bowden-Chapman and her colleagues. Her latest book, Home Truths: Confronting New Zealand’s Housing Crisis, is both a challenge and a plea to the authorities, those with the power, to urgently address the issue of unhealthy homes.

She advocates for the widely-supported requirement that all rental housing be subject to mandatory Warrant of Fitness tests; to be warm, dry, secure, and sanitary, up to 21st century standards.

Bowden-Chapman was a guest at a housing workshop in November 2015 organised by Hawke’s Bay District Health Board (HBDHB) to discuss strategies and initiatives for improving the quality of sub-standard housing.

Other speakers were Maureen Mua, CEO of Roopi a Iwi Trust, based in Maraenui, and George Mackey from Te Puni Kōkiri in Hastings.

Attending were stakeholders from local and central government, housing services, community groups, and health professionals, including Shari Tidswell.

Tidswell works for HBDHB as team leader, population health advisor, facilitating the Healthy Homes programme, which provides insulation solutions to homes most in need.

“Most landlords want to do the right thing … Many simply don’t know.”


“Generally we support people who have existing health conditions, like children with throat swabs linking to rheumatic fever, or respiratory conditions, and skin infections; illnesses that are directly related to living in a cold damp home.”

“These are people who present at the hospital, and our follow-up response is with home visits by health professionals. The majority of those homes are rented accommodation. We talk to the occupant, scope out whether they need insulation, then we contact the landlord.”

The Healthy Homes scheme is jointly funded by the DHB and government agency ECCA (Energy Efficiency & Conservation Authority).

Even though the property owner contributes only 10% to the cost of insulation, “some landlords are a bit stroppy,” says Tidswell. “It’s usually the tenants are behind in rent, but we point out it’s increasing the value of their house, and if it is insulated, the tenants don’t have to pay so much for heating, and will have more money to pay their rent.”

The biggest taxpayer subsidy for rental property owners is through the Government’s ‘accommodation supplement’, around $1 billion annually, supporting private rental housing which is often in poor condition.

As Alan Johnson of Child Action Policy opined: “Surely if a landlord, public or private, is to receive a subsidy from the State, the State should be able to impose some quality controls to ensure it, and the citizens the subsidies are meant to assist, get well served.”

Shari Tidswell’s experience is: “Most landlords want to do the right thing. Sometimes they are missing information on the impact (of cold, damp housing). Many simply don’t know.”

Despite the difficulties and challenges, Shari Tidswell is buoyed by the co-operation and willingness relevant stakeholders contribute in addressing housing issues, and is especially praising of the work of Housing Forum Huarahi Aratika in Maraenui, and the Maori Housing Network facilitated by Te Puni Kōkiri.

Shari Tidwell, DHB Healthy Homes Programme

Making a difference

The Maraenui Suburban Revitilisation Project was formed in response to the Housing NZ decision to demolish 33 houses (96 units) in the suburb.

The project is led by Roopu a Iwi Trust, whose CEO Maureen Mua, is a university graduate in business studies, and former corporate executive.

“Napier City Council are proactive and ward councillors Maxine Boag and Mark Hamilton are part of the team,” says Mua. “Mark (Hamilton) is managing director of Alexander Construction, and we also have Adam Horvath, who built the kaumatua flats.”

Others participating in the Revitalisation Project are Taiwhenua, the Ministry of Social Development, Housing NZ, Te Puni Kōkiri, and HBDHB.

Their aim is develop a plan for building new housing catering to the needs of the Maraenui community.

“We need to be smart and savvy how we do it,” says Mua. “If we build how the suburb was originally built we’ll end up with the same problems in 30 to 40 years time. We need to build in such a way that it’s a sustainable model for generations to come.”

“Nearly eight years ago I said Maraenui could be the Ponsonby of Napier,” says Mua, and she points out that the suburb is close to the city, and has all the infrastructure in place, but she doesn’t shy away from addressing the social problems caused by unemployment and poverty. “We have to be realistic. We need jobs so our people can afford to pay the mortgages. If we get enough people keen perhaps a bank will take a punt with us. Maybe the claimant groups will put some money in.

“We need to build in such a way that it’s a sustainable model for generations to come by building in a manner that looks after the welfare of the whole whanau unit, everyone looking after one another, and we must be inclusive, communicating with the whole community.”

“Maori have been excluded from the housing market by the mere fact that Maori land is in multiple ownership, and banks are reluctant to lend because they can’t take security over the land.”


A model Maureen Mua and her colleagues are exploring is what she terms ‘contemporary Papakainga’. Papakainga is housing development on multiple-owned Maori land, and literally means, ‘a nurturing place to return to’.

‘There is funding for Papakainga on Maori ancestral land, but this isn’t ancestral land, this is government land.”

In his capacity as senior Advisor at Te Puni Kōkiri based in Hastings, George Mackey steers the Maori Housing Network participation in the Papakainga initiative.

Two projects, at Waipatu and Waiohiki, are completed, with many more in various stages of planning.

“Maori have been excluded from the housing market by the mere fact that Maori land is in multiple ownership, and banks are reluctant to lend because they can’t take security over the land; they can’t repossess and sell it as easily as if it were in single ownership.”

The scheme is underwritten by Housing NZ, giving Kiwibank 20% security on the top of the mortgage. But as George Mackey explains, “that’s chattels only, the house has to be on piles, so if something happens they can come in and take the home away.”

The Aorangi Maori Trust Board development at Waipatu experienced this requirement when it wanted to build solid block houses, with high thermal mass, on concrete slabs.

A solution was found. “A nearby block of (freehold) land was used as security,” says Paul Sheeran, project manager, and trustee. He credits Housing NZ manager, Mike
Webber, with being flexible. “He’s seen adaptions can be made successfully. We’re working with three whanau at present, who don’t fit the box, but he’s willing to look at each case.”

George Mackey, Te Puni Kokiri

In Aorangi’s case, six houses on permanent foundations are owned by the Trust and rented to whanau, while two houses are occupied by whanau who wanted ownership. Their houses are timber and on piles.

Residents are a blend of families and elderly, and the project has been so successful, there are plans for “24 more houses with a 50/50 rental/ownership share,” says Sheeran. “We’re thinking the mix might include three one-bedroom units under one roof for elderly who are on their own.”

Paul Sheeran is now contracted to Te Puni Kōkiri to guide whanau with Papakainga land in how to realise their aspirations.

He works closely with George Mackey who explains, “The whole notion is about supporting whanau to return to their kainga.” He adds, “We are having discussion with many whanau about how to build in a way that caters to their immediate needs, but also for generations to come. How do we design the buildings and landscaping? How do we include whanau, who won’t be living there, but want to be able to return to celebrate weddings and birthdays?”

For the 35% of housing stock that is rented accommodation, strictly enforced fitness for habitation standards ensuring all rentals are warm, dry, and sanitary, are urgently needed.

No situation is the same, and he cites a family in Hastings who have converted a general freehold quarter-acre property, bought by grandparents 70 years ago, to Maori freehold.

“They approached us to help facilitate the building of more homes to cater for the needs of the grandchildren. The idea is that young family members will occupy at low rentals, until they’ve saved enough to buy their own homes, then another lot of grandchildren will do the same.”

George Mackey praises the enthusiasm and goodwill the Papakainga initiative has attracted, and gives the example of Unison chairman, Kevin Atkinson, facilitating a team to work on alternative energy solutions for projects ‘off the grid’. And, he says, “Even property developers, who are usually profit driven, are prepared to back off their prices once they understand the whole story.”

Paul Sheeran, on the Aorangi Maori Trust Board, helps whanau with Papakainga land (jointly-owned) realise their housing aspirations

The future

Goodwill, creative thinking, and determination categorise the work being done to both improve the quality of existing housing, and provide new housing fit-for-purpose.

Thankfully, Hawke’s Bay has been spared a property boom frenzy like that in Auckland, which has effectively denied a portion of the population the opportunity of ever owning their own home.

Soundly-built three bedroom houses in Hastings and Napier are available in the $200,000 to $300,000 price range; still affordable for first home buyers, with the Welcome Home Loan and Kiwisaver Home Loan policies assisting.

But, if in Hawke’s Bay, we are to continue to provide our younger generations the opportunity of home ownership enjoyed by their parents and grandparents, it is vital the councils ensure constant supply of houses, both in new subdivisions, and redevelopment projects in stagnant older suburbs.

For the 35% of housing stock that is rented accommodation, strictly enforced fitness for habitation standards ensuring all rentals are warm, dry, and sanitary, are urgently needed.

That 3,000 Hawke’s Bay children a year need hospital treatment, many for diseases directly attributable to living in a cold, damp house, should be reason enough to highlight the urgency.
Housing booms might be sweet for some, but they do nothing to alleviate the misery of others.

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