Ia Tauranga tapped out? Image: Getty
Ia Tauranga tapped out? Image: Getty

BusinessFebruary 7, 2018

Faded dream: Is boomtown Tauranga a bust?

Ia Tauranga tapped out? Image: Getty
Ia Tauranga tapped out? Image: Getty

Sell up and move to Tauranga for a better, more affordable lifestyle? Keri Welham finds Tauranga is still desirable, but housing and wages mean it may now be out of reach.

The mass migration has ended. Gone are the convoys of removal vans thundering down the Southern Motorway, and the scenes of Aucklander vs Aucklander vs Aucklander mayhem in Tauranga auction rooms. Gone too, as a result of the feeding frenzy over Tauranga real estate, is any semblance of home affordability in this city by the sea.

Hana Chadwick works in recruitment in Auckland, and – these days – none of her candidates want to move to Tauranga. They’ve heard what’s happened, or they’ve looked at properties online and figured it out. Tauranga house prices are now within cooee of Auckland’s – but Bay of Plenty pay rates remain dire. “Really?” they say, when Chadwick quotes a pay scale tens of thousands below their Auckland income.

Really. The latest instalment of the comprehensive Demographia International Housing Affordability Survey has outed Tauranga as the least affordable city in New Zealand – and the 12th least affordable of 293 cities worldwide. Tauranga is keeping company at the extreme end of the table with notoriously unaffordable cities such as Hong Kong, Sydney, Los Angeles and Honolulu. The survey works on the premise that a house which costs three times your household income is “affordable”, while five times is “seriously unaffordable”. Auckland came in at 8.8 times; Tauranga at 8.9. The survey, from September 2017, placed the median Tauranga house price at $617,000 and the median household income at $69,100.

Chadwick is very familiar with the Tauranga housing boom. She and her husband Matthew Ramsay battled away on one modest Tauranga income for two years before finally heading back to Auckland, against the migratory flow, in 2015. The couple had moved to the Bay for lifestyle and access to cheaper housing. They were looking at homes in the $500,000s but very quickly – in a matter of months in 2015, as the local housing boom took hold – those homes surged by $200,000 and were out of reach.

Part of what had made their Tauranga sojourn so tough was the paucity of decent jobs in the creative industries. Ramsay left a permanent graphic design job, assuming he’d get another, and was essentially out of work for a year. They found themselves raising three children with one low-income job between them, furiously denying the knowledge that there were lucrative roles in Auckland if they’d just give up the dream and move back. “We were living at Mum and Dad’s bach,” Chadwick says. “We were lucky – we weren’t even paying rent – and we were going back at a rate of knots.”

The lifestyle. Image: Priority One.

Eventually, they borrowed money to return to Auckland. Chadwick and Ramsay immediately secured senior roles in Auckland; they suddenly had two incomes, each of which was double their entire household income in Tauranga. From the very first week back in Auckland, they were back on track.

So now the worm has turned. Employers have lost their master drawcard – affordable housing – and fewer talented, experienced Kiwis are willing to move to the Bay for what would be considered graduate salaries in bigger cities.

Chadwick is recruiting for two roles in Tauranga at the moment, and approached five Auckland residents who had told her they were keen to move south. But when told about the pay, they all refused to entertain the offers. She tells them the work she did at a creative agency in Tauranga was dynamic and innovative and she felt invigorated in her work – but it’s not enough. They want the same money they can command in other major centres. She hopes a new generation of employers will meet the job market’s demands, unshackled by the $10 Tauranga mentality. “There needs to be a changing of the guard, a new Tauranga attitude.”

1st Call Recruitment general manager Angela Singleton says many candidates consider a 10% pay cut justifiable for all the lifestyle advantages Tauranga offers. But not 25%. “People are now starting to push back on the large pay cuts they’d need to take to move to Tauranga. It is getting harder to recruit people in; it’s now a really hard sell. Businesses are still paying sleepy Tauranga rates but there is a dire shortage of workers nationwide. There are 15,000 jobs available in Auckland this month – you need to compete.”

Candidates have started to say no to Tauranga. “They never used to say that because they used to be able to buy a house in Papamoa for half a million, and it was a really nice home. Now it’d be $800,000.” Singleton says when the minimum wage rises 75c to $16.50 in April, Bay businesses should raise their pay rates – and charge-out rates. She says a Tauranga builder charges around $1800/m2 while an Auckland builder charges around $2800/m2. “Tauranga needs to decide whether it’s going to remain rural or start playing with the big dogs. It’s a bustling city. Tauranga businesses need to start charging city prices.”

Then they could increase wages. Singleton says a Tauranga sales rep is paid around $60,000 with a car. In Auckland, the same job with the same company pays $80,000 with a car. Tauranga-based regional recruitment firm Ryan & Alexander has noticed a significant drop in the number of weekly enquiries from Aucklanders wanting to move to the Bay of Plenty. Director Bernadette Ryan-Hopkins says: “It is possible to get a well-paid job here and salaries have definitely moved in recent decades. But it’s also clear many Tauranga employers still expect to pay provincial salaries but attract big city talent. Salaries will need to move if we want to keep attracting excellent people.”  

Image: Priority One

A Housing Demand and Need survey, released in December by local government and iwi partnership SmartGrowth, showed median house prices rose 464% in Tauranga in the 26 years from 1991 to 2017. Over the same period, household incomes rose just 128%. The report says while Tauranga’s affordability challenges have developed over many years, the situation accelerated with the recent surge in house prices and rents.

The 2013 Census found there were just over 50,000 dwellings in Tauranga city; of which almost 4500 were unoccupied. In Mount Maunganui North, where there are more holiday homes, unoccupied dwellings represented 32% of all dwellings. The next Census is scheduled for March this year, and is likely to show significant demographic and housing changes for Tauranga.

Economic confidence in the Bay of Plenty has fallen sharply since September 2017. Back then, 37% of households in the Westpac-McDermott Miller Regional Economic Confidence survey expected the economy to improve. By the end of 2017, that figure had fallen to 13%. Nigel Tutt, chief executive of Tauranga economic development agency Priority One, does not deny the city has become increasingly unaffordable for those on low incomes. 

However, he takes heart from the speed of growth in the city’s business community and continued interest from potential residents living overseas or elsewhere in New Zealand. The city’s population, now an estimated 131,500, has doubled since 1996. Last year, Tauranga City Council approved building consents collectively worth over $1 billion. Of that, consents totalling $534 million were for residential new builds – 1314 single dwellings and 18 multi-unit complexes. If that rate of construction continues, Tutt says the housing market may become more affordable again.

Realty Group CEO Simon Anderson says Tauranga house prices began to surge in 2015 and hit a feverish peak around October 2016. By the start of 2017, the Government’s Loan to Value ratio (LVR) restrictions were making an impact. Throughout 2017, the number of houses sold each month fell back 20-25 percent to what Anderson describes as more of a “normal market”.  House prices also eased back in 2017, but are still much higher than before the boom.

Nigel Tutt. Image: Priority One

Anderson says the growth in Tauranga between 2015 and 2017 was the result of “trickle down” from Auckland, where overseas investors had ignited the market. At one point, 40 percent of people attending Tauranga open homes were Aucklanders. Auctions often came down to three or four Auckland buyers battling it out. “It was seen as cheap, at that time, by Aucklanders.” That has changed. There’s now less of a gap between what you’d get for your money in Auckland and what you’d pay for a comparable home in Tauranga.

“It’s probably not much of an advantage for Aucklanders to come here now.”

And so, while there are still Aucklanders seeking properties, they’re no longer the dominant presence in Tauranga auction rooms. They’re now just in the mix with the Wellingtonions, Cantabrians, ex-pats returning from overseas and locals moving from one home to another. In the first four weeks of this year, agents reported that local first home buyers were back on the scene. Perhaps, Anderson suggests, most of the Aucklanders who wanted to move to Tauranga, have.

The provincial life isn’t for everyone. Many people are unwilling to downgrade their income, walk away from big-city career aspirations, and leave a city of 1.5 million for a beachside community of 130,000.

Unfortunately, Tauranga’s property boom has done more than turn off prospective employees and skew the housing market: it’s forced some families on to the streets. Jan Tinetti, Labour list MP, was principal of Tauranga’s only Decile 1 primary school before entering politics at the last election. In 2015 and 2016, she saw countless families in the Merivale School community slip in to homelessness.

Tinetti says historically Tauranga never had adequate state housing, but families survived because private rentals were affordable if incomes were boosted by a government accommodation supplement. But the Auckland housing boom had tragic consequences for struggling families in Tauranga.

Tenants were evicted so rentals could be sold to investors. The new owners might let the property for a short time, then tenants would be on the move again as it went back on the market at an inflated rate. Many houses were left vacant to, as one investor told Tinetti, “protect” the investment. Some houses were renovated and long-time Merivale locals were refused tenancies in the gentrified properties.  

Jan Tinetti. Image: Supplied

The housing boom is softening – values on estimate websites such as homes.co.nz and TradeMe’s Property Insights drooped throughout 2017. But rents, which rose markedly during the boom, remain high. So families sleep in their cars or in tents parked on friends’ lawns. Some have secured emergency housing – Tinetti recently helped move a solo mother of five out of a tent and into a one-bedroom motel unit. When other motel residents saw her Labour Party car, four families rushed out to request help finding a stable place to live. Tauranga City Council estimates there are 400 homeless people living in Tauranga.

On Jan 26, there were just 15 Tauranga rental properties listed on TradeMe at under $300/wk. Of those, 11 were one-bedroom places, and the other three offered a per room rate for a room inside someone’s house or a boarding house. In Merivale, or “Parkvale” as the real estate agents insist, there were only two properties with more than one bedroom. One was two bedrooms, one bathroom, for $320/week. The other was four bedrooms, one bathroom, for $450/week. To secure either of these properties, the successful tenant had to email through an application including photo ID and pay six weeks’ rent upfront.

The government’s proposed ban on letting fees would reduce that upfront load by one week. Not that long ago, Tauranga was a sleepy idyll. Houses were relatively cheap and many people worked night shift in the kiwifruit season to bump up their modest wages. Now, the landscape has changed.

“It’s unaffordable for the middle class,” Tinetti says. “But when you’re not even middle class, it’s horrific.”

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