Taranaki: Under the mountain
Taranaki offers landlords a broad pool of renters, and cheaper property than many other parts of the country as Karen Clark discovers.
Monday, September 3rd 2007, 12:00AM
by The Landlord
Taranaki is well known as a surfing mecca and home of the majestic Mt Taranaki.
Locals – who affectionately refer to their patch as The Naki – boast of its recreational opportunities, saying they can whip up the mountain for a ski and half an hour later be riding waves on one of the surf breaks lining the coast.
They’re also proud of its arts and cultural attractions, such as the biennial WOMAD music, art and dance festival, and the 45m-high ‘wind wand’ sculpture on New Plymouth’s foreshore.
But to the residential property investor the region offers more than just lifestyle appeal – it also has relatively affordable housing and a steady supply of tenants.
Taranaki lies on the North Island’s west coast, extending from Mokau in the north to Waitotara in the south, Cape Egmont in the west, and to the east of Whangamomona.
At the 2006 Census the region had a population of 104,124, with nearly half of the population (45,228) living in New Plymouth. Other main centres are Stratford, 40km south of New Plymouth, and Hawera, another 30km further south.
Key drivers of the regional economy are dairy farming, the oil, gas and petrochemical industries, and the manufacturing and engineering sectors, all of which have been reasonably buoyant recently.
Major new developments in the oil and gas sector include the Pohukura offshore gas field in northern Taranaki, the Kupe offshore gas field in southern Taranaki, and the Tui offshore oil field. Various exploration projects are also planned or underway.
Until recently, the region’s economy has been growing at a faster rate than the national economy.
That growth has now tapered off – the National Bank’s survey on regional economies shows that in the year ended March, Taranaki’s growth rate fell to 2%, which was below the national average for the first time since June 2004.
However, employment levels remain relatively high. The region’s unemployment rate was 3.7% in the March quarter, slightly under the national rate of 3.8%.
As far as housing affordability goes, Taranaki is currently ranked as the fourth most affordable region in the country, according to analysis carried out by Massey University.
Real estate institute figures show that the median house sale price in Taranaki in June was $265,000. While higher than in the neighbouring Manawatu-Wanganui region, it was still well below the national median of $347,500.
New Plymouth’s median in June was $328,000, Stratford’s median was $170,000, and Hawera’s $222,500.
There were 203 house sales in the region, which was similar to last June’s sales of 205.
Real estate agents say that so far it appears that recent hikes in mortgage interest rates haven’t had too much of an impact on Taranaki’s residential property market.
Professionals Beaven Realty principal Steve Beaven says the market is still “very positive. The interest rate rises haven’t affected values, although we’ve noticed a slight drop in sales volumes”.
There’s been a slight increase in the supply of properties too, he says.
Beaven says factors such as the region’s low unemployment rate, sound economy and infrastructure, and the expected record payout to dairy farmers from Fonterra are underpinning the market.
“There are a lot of things happening here that give people the confidence that this is a great place to live and a great place to invest.”
Allied Farmers First National principal officer, Warren Fulljames, has a similar view. “The economy here is quite strong and that has a flow-on effect. If you’ve got money, you spend money,” he says.
He says his agency hasn’t noticed any marked difference in sales activity recently due to interest rate rises, but buyers are taking a little bit longer to make decisions.
Demand has also levelled off at the upper end of the market, although that usually happens at this time of year, he says.
“Demand at the lower, entry level is still strong.”
However, Taranaki Property Investors’ Association president, Bill Thomas, laments that the rise in property prices in the region has made it hard for investors to find good buys.
“It’s very difficult to get a positive cash flow property,” he says.
House prices have more than doubled in the past five years – the region’s median sale price in June 2003 was just $125,000.
Thomas says he managed to find a bargain last year – a 1950s three-bedroom house in Eltham, near Stratford, which he bought for $100,000 and which he is now renting out for $180 a week – but he was just lucky to be in the right place at the right time.
Plus he was prepared to put in the work to bring it up to scratch, stripping and repainting the tatty exterior.
“These days if you want to find good deals you’ve got to go looking for them,” he says.
On a positive note though, Thomas says he’s never found it difficult to get tenants for rentals he owns in Eltham, New Plymouth, and Waitara, 20km north-east of New Plymouth.
“Many tenants stay long term.”
The tenants in the Eltham rental, who work at a local dairy processing plant, are saving up for a deposit on a house and will probably stay for a couple of years, he says.
Harcourts New Plymouth property managers Rodney Lay and Bruce Wallis say there’s currently a steady demand from tenants for rentals in New Plymouth.
The pool of tenants includes people being brought in to work in the dairy, engineering, boat building, and oil and gas industries.
Some of those working in the oil and gas sector are prepared to pay up to $1000 a week for a good quality modern home or upmarket apartment. Most rent for a short term but some are renting for longer periods – Lay knows of one such tenant who has been renting in the city for two years and expects to stay for another two.
However, Lay says that demand for properties at the upper end of the market is “patchy”.
“The strongest demand is for properties renting for up to $320 a week.”
There’s currently a shortage of good quality rentals in this price bracket, he says.
Both Lay and Wallis own residential rentals in New Plymouth themselves, and are members of the Taranaki Property Investors’ Association.
They say they’ve chosen to invest in the city because they know it well, and because they like to keep a close eye on their properties.
But Wallis says in the current environment, it’s difficult to find a rental to buy that stacks up financially.
“I think at the moment a lot of investors have got their hands in their pockets, waiting for the property cycle to turn,” he says.
Valuer Mike Myers, a director of TelferYoung Taranaki, says he’s aware that some residential property investors are selling properties because they’re not getting the returns that they want, due to the rises in both interest rates and property prices.
Some are moving into the commercial sector where they can get better yields, while others are cashing up.
Then there are those coming off fixed term mortgage rates, who are looking at their cash flow turning negative so they’re selling off one or two of their portfolio, he says.
“But the good news for investors is that rents are growing at the moment,” Myers says.
As at June, the median rent for a three-bedroom house in New Plymouth was $285 a week, according to Department of Building and Housing figures.
This was just slightly below the national median for a three-bedroom house of $295 a week.
In Stratford, the median rent for a three-bedroom house was $180 a week and in Hawera it was $220 a week. Wallis says rents have risen in Hawera recently due to the Kupe gas field project.
Myers believes rents in the region will keep rising because of the growing demand for rental accommodation, and a limited supply of new rental stock.
Many of the houses being built in new subdivisions in northern Taranaki are in the $400,000 to $600,000 price range and unlikely to be used as rentals, he says.
He adds that investors are still exploring opportunities in the residential market.
Some are looking at the potential to build additional rental units on their existing rental properties, he says. Others are looking for properties to which they can add value, such as a scruffy house that can be renovated, or a property that has subdivision potential.
Desirable suburbs in New Plymouth
Desirable areas to live in New Plymouth include the central city and the well-established suburbs of Merrilands and Fitzroy.
The older neighbourhoods of Vogeltown and Westown are also popular because they’re relatively close to the city centre.
Properties in the beachside village of Oakura, a 15-minute drive south of the city, are sought-after but also relatively pricey. A humble bach can cost as much as $350,000.
The township of Bell Block, just north-east of New Plymouth, was once considered a less desirable place to live but has rapidly grown in recent years as people employed in industries based there choose to live closer to their workplaces.
New subdivisions in the township have pushed property prices up to similar levels to those in New Plymouth.
An area of land between Bell Block and New Plymouth has been earmarked as having potential for future residential development.
The New Plymouth District Council is currently considering whether to rezone this rural-zoned land, covering about 110ha, to residential.
Housing affordability declines
Housing affordability is declining in Taranaki, in line with a national trend, a recent Massey University home affordability report shows.
In the year to May, the region recorded a 10.6% drop in affordability.
Nationally, affordability fell 11.9% over the same period, as house price rises outstripped wage increases, and mortgage interest rates rose.
The only region to show an improvement in affordability over the 12 months was Central Otago Lakes.
However, Taranaki’s drop in affordability was modest compared with some other regions, and it was ranked the fourth most affordable region in the country, with an index of 77.5% of the national average.
Southland was the most affordable region, with an index of 50.7%, followed by Otago (68.9%) and Manawatu-Wanganui (72.1%).
| « Nelson: Getting it right | OUR VISION YOUR DREAM – The Pacific at Mount Maunganui » |
Special Offers
Commenting is closed
|
|
Printable version |
|
Email to a friend |
