What London and Tauranga's housing markets have in common
ANALYSIS: As a headline, it makes for devastating reading: Tauranga is worse than London for house price affordability.
Of course, that statement comes with a huge caveat. No one is saying that homes are more expensive to buy in Tauranga than London - the median house price in Tauranga's most expensive suburb, Mount Maunganui, is $743,000, according to the latest OneRoof/Valocity figures. You'd have to cough up almost double that amount just to break into London's property market, and to buy a house in the city's most expensive suburb you are looking an average price of £1.77 million ($3.38 million).
Affordability is the key challenge identified by the 15th annual Demographia International Housing Affordability Study, and that's where Tauranga households are worse off than those in London: incomes don't match house prices.
The median house price in Tauranga is $623,000, the median household income only $68,800 a year, meaning it would take people in the city more than nine years to pay off a house, were they to pour every cent into their repayments.
Londoners have the chance to earn big city bucks, median household income there is £55,800 ($105,020), so, according Demographia, it would take buyers 8.3 years to pay off a house, under the above premise.
Blame London's slip in the rankings to become a touch more affordable on Brexit. According to real estate agency Your Move, the average asking price for a house in the UK capital has tumbled below £600,000 for the first time since August 2015.
Last week the Royal Institution of Chartered Surveyors (Rics) reported that house prices in the UK were falling at their fastest rate in six years, and that the outlook for sales was the weakest in two decades, as uncertainty over Britain's decision to leave the EU starts to bite.
London's wealthiest suburbs have been hit hardest, with prices in Kensington and Chelsea dropping more than a fifth (21.2 percent) in the last 12 months and falling by almost a quarter in Westminster Now is time to snap up a Belgravia mansion - one listed at £100 million last year recently sold for £60 million.
Tauranga and London's housing markets have one key thing in common: both have been inflated by the rapid influx of investor and outside buyers - Aucklanders in Tauranga's case and the global rich in London's. However the recent slowdown in Tauranga's market suggests that out of town buyers no longer see the city as the place to go to for a bargain.
And, not surprisingly, the cities diverge quite noticeably is on liveability. London is outstripped by Tauranga and the rest of New Zealand when it comes to our lower crime, pollution, social deprivation and the cost of groceries and other living costs.
Yes, there are more high-paying jobs in London, more theatres, more galleries and better restaurants, but you have higher chance of being stabbed or falling through the social cracks there than in Tauranga.
As a former resident of London, I can attest to the grinding effect the capital can have on your finances and happiness. It’s not so much a city but a ten-handed pick-pocket rifling through your clothes, lifting everything you have and laughing in your face.
As far as I am aware, Tauranga isn’t synonymous with misery. Its beachside location and easy lifestyle have been key factors in its rise.
However, Tauranga is good example of what can happen (and is happening) to other appealing provincial housing markets around New Zealand.
If salaries don't keep pace with house prices, locals get pushed out. This can be good and bad. Bad because you have to move from where your roots and family may be strongest, good because it breathes life into surrounding, less expensive housing markets: Rotorua has benefited from Tauranga's boom, as Hamilton and Tauranga have benefited from Auckland's.