Investment rental properties are enticing more buyers to Dunedin but real estate companies say the majority of homes sold in the city are bought by locals wanting to upgrade or move.
Real Estate Institute of New Zealand statistics show the median sale price ($285,193) and the number of homes sold (527) in the city increased for the three-month period ending August.
For the corresponding period last year Dunedin's median sale price was $265,000 and 411 homes were sold.
Despite a steady increase in price, Dunedin remains the most affordable of New Zealand's major cities. The median house price in Auckland is $755,000, in Wellington $416,500 and Christchurch $430,000.
While Real Estate Institute of New Zealand chief executive Colleen Milne believed the improved Dunedin market was most likely due to Auckland investors, some local real estate companies did not agree.
Metro Realty marketing consultant Craig Palmer said some people from around the country were looking for property in Dunedin but a big percentage of the transactions were with local people.
''It's really busy and there's lots of properties, in all price ranges, receiving multiple offers and good prices being achieved because of the competition, but it's mostly locals moving around or upgrading,'' Mr Palmer said.
Harcourts Dunedin manager Richard Stringer said 33% of Harcourts Dunedin's sales this year were to people outside of Dunedin.
''At Harcourts we carefully track where our buyers come from. The last couple of months there has been a definite pick-up in outside buyers as they look to branch out of places like Auckland,'' Mr Stringer said.
LJ Hooker Dunedin managing director Wayne Graham said there had been a few more buyers from outside of Dunedin but not a significant increase.
''There's good demand and people looking from all areas but I wouldn't say we're being inundated with inquiries. Inquiries are up in general but I don't think you can put it down to people coming from out of town,'' Mr Graham said.
However, Edinburgh Realty property consultant Lane Sievwright said more North Islanders, especially Aucklanders, were investing in Dunedin properties.
''We're speaking to people every day from outside of Dunedin who want to invest in the university area. Right across the board, for all investment rental properties, we have buyers from right across the country.
''It's to do with the balance of cash flow and capital gain. The issue with Auckland is they've had huge capital gain which gives them a lot of equity in their own portfolio but it's hard to purchase again and remain cash-flow positive.
''The Dunedin university market has been strong for a number of years,'' Mr Sievwright said.
A Dunedin real estate agent, who preferred not to be named, agreed, saying Aucklanders were definitely buying properties in Dunedin.
''Up there, they just can't get very good returns because the rent increases haven't kept up with the price increases. They are thinking why keep their money and property up there when they can go somewhere else in the country and get significantly better returns in a potentially lower-risk environment,'' he said.
''For $285,000 you can get a three to four-bedroom home in Dunedin. Typically, that would be a three bedroom home, in a good suburb and in good condition.''
City homes seen as good value
Andrew Johnston moved his family from Auckland to Dunedin last month after being offered a job here and he is impressed by the value for money in Dunedin's housing market.
''The prices here are probably better for families. In Auckland now you have to have two good incomes to buy a house - both of you pretty much working full time. It seems like you have more work-life balance buying here,'' Mr Johnston said.
He and his wife bought a house in Auckland suburb Mangere Bridge two years ago. They are renting in Dunedin while they decide which part of the city they would like to buy a house in.
''It seemed like a lot of money at the time, it still is a lot. But in hindsight it was a good decision because the house prices just kept going up. The value of the house has risen about 40% in those two years.
''Location plays a big part in the price of Auckland houses. We started looking at the suburb we wanted and moved further away from central Auckland until we found somewhere we could afford,'' he said.
There was less difference between renting and buying in Dunedin than in Auckland.
''In Auckland the difference is substantial. What you would pay in rent here, most houses you could buy for those rental payments.
''All the properties have good sections here, it seems. In Auckland you'd be looking at a half section subdivided unless you're earning lots of money.''
He said further down the track he might consider buying a second property in Dunedin as an investment, which would have its pros and cons.
''On one hand an investment property in Dunedin is good because you get a high yield - what you rent it out for may exceed your mortgage repayments.
''The capital gain is not as high as it is in Auckland but you need so much money to get into the Auckland market - it's a difficult game to play.
''We're a long way away from getting a second property in Auckland but a second property in Dunedin is a possibility.''
- by David Beck
