Archive | Airport

A few negatives appear in QV’s Auckland & Christchurch house price indexes, elsewhere it remains a struggle

A few negatives have slipped into the house price equation – in Auckland, that is. The rest of the country’s had plenty of housing negatives right through the global financial crisis & beyond.

Quotable Value Ltd’s monthly residential value index rose just 0.1% nationally over the last 3 months and remains 2.8% below the 2007 peak when adjusted for inflation. But in March that national index was down 0.4%.

QV said today Auckland was 28% above the previous peak, and 10.5% above, net of inflation. The region stayed positive – up 0.6% in March, up 0.9% over 3 months, up 14.3% for the year – but the combined performance of all the main urban areas was a 0.3% decline in March.

The indexes for the Hauraki Gulf islands, Manukau & Papakura also declined in March – the islands by 0.3%, Manukau overall by 0.2% and its eastern suburbs by 0.9%, Papakura by 0.4%.

Outside Auckland & Christchurch, that’s nothing.

Around most of the South Island, you can buy an average house for a bit (or a lot) less than a squashed section is likely to cost in most of Auckland. In many South Island districts, house prices are well below the level when the global financial crisis hit 7 years ago – down 16.8% in Kaikoura, 12% in Marlborough, 11.9% in Southland. Dunedin is somehow 1.2% ahead of the 2007 level although 3 of the city’s 4 components have fallen, the southern suburbs by 3.2%. Rural Taieri has risen 2.6%.

From an average house price of $290,000 in Dunedin, the average in Christchurch is $448,000. The house price index for Christchurch is up 18.1% from 7 years ago, and up 32.5% in Selwyn, 25.3% in Waimakariri.

QV national spokesperson Andrea Rush said, “The loan:value ratio speed limits and the Reserve Bank signalling further interest rate hikes is likely to be contributing to a levelling off in the growth of property values in Auckland and, for the first time in more than 2 years, we are seeing a decrease in some areas of that market.”

In the southern suburbs on the isthmus (Onehunga through to Epsom), the index gain in 7 years was 36%. In the last 3 months the index has dropped 0.5%, but it clawed back 0.2% in March. From the previous peak until this March, the southern isthmus has picked up just under $200,000 in average house price, from $538,305 to $732,046.

The index for Manukau’s eastern suburbs is up 28.7% from the 2007 peak, and was up 4.8% over 6 months. However, it’s dropped by 0.6% in 3 months and 0.9% in March. Despite that, its price peak has risen from $596,015 to $766,956 over 7 years.

Ms Rush said a number of factors had come into play recently: “Home loan approvals nationwide are down about 10% on the same time last year, overall sales volumes are similarly down and the amount of activity from first-homebuyers around the country is also well down on what it was prior to the loan:value ratio speed limits being applied in October.

“The New Zealand price index is showing a slight tick downwards, which doesn’t represent a nationwide drop in values but rather a reflection of the impact of a drop in the Christchurch price index.

“We suspect this is due to the rating revaluation of Christchurch released in March, in which there was an increase in the overall rating value of the city. This probably explains the sharp downward movement of the Christchurch index this month, and next month the real trend will be clear.”

The figures below show the average value at March 2014 and changes nationally, for the whole of Auckland and around the region based on old council boundaries (and including Kaipara, immediately north of Auckland, Christchurch & the national figures) over the last 3 months, over the last 12 months and since the 2007 market peak.

The average current value is the average (mean) value of all developed residential properties in the area based on the latest index. It’s not an average or median sales price.

Kaipara, $328,581, 0.7%, 7.9%, -17.2%
Rodney, $654,079, 2.0%, 10.8%, 11.5%
Rodney North, $664,700, 2.8%, 12.4%, 10.7%
Hibiscus Coast, $645,390, 1.3%, 9.4%, 9.9%
North Shore, $825,287, 0.6%, 14.6%, 27.9%
Coastal, $947,285, 0.4%, 14.6%, 25.7%
Onewa, $660,957, 0.3%, 15.6%, 33.3%
North Harbour, $797,229, 1.5%, 13.7%, 31.2%
Waitakere, $548,683, 2.0%, 17.7%, 29.4%
Auckland City, $826,721, 0.5%, 13.8%, 32.8%
Central, $742,345, 2.4%, 12.5%, 30.3%
East, $1,035,956, 1.1%, 14.9%, 30.0%
South, $732,046, -0.5%, 13.8%, 36.0%
Islands, $729,114, -1.4%, 9.6%, 14.1%
Manukau, $580,572, 0.9%, 14.9%, 26.8%
East, $766,956, -0.6%, 13.7%, 28.7%
Central, $447,729, 2.6%, 15.4%, 19.1%
North-west, $477,518, 1.6%, 16.6%, 29.2%
Papakura, $426,442, 1.8%, 14.7%, 18.5%
Franklin, $457,363, 2.6%, 13.5%, 15.6%
NZ, $466,665, 0.1%, 8.8%, 12.6%
Auckland region, $699,659, 0.9%, 14.3%, 28.0%.

Attribution: QV release.

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Commerce Commission publishes airport valuation draft

Published 1 June 2010

The Commerce Commission said yesterday it had reached an important milestone in setting a new regulatory regime for airports under part 4 of the Commerce Act. The commission has published its draft decisions & reasons on the input methodologies that will be applied to the information disclosure requirements for airports. The commission has also released its draft information disclosure requirements & associated reasons.

Auckland International Airport Ltd said its initial review indicated the draft determinations were broadly consistent with the emerging views paper the commission published in December 2009. But chief financial officer Simon Robertson said Auckland Airport “remains of the view that airports need to have the correct commercial incentives to ensure they make the necessary infrastructure investment for the benefit of travellers & other airport users, and the broader New Zealand economy”.

In relation to input methodologies, the key draft decisions that underpin the information disclosure requirements are that:

the initial regulatory asset value for each airport will be the value of non-current assets included in the airport’s 2009 disclosed financial statements ,with an adjustment to the value of land using a market value alternative use (MVAU) valuation methodologyairports must revalue non-land assets annually using CPI indexation, and may revalue land before the start of a new pricing period using an MVAU methodologyairports must allocate costs by applying an accounting-based approach to cost allocation using causal factorsan airport’s tax obligations must be estimated using a tax-payable approach, andthe commission will produce & publish vanilla & post-tax cost-of-capital estimates of a 5-year term for each airport on an annual basis, using the simplified Brennan-Lally model.


In relation to information disclosure, the key draft decisions are that airports will need to publicly disclose:

historical financial performancequality measures, including passenger satisfaction survey results, reliability, capacity & utilisation, and operational improvement measuresforecasts of their total revenue requirements (& related assumptions) after they have gone through their required consultation processes and set their pricesprices & pricing methodologies; andother key statistics.


When disclosing the financial information, airports will be required to apply the input methodologies set by the commission, except the input methodology for the cost of capital. The commission said it had received detailed submissions from parties with differing views, and now moved into the most important part of the consultation process – a full critique of the commission’s draft decisions. Commission chairman Mark Berry said: “Given that this is a totally new regime, the commission has engaged leading independent international experts to provide their views, which parties will also have the benefit of in preparing their submissions.” Dr Berry said the commission was working to a very tight statutory timeframe to determine the new regime for airports. Following a further round of submissions & cross-submissions, the commission intends to issue its final decisions on input methodologies by 31 December and information disclosure by 1 January. Earlier stories:

24 December 2009: Dialogue continues on methodology at heart of airport land valuation

6 September 2002: Airport company fires more shots at Commerce Commission

8 August 2002: 3-2 vote for historic over optimised replacement cost at airport


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Attribution: Commission & Auckland Airport releases, story written by Bob Dey for the

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Dialogue continues on methodology at heart of airport land valuation

Published 24 December 2009

The Commerce Commission released papers yesterday detailing its emerging views on input methodologies for electricity distribution services, gas pipeline services and specified airport services supplied by Auckland, Wellington & Christchurch International Airports.


The methodologies will eventually form part of a new regulatory regime for airport services that is due to take effect from 2011.


While the commission’s statement was all about process, Auckland International Airport Ltd chief financial officer Simon Robertson noted that it had amended its earlier-announced preliminary views on several aspects relating to the way input methodologies should be determined. “Key changes relate to the valuation of airport land. The Commerce Commission’s current view is that the initial value of the regulated asset base should use 2009 land values, rather than its earlier view that a 2002 ‘base valuation’ be used. Additionally, land should be revalued at least once every 5 years, with CPI indexation applying between these revaluations.” Mr Robertson said Auckland Airport had expressed its concerns about the 2002 base valuation approach, as it would have the effect of applying regulation retrospectively. He said it was important that airport land was appropriately valued so good commercial decisions were made about its use. “A central thrust of our submissions on airport regulation has been that airports need to have the correct commercial incentives to ensure they make the necessary infrastructure investment for the benefit of travellers & other airport users, and the broader New Zealand economy. “We look forward to our ongoing consultation with the Commerce Commission as it progresses development of an information disclosure regime for airports.”


As the next step in the regulatory process, the Commerce Commission is convening 4 industry workshops to discuss its emerging views papers in February-March.


Commission chairman Mark Berry said the commission wanted to share its latest thinking with interested parties following the input methodologies conference in September and the subsequent cross-submissions.


“This additional step in the consultation process has been made possible by the extension granted by the Minister of Commerce. The papers detailing the commission’s emerging views are not intended to be exhaustive or provide full reasons. They are intended to provide key context for the workshops due to be held in February.”


The commission is seeking the initial views of interested parties on the proposals in the papers by late January & early February.


Website: Industry regulation


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Attribution: Commission & company releases, story written by Bob Dey for the Bob Dey Property Report.

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Airport company fires more shots at Commerce Commission

Tired & weak arguments won’t help

Auckland International Airport Ltd chairman Wayne Boyd took the opportunity of the company’s annual result announcement to fire some more shots at the Commerce Commission over its examination — and findings — of airfield pricing issues.

The commission recommended price control of airfield services at Auckland in a 3-2 split decision on 1 August. The company disagrees with the recommendation, and outlined some of its proposed submissions.

It said correction of numerous arithmetic errors, alone, should reverse the recommendation for price control. The chief problem, though, is the commission majority’s decision to favour historic cost as a valuation method.

The company said it was well outdated and didn’t conform with currently acceptable valuation standards for infrastructure utilities in New Zealand and overseas.

Pushing that view of accounting seems a dangerous ploy for the airport company to adopt: witness the extinction of Andersen after it used what seemed the currently acceptable standard in the US, which was to employ entirely unethical methods to help large companies maintain false balance sheets.

However, looking particularly at the infrastructure sector, the airport company said that, if accepted, “the commission’s valuation approach would create huge anomalies with the manner in which other infrastructure industries (such as telecoms, electricity, gas & ports) are valued & regulated in New Zealand. Such an approach would also act as a serious disincentive for the future development of necessary infrastructure needed throughout New Zealand.

“The New Zealand Valuation & Property Standards Board believes that historic cost valuation methodology would be a significant backward step should valuers be asked to report values based on their historic cost and would result in meaningless balance sheets with significant discrepancy between competing industries.”

This argument, in itself, will do nothing to persuade the commission it’s wrong. What the commission will need convincing about is the ability with newer practices to prevent rorts, which were immediately evident when the electricity industry switched from old-style regulated business to various forms of different accounting.

Auckland International Airport also disagreed with the commission’s decision to exclude the land held for future runway development from the asset base for charging purposes.

“Even the airlines agree that this land has been purchased at the most economically efficient time. For shareholders to receive no return on this investment would create a perverse incentive for the company to sell the land and repurchase it at a later date at a greatly increased cost to the company and the airlines.

“The company is of the view that the significance of these & other issues may warrant judicial review of the commission’s report & recommendation.”

Story on the commission’s report: 3-2 vote for historic over optimised replacement cost at airport

This week’s result story: Travel growth to stay at 3-5%, says airport company

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3-2 vote for historic over optimised replacement cost at airport

Commission finds $2 million/year net benefit from monopoly control

The Commerce Commission recommended by a 3-2 majority that Auckland International Airport Ltd’s airport activities be controlled, while those in Wellington & Christchurch shouldn’t be controlled.

A key issue was the valuation method — the majority opted for historical cost, the minority for the method supported by the airport company, optimised depreciated replacement cost (ODRC).

The commission valued airfield land on an alternative-use base, which the airport company said effectively represented a business exit value. The company said the appropriate value would be what a new entrant would pay.

The commission excluded the land Auckland International Airport holds for future runway development. The company said the timing of its purchase of land for its second runway development was appropriate, so it should be included in the asset base for valuation & pricing.

The commission found a potential $2 million/year pretax net benefit of monopoly control, representing 35% of airfield revenue. The company disputed this evaluation.

Auckland International Airport Ltd said the commission’s historical cost approach to the valuation of specialised assets could have significant consequences on other New Zealand infrastructure companies and the regulatory framework in which those sectors operate.

The commission’s report runs to 600 pages, which I haven’t read. I suspect the commission’s majority has opted for historical cost valuation because other infrastructure businesses, notably the electricity industry, set about fleecing their customers (in favour of new large shareholders who have proved to be short-term investors trying to skip off with windfall profits) as they jacked up asset valuations under optimised deprival valuation methodology.

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