The record price rise highlights the extreme gains and losses of a polarised property market – and the challenge facing the Reserve Bank in hiking interest rates this week.
At a time when other property vendors have been looking ruefully at falling prices, casinos and tourism business leader Peter Treacy has sold his renovated two-storey Ponsonby villa for a massive $9.35m – four times the price he paid for it just six years earlier.
It's the biggest gain of the past year, in an otherwise falling New Zealand market.
The five-bedroom villa has been bought by Kerikeri sawmill owners George and Mark Hewitt, who were looking to downsize from their six-bedroom Jervois Rd mansion (which they sold for almost as much). George Hewitt acknowledges they may have paid "a bit of a premium" on their new home, but they love its views and location.
READ MORE: * Meremere v Normandale – suburbs turn the house price tables * West Auckland woman's big loss in housing market downturn * Shock & Orr: Rate hikes are killing off housing affordability
By contrast, one unfortunate couple paid $1.74m for a three-bedroom house at 54 Severn St, in Wellington's Island Bay – then sold it just eight months later for $1.29m. That's a 26 percent decline, twice the average rate for that neighbourhood.
The biggest winner from those transactions was Tommy's real estate agent Chris Robinson, who has sold that house three times in three years. "It was probably more or less just the change in the market, and the change in the vendor circumstances that prompted the sale," is all he will say.
CoreLogic chief property economist Kelvin Davidson, who has analysed the gains and losses of the past year, is more forthcoming.
"A change in an owner’s financial situation could be behind a short hold period – and at the moment, rising interest rates would be a clear candidate for driving some of these sales," Davidson says. "Other factors such as divorce or death can also drive unexpectedly short hold periods."
Another Wellington family sold their architecturally-designed five-bedroom house at 49 Cedarwood Street, Woodridge, on the hills north of Newlands, for $1.46m – that was $466,000 less than they paid for it 11 months earlier.
These extreme results highlight the challenge faced by Reserve Bank Governor Adrian Orr this week, in deciding how much to hike the official cash rate.
On the one hand, higher interest rates would rein in construction inflation and slow the growth in house prices at the top end of the market; on the other hand, it's denying those on low incomes a chance to get into a home, and threatens to drive disaster-struck New Zealand into a recession.
Bank and consulting economists, who had previously peen picking the Reserve Bank would raise interest rates a resounding 75 basis points this week, have now lowered their expectations.
That's a result of Cyclone Gabrielle, and its grim impact from Northland, through Auckland and Coromandel and saving its greatest devastation for Tairāwhiti and Hawke's Bay. The hardest-hit areas include some of New Zealand's most productive farmland.
The impact on New Zealand's productivity will be harsh, and the likelihood of recession is growing by the day. A 75bp rates hike wouldn't just guarantee recession: it might plunge New Zealand into a deeper and more prolonged recession than in recent memory.
A 50bp rates hike is seen by many economists as the least bad solution – slightly slowing inflation without grinding the economy to a complete halt.
Yet the food shortages and repair bills from Cyclone Gabrielle are expected to drive renewed inflation – which would usually motivate the Reserve Bank to hike interest rates more.
"Cyclone Gabrielle is awful, absolutely awful. People have had their houses destroyed. But there's one good thing – it does create so much work for people. It will keep the economy going." – George Hewitt
The housing market remains problematic. The cost of building a new house increased 14 percent in the 12 months to December 2022, according to Stats NZ's consumers price index.
The construction industry is already struggling with labour shortages and tight to nonexistent margins, and now faces the added difficulty of embarking on the rebuild from the cyclone – a project that the Government now indicates may be bigger than the Canterbury earthquakes rebuild.
And with the numbers of residential building consents dropping away, the country looks to be walking straight into a renewed housing crisis.
The last thing the Reserve Bank will want to see is a return to rising house prices; the last thing the Government and community services agencies will want to see is a return to housing shortages and widespread homelessness.
The return Peter Treacy made on the purchase price of the Ponsonby villa, in the quiet, sunny cul de sac of Arthur St, was not unique. Across the other side of the CBD in Remuera, the owners of a Bell Rd property sold it for $8.25m – nearly 10 times what they paid for it. But they had held it for 25 years, and the whole suburb has increased in value over that period.
The price increase to the Treacy house, by comparison, massively outstripped its neighbours. Prices in Freemans Bay, on the eastern slopes of Ponsonby, had increased by 59 percent over six years – but the Arthur St villa went up 300 percent.
That was significantly boosted by the big rebuild Treacy had done on the house, in the six years he owned it, turning a fairly battered old villa into an elegant modern home.
Harvard-educated Treacy is a former general counsel of Skycity Casinos, who now sits on the board of Christchurch Casino. He is chair of Skyline Enterprices, which runs gondola and luge tourist attractions in Rotorua and Queenstown, and he is on the council of AUT University.
He won't comment on his property market windfall, but new owner George Hewitt is happy to show off the house. Despite agreeing they paid a premium, she's delighted with it.
The fact it was already renovated was a big selling point. "You don't have to have a car to go everywhere, and it's got an incredible view. And it was just all brand new and done. Everywhere else was reno, reno, reno, reno."
She and her husband Mark own Mt Pokaka Timber Products, a sawmill in Kerikeri that supplies external timber to clients including Mitre 10 and Bunnings, so she can see the benefits in renewed construction demand.
"Cyclone Gabrielle is awful, absolutely awful. People have had their houses destroyed. But there's one good thing – it does create so much work for people. It will keep the economy going."
