THE REGIONS ARE WHERE IT'S AT
Mark Lister, 26 March 2019
It’s official. The regions are the place to be at the moment, looking far more upbeat and just as economically vibrant as our traditional growth engine of Auckland.
The biggest city in New Zealand certainly isn’t in bad shape, but its suffering in the wake of a housing boom that’s over, waning migration and all sorts of infrastructure challenges.
This dynamic came through loud and clear in the latest Westpac-McDermott Miller Regional Economic Confidence report. Of the eleven regions covered, Auckland was by far the most pessimistic. It was the only one in negative territory, and it saw the sharpest decline from three months ago (having already been the most downbeat then too).
The end of the house price party is likely to be a big factor. Many Auckanders will have got very accustomed to seeing steady double-digit annual gains in their biggest asset, and with prices now slipping some homeowners will be feeling slightly uncomfortable. If they're looking across the Tasman, they'll be downright nervous.
One telling indicator from the Real Estate Institute housing report last month was the number of days to sell for Auckland properties, for which a rising trend is often a precursor to further declines in prices. This rose by six days to 57, the highest since February 2009.
Meanwhile, many of our regions are booming. Confidence is very strong across Bay of Plenty, Gisborne/Hawkes Bay, Nelson/Marlborough and also at the bottom of the South Island, to name a few.
The unemployment rate declined in most regional areas during 2018, most notably in Taranaki, while in contrast it increased slightly in Auckland. Similarly, the biggest rises in retail sales during the last quarter came from Northland, Hawke's Bay and Nelson.
I haven’t needed to wait for any of these data releases or surveys to tell me any of this. I have the privilege of travelling all around our great nation most weeks speaking to investors and clients, so I’ve seen it first-hand.
Nelson and Marlborough feel very buoyant, Tauranga and Whakatane are humming, while half of Auckland seems to have moved to Hawke’s Bay this past year.
The good people of Ashburton had nothing but positive business stories to recount last week, while a fortnight ago there wasn’t a single room available in all of Invercargill. That was on a Tuesday, by the way.While Auckland house prices are two per cent lower than a year ago, prices are up more than 15 per cent in Dunedin, Invercargill, Palmerston North, Rotorua and Hastings.
There’s a steady stream of people moving to the regions, prompting businesses to open and forcing big companies to get more open-minded about staff working remotely.
There’s also a positive export story happening, from kiwifruit in the Bay of Plenty to apples in Hawke’s Bay to wine in Blenheim. Dairy prices are up 26 per cent since November, which should offset some of the impact of recent dry weather on some of our dairying regions.
For New Zealand to prosper, we need the Auckland economy to be strong. Our biggest city will always be a powerhouse because of the sheer number of people it is home to, but for now it’s great to see regional New Zealand picking up some of Auckland’s slack.