3 Prices
In this section we examine changes in house prices between 2004 and 2008. Figure 1 gives kernel density plots of the distribution of owner-occupied house values for each of waves two, four and six of SoFIE. As described in the previous section asset values provided in these waves are indexed approximately to the first quarters of 2004, 2006 and 2008 respectively.
- Figure 1 - Distribution of owner-occupied house values, 2004, 2006 and 2008
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- Source: Statistics New Zealand (SoFIE) data
Owner-occupied house values increased substantially between 2004 and 2008 right throughout the distribution, with the largest change occurring between 2004 and 2006. Indeed the mean house price rose from approximately $280,000 in 2004 to $355,000 in 2006 and $415,000 in 2008.
Growth in owner occupied house values is explored further in Table 1. In particular, for each of the six major regions within SoFIE the change in house values are shown at three different points on the distribution (the lower quartile, median and upper quartile). Two points of interest are immediately apparent. First, house values at all three points on the distribution in Auckland were higher than those of any other region in both 2004 and 2008, however, all other regions experienced greater increases in house values than Auckland did over the period. Second, in all regions the lower quartile experienced stronger growth in house values than the upper quartile.[5]
There are a number of possible reasons for this observation. With various tax incentives on rental property more pronounced in the 2000s than they are now, and rental property typically being toward the lower end of the quality spectrum, this may have stimulated demand more at the bottom end of the distribution. Further, with fixed land prices for example, when building new properties the returns to doing so are likely to be better for larger, better quality houses. If this is the case then the supply of lower quality houses may have increased less than high quality houses, relatively speaking, putting further pressure on lower quartile priced houses. This is consistent with data presented in the Productivity Commission's housing affordability inquiry report, which showed that land prices as a share of house values have increased over time and investment in new houses has tended to come in the form of large and relatively expensive houses (Productivity Commission, 2012).
| Lower Quartile | Median | Upper Quartile | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Region | 2004 ($) | 2008 ($) | %age change | 2004 ($) | 2008 ($) | %age change | 2004 ($) | 2008 ($) | %age change |
| Auckland | 230,874 | 330,649 | 43 | 308,466 | 439,204 | 42 | 431,731 | 595,169 | 38 |
| Waikato | 135,642 | 234,245 | 73 | 192,706 | 337,742 | 75 | 282,588 | 452,333 | 60 |
| Wellington | 169,086 | 282,770 | 67 | 228,531 | 358,711 | 57 | 326,015 | 489,797 | 50 |
| Rest of NI | 114,125 | 190,347 | 67 | 176,804 | 289,031 | 63 | 260,232 | 403,088 | 55 |
| Canterbury | 159,795 | 248,109 | 55 | 213,060 | 323,665 | 52 | 308,376 | 449,251 | 46 |
| Rest of SI | 113,009 | 197,633 | 75 | 169,933 | 264,137 | 55 | 270,647 | 377,300 | 39 |
| New Zealand | 150,679 | 244,863 | 63 | 224,940 | 343,731 | 53 | 328,350 | 483,125 | 47 |
Source: Statistics New Zealand (SoFIE) data
Notes
- [5]This is also true with respect to the median, with the only exception being that of Waikato – 73% versus 75% growth.
