This week saw a media article highlighting the un-affordability of Tauranga property. It also stated that the city was now the 12th most expensive city in the world.
I am really not sure where this data point comes from and sadly the publication - The NZ Herald, failed to substantiate the claim. Seems odd to me where a city of 125,000 people can be the 12th most unaffordable in the world, when there are over 1,000 cities nowadays with a population of more than 500,000 people with many in economically strong stable western economies. Anyway, I was drawn by the article to undertake some analysis to compare the property prices in Tauranga with Auckland just to see how different they are currently and historically.
Back when accurate reporting began of property prices in 1992 the typical property in Tauranga sold for $113,000. At that time the median property in Auckland sold for $135,000. Tauranga properties back in 1992 were 16% cheaper than Auckland properties. Fast forward 26 years and today Tauranga median sale price last month was $635,000 whereas the median sale price in Auckland was $835,000. Tauranga properties today are 24% cheaper. However whilst the relative gap has moved in favour of Tauranga as a cheaper place to buy there is no denying the underlying fact that Tauranga prices have seen more than a 4 fold increase in the past 26 years and Auckland a more than 5 fold increase. Again these factors of price growth are not unique to NZ as I recently outlined in the article "Do house prices quadruple every 20 years?".
To see just how this price inflation has played out over the past 26 years I have constructed this chart which tracks the percentage growth by month of the REINZ House Price Index using January 1992 as the base month which each month indexed as a percentage against it.
The property price inflation seen in this chart reflects the well documented property cycles experienced in NZ over the past 26 years. However there is a period within the Tauranga data that is very unusual and frankly pretty staggering.
During the period of just 20 months beginning in December 2014 and ending in August 2016 the House price index in Tauranga rose 50%. That is a staggering rise. Over those same period when the Auckland market was super hot the Auckland index rose just 34%. Compare that to the most recent 20 months leading up to the latest data for July 2018 - Tauranga's price index has risen by just 8% whilst Auckland has made a very modest 1% rise.
As to the comparison of Auckland property prices and Tauranga property prices today, as noted earlier, Tauranga median sale prices today are 24% cheaper than Auckland.
The median variance over the past 26 years is 21% cheaper; so today Tauranga property sales prices are a little bit cheaper than historical average against Auckland prices. Those are the facts of property statistics, I recognise that these facts are of little comfort as affordability, upon which the orgininal media article focused is all about income in comparison to price, and in that regard un-affordability in Auckland is as real as un-affordability in Tauranga.