Manawatu, a bright economic star reports Vicky Holder

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Manawatu boasts it is provincial New Zealand at its very best. As the most affordable, it’s certainly one of the easiest places in the country to live.

Thursday, February 1st 2007, 12:00AM

by The Landlord

People go there for the relaxed, safe, family-friendly community lifestyle. There are abundant parks and reserves, great schools, top educational facilities and job opportunities for skilled and motivated people. People enjoy a good standard of living.

Its biggest regional centre is Palmerston North, and the region retains the charms of a laid-back rural lifestyle in six smaller towns.

Manawatu is home to some very successful knowledge-based industries, in particular bio-tech industries, many of which have research links to Massey University. This may be part of the reason why business confidence in Manawatu is the second highest in the country.

Palmerston North City Council actively fosters the easy living and business environment, deliberately trying to attract families away from other centres with its new identity, Young Heart, Easy Living.

Location
Stretching from the magnificent Tararua and Ruahine ranges to the coastal plains of Himatangi and Tangimoana, Palmerston North is the eleventh largest city in the country with a population of 78,000. It’s about 140km north of Wellington (two hours’ drive), in the centre of the Manawatu Plains and close to the northern bank of the Manawatu River.

Combining Palmerston North, Feilding, Bulls, Ashhurst, Foxton, Levin and Shannon, Manawatu has the country’s largest university, the lion’s share of New Zealand’s defence forces and well-developed transport routes.

Traffic is not a problem in Palmerston North. In the city, just about everything is five or 10 minutes away. Nor is getting to anywhere else in the country difficult. Location is probably the area’s key strength for business.

Manawatu’s strategic, central position supports unparalleled advantages as a major distribution centre for the lower North Island. Close to two thirds of New Zealand’s population live within 400km of the Manawatu district with 30% within 250km.

The Palmerston North international airport has one of the highest year-round operating records in New Zealand with well developed mail and freight operations. Substantial recent development at the airport has improved facilities for freight handling, and more improvements are envisaged. In 1998, the runway was extended, with further extensions planned, and earlier this year a 4700sqm aircraft apron was completed. Construction of the next stage of the Airport Drive entrance to the airport was completed during the year, creating a four-lane arterial road between the airport terminal and the central business district. There are also plans for new roads to link John F Kennedy Drive to Railway Road to further improve access from one of the city’s main industrial precincts to the airport and open up industrially zoned land at the airport. Palmerston North also sits astride the main trunk line with links to all three ports in the lower North Island.

Business costs are cheaper in Palmerston North than in many other main centres, because of lower property rentals, lower wages and stable labour relations. These factors make Palmerston North a great base for industry, which has seen massive growth over the past four or five years. Most of that growth is happening north-east of Palmerston North, near the airport around the North East Industrial Park.

ING Property Trust recently took a 50% equity interest for $30 million in North East Industrial Ltd, which owns 70ha of industrial and commercial zoned land at North East Industrial Park. The company believes the deal will provide significant opportunities for growth.

In July, Ezibuy gave the region its vote of confidence, expanding its operation with a 27,000sqm major distribution centre on a 5.9ha site at North East Industrial Park. With 2.5ha reserved for potential growth, it is the biggest of its kind in the southern hemisphere.

Foodstuffs has recently bought a greenfield site adjacent to the industrial park and plan to develop a 30,000sqm building. The property will serve as the company’s lower North Island distribution centre, an operation which is currently based in Wellington.

Allflex Ltd, a developer of a Palmerston North livestock management system has just leased 4000sqm and Mitre 10 Megastore has taken 13,000sqm on 2.4ha near the former Ezibuy site on John F Kennedy Drive.

Bayleys Karl Cameron says the ING investment may help to speed up economic development and entice major listed property entities to the province. “From our perspective, the new industrial park is welcome because there is a shortage of land for development in Manawatu.”

With the lack of land for distribution companies around the seaward area of Wellington, Palmerston North is well-positioned to service areas like Hawkes Bay, Wanganui and Wellington.

The city’s industrial market as a whole is performing strongly as indicated by low vacancy rates and rising rental levels. There is strong demand for smaller sites but little land is coming on the market. This imbalance has resulted in land values doubling over the past few years.

Rural Base
Manawatu is highly fertile, making a major contribution to New Zealand’s primary sector production and processing industries. The region’s strong rural focus is captured in Feilding.

Feilding’s stock sale yards in the town’s central business area, are among the largest in the southern hemisphere. The yards draw farmers, tourists and stock experts from around the country. Traditionally, meat-processing plants provided major employment for the town but the development of the agricultural processing industry now offers further scope for employment, expansion and diversification.

Manawatu continues to be a bright economic star. In December 2005, the Manawatu-Wanganui region had the strongest rate of economic growth in New Zealand, growing by 3.9%. The achievement is a milestone for the region, which has not led the nation in economic growth over a calendar year since 1980. Over the March 2006 quarter, the area’s strongest gains in comparison to the March 2005 quarter were new construction, retail sales and property sales.

Vision Manawatu CEO Ian Reid says: “Despite some weakness in the last quarter, the region has some underpinning strengths. House sales are still rising as is employment. Manufacturing in this region is proving to be more sustainable than in larger centres such as Auckland, and the growth in warehousing shows an increasing recognition of the region as a distribution centre.”  

According to the last census, the Manawatu-Wanganui region had the slowest population growth in the North Island for the past five years. Census night data shows a population of 103,500 for Manawatu, an increase of just 3190. Palmerston North’s city council forecasts growth to reach 94,000 by 2016. By 2020 it wants to have 100,000 people, achieving growth of 1.6% each year.

Jobs however, have grown on average more than the rest of New Zealand. Jobs are mostly in education, government administration and defence, health and community services, transport and storage and retail.

Who lives here?
Reflecting Palmerston North’s important tertiary education, training and military sectors, the city has a relatively young age profile, made up of 76% Europeans, 30% Maori, 5% Asian and 2% Pacific Islanders.

Around 30,000 students from Massey, Universal College of Learning and IPC, bring a youth culture to the city, helping to support the many cafes and bars. Unfortunately, few students stay here after their studies and at the moment the area is losing their skills. The city council aims to reverse this trend by 2016, encouraging people to stay on to launch their careers in the high-tech businesses that spin-off from the bio-commerce centre.

The city’s suburbs extend away from The Square, a small park at the centre of the retail hub. Fitzherbert Avenue extends south, crossing a bridge and connecting the city to Massey University and the International Pacific College as well as some newly developed residential areas. The university campus is almost a separate urban area in its own right, containing student accommodation. IPC provides a park-like campus for its 600 residential students from New Zealand and parts of Asia.

Residential growth
Bayleys John Yee says the residential market has expanded by 45% since five years ago. Residential sales were up by 11.2% and new dwelling consents were up 12.6% on the previous year. A lot of movement has been from within the region, spurred by low interest rates and confidence in the economy.

Palmerston’s median sale price has increased significantly over the past five years. In 2000, almost a quarter of all sales were $100,000 or less, with 62 % within the $100,000 to $200,000 range. In 2005, there were only 17 transactions recorded in the $100,000 or under price bracket, with the $100,000 to $200,000 range taking 40% of sales. The $200,000 to $300,000 price tripled to 36% of total sales in 2005.

In June 2001, the median sales price for a home in Palmerston North was $124,500 and by 2006 it had reached $241,500. Days on the market have remained steady and in June last year, they stood at just 23.

Yee says many young families and new residents to the city are buying new homes in growth areas like Kelvin Grove, north-east of the city. “A truckload of new subdivisions has opened up in the area, each branded with a new identity – names such as Logan Acres, Meridian, Liberty and Lakemba Park among others.” Handsome modern family homes like those that have proliferated on the Gold Coast of Australia represent value for money for first and second homebuyers.

Typically, they have three or four bedrooms, double internal garaging and are on 600 to 700sqm sites. Prices range from early to mid $300,000 to $500,000. Five years ago, when these new subdivisions started emerging, the same homes went for around $230,000 to $240,000. Those who bought early have experienced considerable capital gains.  

People on transfer and many associated with Massey University and the tertiary institutions have been drawn towards the other big growth area near Massey at Aokautere.  Many of these new homes are in the upper market range from $500,000. They are grand, two-storey homes often with rural, city, river or mountain views.

Ray White’s Kevin Boniface says Hokowhitu, one the most established, older character areas, is hot property – still one of the most sought after in Palmerston North. The big drawcard is zoning for both Palmerston North Boys’ and Girls’ High Schools and proximity to recreational facilities including the golf club. To buy a house in this area costs anything upwards of $400,000.  He says there’s also a lot of growth east of the city in a new housing area called Fernlea Park.

 
Lifestyle
Manawatu has also benefited from the popularity of lifestyle property around the country. There has been an increased in median sales price of 60% from the December quarter of 2000 to the March 2006 quarter.

With the expansion of the military bases at Ohakea and Linton, more people have moved to the Rangitikei area around Marton, Feilding and Bulls, which have experienced huge population increases.  In Feilding, the median sales price was $124,500; by 2005 it had gone up to $166,000 and in June this year, it was at $200,000, slightly down from the high of $210,000 in March 2006. Days on the market remains steady at 35. In Marton and Bulls, the median price was just $92,000 in June 2001 and by June 2006 it had climbed to $150,000.

Yee says there is “quite a bit of money around the Manawatu”. “A lot of people are retiring from their farms and buying in the city. Generally, everybody’s equity has gone up, so it’s easier to reach upwards. Million-dollar properties are quite common. Go back five years and they were scarce.”

Around two-thirds of the population of Palmerston North own their own homes. The rest mainly rent privately. Most of the vast student population prefer to rent close to the city so they don’t have to travel far for entertainment. For families who need to be near good schools, there is plenty of rental accommodation to choose from throughout all areas.  

Because it has long been a student city, there have always been plenty of investment properties in Palmerston North. However, it’s now very hard to find a property for under $200,000. Anything in that price range is very sought after, says Yee. Kevin Boniface adds that most of these properties sell quickly, within 20 days. While the top end of the market has drawn little interest, there are still a lot of investment buyers in the lower price range, many from Auckland and Australia, which makes it harder for first homebuyers.

They’re not there for the yields, which frequently go as low as 6% gross. Residential property is regarded as a safe prospect. Investors in Palmerston North take a long term view. They’re after the capital gains.

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