Skip to main content

After years of lagging, Wellington may be on the verge of new wealth effect Found in: Art News

After establishing a presence in Auckland in 2000, Dunbar Sloane junior, the fourth generation to work for the auction house founded in Wellington in 1918, was told the city was awash with money.

 

But this week he said that for the last 12 months, antiques put up for sale in New Zealand's largest city were routinely being trucked down to Wellington for auction, because prices being fetched in the capital were simply stronger.

 

A recent upturn in major project announcements in Wellington (most notably the council's decision to pay for a building to house Sir Peter Jackson's film museum) can be more than matched many major projects being approved in Auckland.

 

The recent rise in house prices in the capital come after the city, for a long period, lagged that being seen even in regions near Auckland, as part of a spillover effect caused by intense population growth.

 

But the fact that luxury goods are leaving Auckland points to a story of discretionary income, as confidence appears to be heading - literally - south.

 

It is little surprise that there is more cash in hand in Wellington City, as average salaries are higher than in Auckland, yet house prices are little over half.

 

As Sloane put it, Aucklanders "are always stretched out to the max" by hefty mortgages, meaning discretionary cash is higher "the further south you go".

 

The comments same just days after Westpac industry economist David Norman put it: "for many people [in Wellington] it is just not as hard day to day as in other parts of the country".

 

The differences in income have counted for little in the years of restraint and uncertainty brought on by the National Government's rhetoric about cutting back on the Wellington bureaucracy.

 

The claims of savings have largely been an illusion - the number of public servants is largely the same or higher than in 2008 - but the cuts served to undermine confidence, especially employment confidence. John Key went so far as to say the city was dying.

 

Increasingly though, National is dropping even the pretence. After meeting its surplus target in 2014/15, there is no commitment to maintain it this year. Infrastructure spending plans have been brought forward to help buffer against falling farmgate prices, and debt targets have been eased. Loosening the purse strings is usually a symptom of losing control of them.

 

Although the spending is coming across the country, Wellington naturally gets more than its per capita share, one way or another. Beyond this, with the population nationally growing at the fastest rate since the early 1970s, the size of government has little scope to grow with it.

 

As Wellington's confidence returns even simply to the same level as the rest of the country, a city finds itself, almost unexpectedly, as one of the more affordable places to own a home.

 

The brighter prospects have seen an almost alarming increase in demand for houses to buy.

 

According to QV prices rose 4.7 per cent in the city in three months. After years of drifting, Wellington City's average price almost fell below the national average, but in February, as the national average dipped slightly, the average in Wellington climbed by almost $4500, or $150 a day.

 

It is unlikely that such gains will be sustained for long, and given the experience of Auckland, it is not desirable for the city's liveability if they were to do so.

 

But after years as something of a poor cousin, Wellington's residents have every reason to enjoy a little bit of the wealth effect that comes with rising house prices. At the very least it is driven by by affordability, where Auckland has driven largely by debt.