Wairarapa: Tapping into the positive flow
Wairarapa is one of the few regions left in the country where it is still possible to find “positive cashflow” properties, Andrea Milner reports.
Friday, September 29th 2006, 12:00AM
by The Landlord
Wairarapa’s lifestyle attractions are well established, and include proximity to outdoors adventure activities, vineyards, and dramatic coastal and mountain range scenery. However property investors’ interest in Wairarapa has primarily developed in the last year, says Trevor Pearson, who heads the 34 member Wairarapa Property Investors Association.
The region is comprised of three main districts: Masterton, Carterton and South Wairarapa (Greytown, Featherston and Martinborough); with Masterton being the most populous.
Unlike in some other regions around New Zealand, the investment property market in Wairarapa hasn’t slowed, Pearson says, although ordinary residential sales have eased slightly. Sales of lifestyle blocks and coastal property also seem to have slowed in the present economic climate, Pearson observes. He does not predict the local market will remain slow for any length of time, and anticipates activity picking up at the end of the year when interest rates drop.
Sarah Brooking, sales manager for Harcourts Hamill Realty Limited confirms the market is still buoyant and “prices are still surprising us. We’re still achieving multiple offers on properties in all kinds of price ranges”. The median number of days to sell in June this year was 46.
Paul Joblin, Wairarapa manager of Property Brokers Limited and the region’s REINZ representative maintains houses are still selling at the same level as they were “two or three years ago. Numbers are back on last year, but last year was pretty heady really”.
“Numbers of house sales per month in Masterton used to be in the mid to high fifties, but rose to the low seventies. Now they’re back in the sixties, and quite steady.”
REINZ figures for the whole region show the number of house sales in July 2005 was 75, rising to 122 in September, and levelling again at 87 for June 2006.
Investment properties are selling well – particularly multi-income stream properties, which Pearson says do not stay on the market long when available. Those requiring a ‘do-up’ or renovation are also popular. Subdivision sales have slowed slightly according to Pearson, although he says new Carterton subdivisions are selling well.
The supply of new residential sections and subdivisions is growing, Pearson says. “Carterton seems to be on a bit of a boom. There’s quite a bit of development going on there, with four major new subdivision developments in progress. It’s a hotspot where investors could make some money.”
Joblin says there is a steady supply of cheaper rental properties owned by investors available, matched by steady demand, “but our population isn’t really growing”. This is set to change, however, with the regional authority aiming to achieve population growth of 10,000 over the next 20 years, and actively working to encourage migration to the region. As well, local small businesses are beginning to grow – all factors likely to drive continuing rental demand in Wairarapa.
Farming and forestry drive the region’s economy, with over 400 people employed at the local mill – the largest employer in Wairarapa – and a high level of employment generally in the region. The wine-growing belt has fanned out from Martinborough to encompass Gladstone and Masterton districts to the north as a continuance of the Wairarapa wine trail. Martinborough has become a unique wine village with over 20 boutique vineyards, and is “a very desirable place in which to invest, and we’re still selling lots of property down there,” Joblin observes.
The promise of an easier lifestyle draws workers from other areas to Wairarapa, which is just an hour’s drive from Wellington. Wellingtonians and people from Palmerston North “see Wairarapa as a place to escape to, especially in the weekends,” says Brooking. “We’ve had lots of investors from Wellington looking to buy here. Wairarapa has really taken off in the last 10 to 15 years as a desirable place to live in terms of the lifestyle it offers.”
“People are looking for the laid-back lifestyle on offer here, so there is fairly high demand at the moment for good quality properties, and people relocating to the area are prepared to pay for them,” Avis Voice, director of Wairarapa Property Letting Services confirms. “There’s plenty of scope in Wairarapa at the moment for employment. We’re still in close proximity to Wellington or Palmerston, so Wairarapa is quite sought-after as a residential area because of the comparatively higher cost of living in a city.”
“I think there are more and more professionals working on contract in Greytown and Carterton, or living here and working in Wellington,” Pearson explains. Joblin confirms “there are a large number of people who now live in Wairarapa and commute to Wellington to work”. However while a lot of buyers come from Wellington, Brooking estimates three quarters of the people who buy in Wairarapa already live there.
Pearson says there are some good investment opportunities in Masterton, Carterton and Featherston, with Carterton’s popularity increasing among Wellingtonians moving to Wairarapa now as Greytown has become more expensive. The desirability of these areas is set to increase with the planned $27,000,000 upgrade of the road into the region from Wellington through the Rimutaka ranges.
“The Wairarapa is still in its infancy really, it’s still untapped,” Joblin says. “We’ve got the Rimutaka hill between here and Wellington, which is to some extent prohibiting our growth, but the newly-announced roading upgrade will really help us.”
“Wairarapa still offers very good value for money in terms of the returns investors get,” Brooking says. “There is a shortage of good rental properties available vis-à-vis demand from tenants. Pearson agrees there is high demand for rental property from average income earners. Voice also describes Wairarapa rental trends as positive, with Masterton the most popular area in which to rent. Masterton is the largest town in Wairarapa and has played a traditional role as the service centre for extended urban and rural communities. She says renters look for garaging, and usually some form of heating.
The most desirable areas in which to buy rentals, Pearson advises, are eastern and southwest Masterton. Voice agrees west Masterton is the most popular area, but says the east side of town is not popular at all. “Demand is very high in the better locations – very high,” says Voice, “possibly because of the very low unemployment figures”. Joblin says few rentals become available in Greytown and Martinborough.
With wages being comparatively lower in the region than in larger centres and rising petrol prices beginning to bite, Pearson describes the cost of living in Wairarapa as quite high. However housing affordability there compares favourably against the rest of the country. “You can buy houses here between $100,000 to $200,000 easily, but rents are low.”
He says rents for three-bedroom homes range from $150-$170 per week in average areas, and from $170-$210 in more upmarket spots. Voice estimates a slightly higher range of $160-$200 per week rent for an average three-bedroom house.
Pearson owns the Richmastery franchise in Wairarapa, a property investment education business which coordinates a mentoring group of 27 students “who are all out actively investing in property”. In fact Pearson claims investors are still regularly finding “positive cashflow” properties in Wairarapa.
However Joblin says rents in Wairarapa haven’t really kept pace with rising house prices, and this factor combined with higher interest rates means it is very difficult for investors to buy “self-funding” properties – which seems to belie Pearson’s claims that there are still “positive cashflow” properties to be found regularly.
While there has been some recent upward movement in rents, Pearson agrees they haven’t risen significantly. A major reason for this is that one landlord – Trust House Limited – owns a large proportion of Wairarapa’s rental properties. It owns 412 properties in and a further 119 in Tararua region. Trust House guarantees long term tenure to its tenants with rent levels below the average market rent as advised by the Ministry of Housing. Numbers of Trust House properties in the region are:
· Martinborough 4
· Featherston 14
· Greytown 7
· Carterton 6
· Masterton 382
· Eketahuna 3
· Pahiatua 30
· Woodville 6
· Dannevirke 82
Andrew Whitehead, Housing Operations Manager at Trust House says the organisation has a self-imposed limit of not increasing a tenant’s rent by more than $10 per year, which has over time led to its rent levels not keeping up with some being asked by other landlords. “ As with all landlords, we review the rent when a tenancy changes; however we will always try to keep the rent at a fair level.”
As to the organisation’s future intentions in the region, King says “We are comfortable with the current numbers [of its properties] and our immediate aim is to reinvest in our existing portfolio before we expand. This year we are reinvesting approximately $700,000 on capital improvements into our portfolio and we hope to increase this in future”.
With such a substantial number of holdings in Masterton, it is evident Trust House presently controls rents there.
However, perhaps this factor needs to be weighed against the investment opportunity presented by the comparatively low house sale prices still predominating in Wairarapa.
Current low rents may turn off investors seeking the ever-elusive “positive cashflow” property, but those in the game for long-term capital gains may recognise a window of opportunity to buy at bargain prices which are unlikely to hold as the region develops. As Joblin succinctly sums up the investment chance: “People from Auckland and Wellington who come here can’t believe how cheap our land is really. Certainly there’s huge potential.”
Population statistics
The total population according to the 1996 census is 38,511, of which 28,275 people live in urban areas.
The town populations are:
| Masterton | 18,070 |
| Carterton | 4,169 |
| Greytown | 1,953 |
| Featherston | 2,580 |
| Martinborough | 1,503 |
The district populations are:
| Masterton | 22,758 |
| Carterton | 6,813 |
| South Wairarapa | 8,940 |
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