Time to Go?

Over the last couple of years, a lot of clients have been talking to me about leaving Auckland. Gridlock, house prices and the cost of living (fuel tax) have pushed many to seriously consider leaving. However, the decision to leave has its challenges and pit falls, careful consideration of the options is essential. You need a plan to ensure you are in the best financial position to maximize the benefits. If you want to meet to discuss this in more detail please do not hesitate to contact me.

People looking to move tend to fall into 3 camps.

1. People retiring in the next 10 years or so looking to cash up and head for cheaper areas, it makes a lot of economic sense to unlock your Auckland home’s equity.

2. People in their 30 and 40’s with families looking for a better lifestyle.

3. First home buyers trying to get on the property ladder who have been priced out of Auckland.

Auckland housing prices have risen by 85 per cent in the last four years, taking the average price to around nine times the average household's income. Auckland's median house is now over $825,000, compared to $550,000 for New Zealand as a whole.

Things you will need to consider when looking to leave.

Firstly, you are leaving your friend, family and social connections. You will need to be prepared to rebuild these at least in part. The older you are when you move the harder it may be.

Secondly, it’s a one-way trip. If you sell in Auckland and then in a few years’ time try to buy back you will find it very different as Auckland house prices historically have risen faster than the rest of the country. To minimise this risk, you may consider purchasing a smaller property in Auckland to rent out as a “bridge head” in the Auckland property market.

Thirdly, unless you are retiring it often comes down to jobs. The challenge for a lot of people is they're not able to get the same kinds of jobs or job security in other parts of New Zealand. However, depending on where you move to, your mortgage, if indeed you need one will be a lot smaller and thus require a lower income to service it. This can be the difference between being able to afford to start a family or not, or dropping income to start a new career path. A few or my clients have started a small business, which are not location specific and building the business to the point that they can work in it full time.

There are signs that even the modest numbers who have left have affected the regions. Migration from Auckland seems certain to be partly responsible – along with Auckland property investors looking for better rental returns – for driving up property prices in some regions. To counter this some clients who will not be ready to leave Auckland for a few years are purchasing property in the area they wish to move to, renting these properties out and using the income to help pay off the mortgage. This is a particularly good strategy in areas of limited supply such as coastal property.

In reality, nobody is quite sure of the actual numbers leaving Auckland. My personal experience is that some are leaving, but more are planning to leave, as it does take some time to get your ducks in a row. I am confident that this will become a feature of the Auckland and regional property markets over the next decade, Time will tell!