Tauranga – caught on a wave
With a pristine harbour and surf ocean on both doorsteps, Tauranga was destined to be a magnet for lifestyle seekers. Phenomenal growth, however, needs economic growth to support the boom. As the pulse of Western Bay subregion, Tauranga drives a big-picture initiative that is gathering momentum – and reaping rewards, writes Jo Ferris.
Thursday, March 1st 2007, 12:00AM
by Jo Ferris
The second fastest growing city in New Zealand, Tauranga’s property valuations have doubled in three years. Median selling prices keep peaking, development snowballs, unemployment is down and economic indicators reflect strong performance. There is good reason to continue investing in property.
Location, climate and lifestyle aside, several factors point to the rapid swell. Talk to those caught in the wave, however, and it can be summed up in one word – SmartGrowth.
The SmartGrowth strategy is a joint initiative between Tauranga City Council and Western Bay of Plenty District Council, with regional body Environment Bay of Plenty an important player. SmartGrowth underpins everything now happening throughout Western Bay – an umbrella strategy embodying the economy, transport, education and the arts.
Adopted in 2004, this 50-year vision is managing WBOP’s growth – a ‘live, work, play’ philosophy focused on mix-use areas. Greenfield areas are opening up – the first major development planned around SmartGrowth’s principles is 6kms southwest of Tauranga on 254ha at Tauriko. The Lakes’ success typifies the region’s new pathway – hinged on a willing collaboration of key players, according to TCC mayor Stuart Crosby.
“To me the most important part of the development strategy is implementation built on services and making relationships with the two authorities and the regional body. Crucial to that is tangata whenua input at strategic and implementation levels. They sit at the table as equal partners.”
Crosby says crown entities are also important – as key funders for transport, health and education. A third crucial element involves relationships with the private sector – a win-win situation for Crosby.
“From an investment perspective, investors – whether they are looking for residential or commercial opportunities within Western Bay – need the confidence of certainty. And this is happening.”
WBOP district council mayor Graeme Weld says SmartGrowth has removed the guesswork and allowed both councils to address what they already knew was happening but didn’t have a handle on.
“We now have a clear direction. From a planning perspective it gives a degree of certainty and security so people know what’s going to happen – and invest with confidence.”
Weld says SmartGrowth research shows 100 people arriving in WBOP each week – though 53 leave – 32 new houses finished, 54 more vehicles on the roads and 45 new jobs – all of which create different issues for both councils.
Priority of economic growth
Working in conjunction with local authorities, Western Bay’s economic watchdog Priority One is helping drive the region’s business growth. Funded by the business community, the organisation focuses on attracting new business that utilises high skill levels to build productivity.
National Bank’s Quarterly Regional Economic Activity Report to September 2006, in tandem with a BERL (Business and Economic Research Limited) report released earlier in the year placed WBOP’s ranking on a composite basis consistently in the top three for economic performance. Key indicators included growth in GDP, employment, population, business numbers and size.
Capping this last year, two of Tauranga’s biggest companies – Port of Tauranga and TrustPower – were named the two best performing public companies in a decade.
Productivity is the only area where Western Bay lags. Priority One aims to increase this, with initiatives underway to attract new business. These include cluster groups to embrace food manufacturing, a marine precinct, information and communications plus freight. Tauranga’s location – close to Auckland, Hamilton and the wider central region – give it prime position to become a major distribution and logistics hub.
Tauranga’s city-based airport offers good connections and main roads all lead to Tauranga. Port of Tauranga’s Metroport rail link to South Auckland also provides proven freight advantages, while talks of a possible merger between ports of Tauranga and Auckland only increases the potential.
Other major players include Zespri, whose headquarters are in Mount Maunganui. Health manufacturer Comvita grew from nothing to become a major New Zealand exporter and remains based at Paengaroa. With visitor numbers up 10.2% in the year to October 2006, tourism is a sleeping giant according to mayor Crosby, while tertiary education encourages youth to stay put, thanks to Waikato University’s presence and Bay of Plenty Polytechnic.
Population swell
With a combined population of 145,713, WBOP accommodates mainly Europeans at almost 104,000, with 23,493 Maori, 2559 from Pacific Islands and 4428 Asians. Crosby says projections put Western Bay’s population at 200,000 by 2020.
“In 2050 it is estimated that the population will be around 300,000 and 70% of that growth will happen within the Tauranga City boundary.”
WBOP remains a retirement capital – its population higher than the national average and supported by a SmartGrowth report on the impact of an ageing community that states within 25 years, WBOP will have more people aged over 45 than under. Crosby says research also suggests baby boomers will live longer, and on their own.
“We need to know that and plan for housing. Private investors need to plan.”
Targeted development for TCC includes greenfield expansion, plus intensification of existing urban areas. Growth surge for WBOP district council focuses on Waihi Beach, Katikati, Omokoroa and “the sleeping giant of Te Puke”, according to Mayor Weld. Much is planned for this township, currently home to 7080. With new industrial land destined on its outskirts, New Zealand’s acknowledged ‘kiwifruit capital’ offers opportunity, particularly with the dense growth at Papamoa East – natural neighbours at 15kms apart.
Papamoa is Tauranga’s fastest growing suburb; blossoming 40% since 2001 and valuations are up 67% from three years ago. TCC valuations released in November 2006 put Papamoa’s median land value at $256,785 – up from around $173,000 in 2003. Beachfront is the most significant with a 610sqm section valued at $1.456 million, up from $960,000 three years ago.
Real Estate Institute of New Zealand figures support the entire coastline’s growth. While activity flattened in the past two years, November 2006 saw the market surge more than 40% in some parts. Significant beachfront sales and apartment settlements in Mount Maunganui raised the Mount and Papamoa’s previous median record of $402,00 in October 2006 to $445,000 in one month – the highest in New Zealand. In contrast, Tauranga’s November median selling price dropped to $340,000 from October’s high of $345,000. Outlying townships reflect their affordability – Katikati’s November median at $291,000 with Te Puke at $294,000.
Quotable Value monthly median selling figures to November 2006 vary through Tauranga’s suburbs – Matua at $394,000, the Avenues at $382,000 and Otumoetai at $376,000. Greerton – traditionally among Tauranga’s cheaper areas – creeps up at $294,000.
Neville Falconer of LJ Hooker Tauranga, who sits on REINZ’s national council, believes “Tauranga’s once lower end areas” offer opportunity, thanks to growth, new road networks and the advent of big suburban shopping centres. Housing continues to offer investment prospect, according to Falconer, considering the numbers arriving each week.
“Rough rule of thumb says one hectare of land is needed per week to house these people. Plenty of land has been land banked – and the rate of uptake is very strong.”
Falconer believes area choice is all about lifestyle and affordability. Those looking at schooling need to be mindful of zoning. Overall, however, Tauranga’s lure is having the best of both worlds – an ocean coastline and an expansive harbour stretching growth into Western Bay of Plenty.
“Bethlehem’s triangle, bound by Cambridge Road, Moffat Road and SH2 has a surge of growth and offers a good mix of demographics. It’s also an easy link to Auckland,” says Falconer.
Western Bay offers options – a prized coastline, growing city and suburban sophistication, retirement villages, rural lifestyle and a strong horticultural and agricultural backbone. Recreation is a key focus – aquatic sport handshaking with bush activity in the Kaimai Ranges and Papamoa Hills.
Apartment lifestyle
Apartments remain a drawcard with Mount Maunganui the region’s mecca – land scarce in the narrow peninsula beneath Mauao and opportunity for vacation investment. New complexes are ongoing – the most ambitious due to start in April. It was last year’s coup – a major land swoop on 3985sqm and 17 properties – including a Marine Parade home that secured vital beach access on this narrow blue-chip neck. It was the key to the entire development of Eleven – designed by Auckland architect Robert Donald, in conjunction with Mount real estate broker Malcolm Eden of Colliers International, who brokered the deals. They’re confidential, but Eden concedes records were broken.
The complex will comprise 64 apartments within three defined entities, including two high-rise towers atop podium levels, and beachfront penthouses. It will embrace rooftop swimming pools and gardens, external glass elevators, three-tier parking and a further 100 car park spaces for sale – a key factor, considering the Mount’s parking shortage. Prices start at $595,000 but anyone with $6.45million to spare can buy a tower penthouse complete with rooftop swimming pool.
Other significant complexes continue the Mount’s affair with apartments – prices ranging from $375,000 to $800,000 plus, up to several million for penthouse. Top end is a new Pilot Bay complex offering two penthouses for $5 million each. This is based on $17,000 per sqm for a Marine Parade top-floor apartment believed to have fetched $3.2million.
Tauranga’s CBD rebirth introduced upmarket commercial accommodation merged with private apartments. It began with Devonport Towers, which incorporates Tauranga Club in a three-way blend with apartments and a hotel. Kingsview Resort and Towers then replaced the old CT Club – a 70-unit complex blending accommodation with private apartments – small studio units still available at $290,000 up to luxury three-bedroom plus office suites at $3.2 million.
Tauranga’s newest development – The Sebel Trinity Wharf is built partially over the harbour and brought international hotel status to Tauranga. Fifteen luxury apartments share the upper levels, along with hotel facilities – prices ranging from $850,000 to $1.75 million.
Another example of Tauranga’s growing innovative commercial and residential mix is the nearly completed Fort Nautilus – a harbourside marine development incorporating dry boat stacks and apartments.
TCC’s resolve to reignite the city’s CBD hints at further opportunity for inner city investment, according to Mayor Crosby.
“Property owners are saying they are getting good returns on commercial development, but they want to do better – in terms of providing office space, we may need change.”
Wider afield
Wider afield, evidence of SmartGrowth at work is Omokoroa’s wastewater connection to Tauranga. Due for completion in July, it has sparked significant development.
A peninsula harbour village, Omokoroa’s forecasted population in 50 years is 12,000, according to Western Bay of Plenty District Council communications manager Peter Hennessey. He says structure plans lay out its pattern of development as greenfield growth opens up and allows commercial opportunity.
Proof of the interest in Omokoroa was $14 million worth of sales last December at the launch of its first gated community, Victoria Key. Due to start this year, the 2.8ha development offers land and house packages from $415,000 to $560,000.
Commercial growth needed
According to WBOP council resource management manager Phillip Martelli, Katikati, Waihi Beach, Te Puke and Maketu are all under scrutiny with long term planning documents embracing strategies to deal with land use, cultural issues, employment and economic potential. He says residential growth must be supported within the ‘live, work, play’ concept and this is already happening at Katikati.
Five kilometres east of Te Puke, around 175ha of industrial land has fresh approval from council. Rangiuru Business Park is subject to appeal, but is planned in two stages – 20ha initially, the remainder timed around Te Puke’s proposed bypass, on which detailed design work is progressing. The Eastern Arterial will eventually link SH2 through the Mount’s corridor to Tauranga via a second harbour bridge. This is expected to start this year in line with the region’s road network strategy – a key factor of SmartGrowth.
Meanwhile, earthworks are underway on the first of 195ha at Tauriko Business Estate, adjoining the The Lakes development. This involves 180ha of industrial land, 12ha for retail and business and further land developed around the environment. Timed over 10-15 years, first titles are due late this year.
Commercial specialist Adrian Knowles of Association Realty says industrial land is desperately needed and has been one of the area’s disadvantages in encouraging big business. Land rental is also high at $250-$300 per sqm, according to Knowles.
Papamoa Junction currently has 50ha under development, with a further 30ha due in future to meet Papamoa East’s growth. Commercial development is a key part of TCC’s strategy for Papamoa East – its target population around 35,000, according to TCC environmental planner Andy Ralph.
Stage one is the suburb of Wairakei, embracing existing housing plus new development.
The latest to gain approval is a $100 million proposal offering a back-to-the–future, pedestrian-friendly village concept, mixing apartments with houses and short walks to services and work. A higher building density could offer land less than $200,000 for a normal 600sqm site and sections will drop to 300sqm ‘cottage’ size.
Wairakei’s target population of 12,500 is estimated between 2016 and 2021. The next phase to watch embraces mostly Maori land known as Te Tumu – Western Bay’s last raw coastal ribbon, planned to house around 22,500 – but not anticipated before 2021, according to Ralph.
Property market bouncing back
Hand in hand with new development, however, is the existing property market – a main driver of the region’s rising property values. TCC land valuations released late last year show a $25 billion boom in Tauranga alone, averaging a 50% rise in the past three years.
Translated into actual sales, Realty Services group marketing manager and auctioneer Gil Beadle believes that, while homeowners in the likes of Greerton might be buoyed, he isn’t too excited by rating valuations.
“If someone is looking at property and works on a percentage above or below valuation, they are confusing themselves. There is no pattern – we are selling above, below and at.”
That said, Greerton – generally accepted middle of the road – offers opportunities.
“With what is happening at Pyes Pa, 40% of the market is south of Twenty-Second Avenue,” says Beadle.
As owners of both Bayleys and Eves, Beadle says Realty Services has 40% of the area’s market share and, while the top end hasn’t come down, sales have stabilised.
“The dramatic heat of four years ago has certainly softened.”
But, Beadle is happy – November 2006 going down as one of their best years yet.
“There is a lot going on – particularly in the $400,000 to $600,000 bracket.”
Tauranga offers good opportunity for rental investment, according to Beadle. With a management pool of 1200, he says Bayleys have people willing to pay between $400 and $500 per week.
“The rental market is quite strong – not so much at the lower end, more the mid to upper end.”
Bonds lodged with the Department of Building and Housing in the year ending June 2006 were down 202 in Tauranga at 5615, but marginally up in WBOP at 1136 – up 15 from the previous year.
Beadle says British migrant renters are actively targeted by Bayleys. Added to the mix are South Africans and a growing number of Canadians. Upmarket areas such as Tuihana at Papamoa will gain rents around $400. Bayfair estate is popular, with average rents around $300-$350. At the lower end – in parts of Greerton, the Mount and Papamoa, basic three bedroom homes rent from $270 to $300. There’s a ready clientele looking to rent, says Beadle – further indicators of Western Bay’s magnet appeal.
“Tauranga has always been an economic island. People see the future of the place as strong. It tends to out outperform other areas.”
SIDEBAR
Rental investment still one of the best
Rental specialist William Mathewson of Mathewson Real Estate Papamoa Ltd has seen a shift in market trends during the past six to eight months. Working from his base at Ray White Rentals Papamoa, he has watched development and values soar dramatically along the coastline in the past four years. However, in line with that development, there have been the inevitable cyclical changes.
Sitting on the executive of the Real Estate Institute property management specialists, representing Western Bay of Plenty from Katikati to Te Puke, Mathewson says the tide has turned and stock numbers are down. Various factors influence trends – key among them affordability.
He makes no bones when crunching numbers with property investors looking for top dollar return.
“My criterion is that rent should be no more than 35% of someone’s income. “People cannot afford 40 to 50% of their income.”
And while he says some will receive Government assistance, he’s pragmatic when conceding that, in some ways, returns are marginal – a seeming contradiction from someone whose sole focus is rental and property management.
Average incomes aren’t anywhere near the $45,000 to $50,000 benchmark Mathewson says is required if people have high rental expectations. New council rating valuations raise questions of rent reviews. However, he says there are two schools of thought on this issue.
“One: rental returns are based on the original purchase price plus improvements. The second school of thought is perceived rent on the current value. I’m not a fan of that.”
By yesterday’s standards, returns are not as spicy, when Mathewson says a $100,000 property would attract $180 – a 9% return. On today’s average house of $350,000 and weekly rental of $325 the return is 4.6%.
Despite that, William is a fervent bricks and mortar man – and business confirms investors think so too.
“Rentals are increasing every year – rents range from $180 to $600, averaging $280. New rentals are around $300 to $320.”
Areas vary and it’s horses for courses, according to Mathewson, but his philosophy doesn’t waiver. It hinges on choosing the right tenants and sticking to rent criteria.
“It’s why a lot of property investors come unstuck. They haven’t geared themselves sufficiently to choose the right tenant. They’re too focused on the dollar.”
As interest rates rise – and values rise, William believes there is caution in the marketplace.
“It’s coupled with price, coupled with interest rates, coupled with job creation.”
But, he maintains rental property is one of the best investments people can make – to be considered long term, not short term.
“You can drive by it, touch it, look at it – and say that’s mine. OK, the bank might own it – but you can still say that’s mine.”
SIDEBAR
First development under SmartGrowth
Tauranga’s face of SmartGrowth is emerging 6km southwest of Tauranga’s CBD – linked via the city’s expressway network.
The Lakes is an ambitious development that cut a three to five-year process into 15 months from inception to approval – one that represents probably the largest town planning change undertaken in New Zealand
A total 254ha of farmland was rezoned residential – two thirds within Western Bay of Plenty jurisdiction and the remainder in Tauranga City. The process also involved EBOP and Transit New Zealand with the block bordering SH29 and 4.6kms of road extending Route K’s expressway through the development to Pyes Pa and Rotorua.
The Lakes comprises 2081 sites – mixed residential sites, lifestyle blocks plus 2ha for commercial development. When finished in around eight years it will be home to around 7000 residents – a town the size of Te Puke.
The Lakes fulfils SmartGrowth’s ‘live, work, play’ philosophy – its key being extensive parks, reserves, playgrounds, walkways, cycleways and lakes – 22 in total, among them water suitable for boating.
Uptake has been strong – with stage one’s 71 sites all but sold and prices starting at $175,000 for sites around 550sqm. Stages 2 and 3 are in equal demand – offering mixed medium to larger sites and prices also starting at $175,000.
Landscaping is a crucial aspect – designed around TCC’s principle of crime prevention through environment design. And public transport will be in place from day one – linking to Tauranga’s CBD on the region’s Hopper bus service.
Collaboration is the critical element of The Lakes success – from Grasshopper Properties’ visionary forethought through to consultation, planning and design. The development
has been acknowledged by the Resource Management Law Association and the Planning Institute Association of Consulting Engineers.
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