Housing in the Manawatū Region

The property market in New Zealand is struggling under the pressure of increased demand for houses.

In recent months, the New Zealand house price growth has been exceptionally high, with house prices across New Zealand sitting 11% higher than a year prior in the December quarter. This incredibly robust growth has been felt over all regions, but some of the highest growth rates are being seen in Manawatū-Whanganui and Hawke’s Bay. These prices are being pushed up by record low interest rates and more kiwis relocating to the regions for jobs, pushing an ever-increasing number of buyers into the market.

While house prices are looking great for sellers, it’s not all positive as the supply simply isn’t keeping up with demand, making it increasingly challenging for first home buyers.

The single largest factor driving up housing prices is the limited supply, a challenge not unique to our region but a very real and pressing one.

Palmerston North is significantly short of land and may not be able to have sufficient land rezoned until 2023, unless central government allows the councils to speed up the consenting process. Despite this, it’s reassuring to see the work underway by local councils.

Palmerston North City Council (PNCC) is prioritising resources to increase greenfield supply at Aokautere, Ashhurst and Kākātangiata, and have recently rezoned additional land at Kikiwhenua.

David Murphy, Acting General Manager Strategy and Planning, PNCC, says “We are working closely with landowners at Flygers Line, Napier Road and Roxburgh Crescent to increase supply, and are developing the Tamakuku subdivision at Whakarongo which will deliver over 100 new lots to the market.”

“The District Plan has been changed to enable a range of housing including multi-units, traditional infill and minor dwellings and PNCC has a ‘Delivering Change Fund’ to assist developers to create new forms of housing by providing design support.”

“Additionally, a housing forum is scheduled for 30 March for the city with key stakeholders, and landowners participating, ensuring we’re working collaboratively to future proofing our city’s housing” Murphy adds.

House Sales

House sales in the region decreased by 6.3% compared with the previous year. Growth underperformed relative to New Zealand, where sales increased by 9.3%. A total of 1,872 houses were sold in the region in the past 12 months to December 2020. This compares with the ten-year average of 1,882.

Shelley Grieve, Residential and Lifestyle Sales Consultant at Bayleys Manawatū, Rangitīkei and Horowhenua regions says, “The region’s affordability remains very attractive for buyers and despite the lingering challenges of COVID-19 forces swirling around us, our region’s property market is consistently performing well with Palmerston North city, Manawatū and Horowhenua experiencing record median year-on-year sales albeit on the back of lower sales volumes,”

“The record hot demand combined with record low supply is fueling the property price upwards. Although it is good news for sellers, first-home buyers are finding it increasingly difficult to enter the marketplace and constantly frustrated at missing out on properties often sold within a week with no transparency thanks to the all-too-common multi-offer sales process being adopted by most agencies in the region. At Bayleys we prefer to campaign properties which provide buyers more time to perform important due diligence, view properties out of region and enable buyers to compete transparently in an auction process,” Grieve explains.

Manawatū House Values

The average current house value in Manawatū was up 21.2% in December 2020 compared with a year earlier, bringing the average current house value in the region to $586,621 ($806,151 New Zealand average). The growth in the region outperformed New Zealand, where values increased by a relatively lower 13%. 

Peter Crawford, Economic Policy Advisor at Palmerston North City Council (PNCC) says that the expectation is for house price growth to continue in 2021 as the region’s councils are struggling to free up enough land to meet the increasing demand for housing.

While the changes to loan-to-value restrictions should help ease some demand pressures, a significant increase in central government investment is urgent, with the waiting list for Kainga Ora housing reaching 778 households in December 2020. The total social housing supply in the region increased by just 31 houses in the past 12 months but the waiting list increased by 278.

“Much of the pressure is at the lower end of the market, driving market rentals and houses out of the reach of more people,” Stacey Bell adds.

Residential Consents and Sector Pressures

The housing and construction sector is facing significant pressure, with construction of new houses lagging well behind the demand.

“The pressure is coming from a 154% increase in the value of commercial/non-residential consents in the region in the year to January 2021, which has occurred alongside the strong growth in residential consents. That pushed annual building consent values over $500 million in the year to January 2021 for the region.” says Peter Crawford.

As a region, the number of new builds is increasing but not at a fast-enough rate to keep up with demand. “We are slowly bridging this gap with 698 new residential building consents issued in the year ended December 2020 in the Manawatū region, compared with 600 in the previous year, which is an increase of 13% compared to the national consents of 5%,” explains Crawford.

Supply side constraints both in the availability and cost of materials and the availability of construction labour is further driving delays as projects compete for limited resources. This is particularly prevalent in the Manawatū region where there are unprecedented levels of non-residential construction projects planned and underway alongside strong residential construction activity.

Stacey Bell adds “The construction sector is scaling up to cater for the strong growth in demand for both residential and commercial construction across the region, however this takes time, and we are not there yet. Put simply, we need the construction sector and support industries to scale up substantially more to cater for existing, let alone anticipated demand for construction sector activity in the region.”

Housing and Rental Affordability

Manawatū’s housing is still more affordable than the rest of New Zealand, although house prices increased by 18% in the year to December 2020, with average values increasing by $86,760This was only slightly higher than the national increase of $78,800, even though the national increase was only 11%.  

Affordable housing and affordable rental accommodation are important for people’s well-being. For lower-income households, high housing costs relative to income are often associated with severe financial difficulty and can leave households with insufficient income to meet other basic needs such as food, clothing, transport, medical care and education. High outgoings-to-income ratios are not as critical for higher-income earners, as there is sufficient income left for their basic needs.  

 Although student accommodation in the Manawatū is still comparatively cheaper than most other University cities, such as Otago, Wellington and Aucklandthe quality of the houses we attain is relatively the sameThe quality of the student accommodation available sometimes does not have sufficient insulation or the accommodation does not comply with the healthy homes act, thus students end up with higher electricity bills,” says Fatima Imran, President of Massey University Students’ Association (MUSA). 

In my perspective the average student in Manawatū doesn’t get influenced by the rental affordability itself but by the quality of the rental property, when choosing where to study,” Fatima concludes.  

“The housing stocktake in the Manawatū District highlights substantial concerns around the erosion of affordability and availability of housing, and in particular the impacts on lower income and vulnerable parts of the population,” adds Stacey Bell 

The Manawatū District Council (MDC) is in the process of developing a housing strategy to guide allocation of MDC’s funding to support housing affordability while working on a 10 Year Plan and encourage the community to participate in the process. The consultation period is scheduled for 29 March – 30 April. For more information visit: https://www.mdc.govt.nz/Documents/Plans/10-Year-Plan-2021-2031 

MDC is set to review the District Plan, which sets the framework for managing land use and development within the districtThe District Plan categorises land into different zones and sets standards for subdivisions, buildings, noise, etc. Find out what your property is zoned and read more information about the draft proposals http://ow.ly/rn6V50DG2D9. Feedback to the draft plans changes is due 4PM, 16 April. 

Consultation on Palmerston North City Council’s 10 Year Plan will open mid-April and run till mid-May, giving residents the opportunity to give feedback on what matters most. Visit https://www.pncc.govt.nz/council-city/official-documents/plans/10-year-plan/ 

View the full Infometrics Manawatū Quarterly Economic Monitor 
View the full Marketview Manawatū Region Quarterly Report  

For more information:
Janet Reynolds
Marketing and Communications Manager
[email protected] 

Images by Palmerston North City Council

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