Properties in Gisborne are selling for an average of 71 percent more than their capital value, while the average for Auckland properties is just 5 percent, a new report shows.
It comes as record-low interest rates and an influx of Kiwis coming home due to the COVID-19 pandemic has increased demand for properties. But COVID-19 lockdown and alert level 3 restrictions, together with widespread uncertainty, have resulted in a delay of new properties coming to the market, causing prices to increase.
Analysis by REINZ shows that since October 2019, on average, selling prices of Gisborne properties were 71 percent higher than their listed capital value (CV). REINZ chief executive Bindi Norwell said the percentage paid above CV in the region was the highest in the country.
"For the last 10 months in a row, the Gisborne region has seen purchasers pay the highest percentage over the CV, showing how the shortage of listings has continued to impact the East Coast," she said.
In Southland, prices were around 43 percent higher than the CV, followed by Hawke's Bay and Marlborough, at around 27 percent. By comparison, buyers in the Auckland region were paying an average of 5 percent over CV.
"Auckland has been the region where purchasers are paying the closest to the CV for the last 11 months. For the prior 9 months, it was the only region in the country where properties were selling below CV," Norwell added.
Property investor and educator Steve Goodey confirmed that a property's capital value or CV, is a base indicator only and it shouldn't be relied on as a current market assessment. As CVs are done three-yearly and were last set by Auckland Council and Gisborne District Council in 2017, they are out-of-date.
He suggests buyers instead ask agents for a list of comparable sales to help them decide what a property is worth.
"Call local real estate agents and ask them what's sold in the area lately," he suggested. As property sales take up to eight weeks to be recorded at the Land Transfer Office, online sales data is delayed."
A reason why Gisborne properties were selling significantly higher than the CV relative to Auckland properties could be due to increased investor demand, particularly as interest rates were so low.
"Areas that have previously not had large capital gains, such as Gisborne, Hawera and Invercargill, are among the few places where investors can still get returns (rental income less expenses), of 8-to-9 percent," Goodey said.
According to current REINZ figures, the median selling price in Gisborne in July was $483,000, an increase of 58.4 percent compared to the same time last year. By comparison, Auckland's median house price was $920,000, up 11.5 percent year-on-year.