Revealed: earning a million a year is no dream! Can returns on these New Zealand properties rival top CEO salaries?
OneRoof editor Owen Vaughan said these substantial gains reflected two facts: first, large gains often accumulate over many years, with the 225 properties analysed held for an average of almost 20 years; second, buying property in top suburbs requires a CEO-level income.
Property gains outstrip workers’ earnings
New research shows that 10% of New Zealand homes generated capital gains over the past 12 months exceeding an ordinary worker’s annual income. Valocity’s research found that average property values in 119 suburbs nationwide increased by more than NZ$66,196 over the year, equivalent to the median annual salary of an ordinary New Zealander.
Ranking of suburbs with the greatest house price gains nationwide over the past year (source: OneRoof)
A handful of New Zealand suburbs have also recorded property gains comparable to executives’ salaries. In the 12 months to the end of July, property values in seven suburbs rose by more than NZ$200,000. Whitford in East Auckland led the country, with house prices rising NZ$358,000. Next was Arrowtown in Queenstown-Lakes, where average property values increased by NZ$337,000. Other highly ranked suburbs included Herne Bay(NZ$264,000), Waiheke Island (NZ$256,000), Fendalton (NZ$233,000), Kelvin Heights (NZ$208,000) and Queenstown (NZ$207,000).
Property sales delivering gains above top CEO salaries
The average annual salary of CEOs at New Zealand’s top listed companies last year was reportedly NZ$2,288,000, while the highest-paid CEO, Ebos Group’s John Cullity, earned NZ$8,420,000. Figures show that 225 home sales over the past year generated gross profits for their owners exceeding the NZ$2,288,000 average salary of CEOs at New Zealand’s top listed companies. Five transactions even exceeded Cullity’s salary. A luxury home on Victoria Avenue in Auckland’s Remuera sold in July last year for NZ$23,800,000, generating a gross profit of NZ$18,600,000. Another Italian-style stone mansion in Ōrākei sold in March this year for NZ$21,840,000, generating a gross profit of NZ$11,340,000.
Comparison of property capital gains and salaries (source: OneRoof)
How the high-end property market builds wealth
OneRoof editor Owen Vaughan said these substantial gains reflected two facts: first, large gains often accumulate over many years, with the 225 properties analysed held for an average of almost 20 years; second, buying property in top suburbs requires a CEO-level income. Valocity senior research analyst Wayne Shum pointed out that most buyers of these high-end properties were already millionaires with considerable wealth when they purchased, so their gains were less remarkable than the figures might suggest. For example, Point Chevalier had a property that sold for NZ$30 in 2001 and resold in November last year for NZ$4,200,000, but it had “effectively been rebuilt”. Most owners add new swimming pools, kitchens and bathrooms during their ownership, as high-end homes are often the result of one generation holding an asset for 20 years or longer.
Ranking of Auckland’s ten properties with the highest capital returns over the past twelve months (source: OneRoof)
Among Auckland’s ten highest-priced properties, Bayleys Remuera agents Gary and Vicki Wallace were involved in half the sales, including the top-ranked property: a mansion on Victoria Avenue in Remuera that sold in July last year for NZ$23,800,000, generating a gross profit of NZ$18,600,000 for its owners.
A mansion on Victoria Avenue in Remuera
Wallace said a high-net-worth individual bought the property around twenty years ago and undertook extensive renovations, including adding a second swimming pool and a tennis court. These wealthy buyers often like to invest substantial sums in renovating and modifying their properties.
A mansion on Aldred Road in Remuera
Another mansion on Aldred Road in Remuera sold last year for NZ$12,800,000, giving the seller a profit of nearly NZ$10,000,000. The previous house had been demolished and rebuilt as a large home of more than 500 square metres.
Arrowtown in Queenstown-Lakes recorded remarkable house price growth last year
At the other end of New Zealand, Arrowtown has attracted many wealthy buyers, changing the makeup of the historic gold-mining town’s population. Bayleys Arrowtown branch manager Richard Newman said that although Arrowtown’s market was small, its house prices had still risen 46% over the past year. The growth was concentrated at the top end, while the lower and middle segments changed little. Buyers who considered Millbrook too expensive began turning to Arrowtown, willing to pay NZ$3,000,000 for a good home. A number even demolished homes worth NZ$2,000,000 to build new ones worth NZ$10,000,000. Although uncommon, this was happening. Buyers were mostly high-net-worth individuals, including chief executives and business owners, whose arrival was also moving Arrowtown’s property market upmarket overall.