Regional Review: Porirua pulse
Porirua is a diverse and underrated location for investors and tenants alike.
Thursday, August 16th 2012, 12:00AM
by The Landlord
If variety is the spice of life, Porirua is hot.
Once seen as merely a satellite city of Wellington, Porirua is now a diverse and bustling region that draws all types of people and industries.
Around one in 10 people in the Wellington region call Porirua home, and its total population is just over 50,000. Porirua has a strong family focus and tends to operate like a cluster of friendly villages.
Located around the Porirua Harbour, the combination of village atmosphere and beach lifestyle means that residents are passionate about their region.
"Porirua has New Zealand's youngest population, so we are have very family-orientated communities and amenities,” says Porirua Mayor Nick Leggett. “We are only 25 minutes from the Wellington CBD by train or car and almost half our workforce commutes there daily. People are drawn here for the superb outdoor pursuits, diverse and friendly villages, shopping at North City Mall or the MegaCentre - as well as our beautiful harbour. What's more we also have lots of choice in our housing market, be it $200,000 to well over $1 million."
That lower end of the market has always been a drawcard for investors. With a more affordable entry level than Wellington, many of the capital’s residents choose to buy an investment property in Porirua.
“Investors would also be interested to know Porirua City has New Zealand's fourth-highest per capita household income and the lowest crime rate in the Wellington region," says Leggett.
One of the reasons for that low crime rate is perhaps the presence of the Royal New Zealand Police College, where all new recruits spend 19 weeks doing intensive training before graduating as a fully fledge constable. This draws tenants to the area and gives it a reputation for being safe, again adding to the family appeal.
Maori residents make up 21% of Porirua’s population, a higher proportion than the 15% average across New Zealand. Porirua has an even higher number of Pacific Islanders, at 27% of the population, much higher than the 7% national average. This is counter-balanced by lower numbers of European (57%) and Asian (5%) residents compared to the rest of New Zealand (77% and 10% respectively).
While many Porirua residents work in Wellington and the Hutt Valley, around 15,000 work in Porirua itself. The area’s main industry is education, and there is a wide range of schools in addition to the Police College. Again, this helps bring families into the area.
Investors slowly returning
Real estate in the area is also family-focused, with a strong emphasis on three- and four-bedroom standalone homes. Families make up the majority of tenants, and there are many owner-occupied homes. Until recently investors have been conspicuously absent from the Porirua marketplace.
Few investors bought in Porirua between 2008 and 2010, due mainly to the impact of the global economic crisis. Prior to that, as elsewhere, prices had been very high but rents had remained low. The result was that investors “left the market in droves,” says Wayne Keats of ReMax Porirua.
“At the highest point the houses were around $220,000 to $240,000 to buy, and rents were stable at $250 or $260 per week,” says Keats, “so it just didn’t stack up. Then the market adjusted by 10% to 15% and the houses went back to around $200,000, so in the last year or so investors have been coming back into the market.”
Susie Hunt of Quinovic Whitby has seen the same change – she says that while there were more investors back in the boom days, there are still a few smart people “buying away happily”. Her customers have told her that a big factor has been the low interest rates; canny investors have been trying to pick up bargains while the rates remain low.
At Rental Results, Jackie Thomas-Teague’s Lower Hutt property management company, more investors have been looking to list their rentals after recent purchases. But more surprising to Thomas-Teague has been the cold-calling from prospective buyers, hoping to find out whether any Rental Results’ owners have properties for sale. That kind of interest seems to indicate that sales in Porirua are beginning to pick up momentum.
Strategic investment buying
Keats says that he sees many Wellington investors using Porirua to balance out their portfolio. For instance, a couple might have one property in central Wellington which is negative cashflow but for which they expect high capital gains. They will then buy a property in Porirua which will provide the positive cashflow to pay for the shortfall on the Wellington property, but they won’t be banking on a serious appreciation in value on the Porirua property.
In order to secure cashflow positive properties in Porirua, says Keats, investors need to be on the look-out for a bargain. Cannons Creek is the suburb most popular with investors looking for affordable properties, and at present it’s still possible to pick up a property for around the $200,000 mark. You might be wondering what the quality would be, but Keats says that it would typically be a 1960s three-bedroom home in tidy condition, featuring rimu floors, clad in weatherboards and around 90 to 100m2 in size.
“It’ll be a bit draughty and cold, but you can insulate,” he says, adding with a laugh that similar properties in Auckland regularly fetch around $450,000. “I think those Cannons Creek properties have hit the bottom. I think that soon they’ll be going for $210,000 or $215,000.”
Keats has also seen some investors picking up properties as cheaply as $150,000 to $170,000 at mortgagee sales, tidying them up and getting $300 per week in rent; as Keats puts it, “stacking up quite nicely.” He’s even had the odd investor buy a property sight unseen over the last few months.
There are over 3000 Government-owned houses in Porirua and the bulk of them are in Porirua East. Average rent on a three-bedroom house in Porirua East/Waitangirua is $292. Compare this to $394 in Paremata/Mana/Pukerua Bay and you can see that the range is substantial across the suburbs. It runs to the extremes: Hunt says she could find a multi-million-dollar home in Plimmerton which rents for $2,000 per week; a lower-priced two-bedroom flat in Porirua East could cost tenants just one-tenth of that.
Thomas-Teague believes that some of the best buying available at present can be found in Titahi Bay. The suburb boasts beautiful views, but has been unfashionable until quite recently. Now first-home buyers, flush with Kiwisaver funds, are beginning to buy and renovate some of the ex-state houses that overlook the Bay and turning them into lovely modern homes.
“People are starting to see the benefits of Titahi Bay, and they’re still getting houses at good prices,” says Thomas-Teague, herself an investor with an impressive portfolio. “I really regret not buying there 10 years ago.”
However, these houses too are in demand from first-home buyers, who are competing with investors for the same affordable properties. This is driving prices up and Porirua, like most of the country, is suffering from a listings shortage.
“The time of year to sell is spring,” says Keats, “and [first-time] buyers are running around with Kiwisaver money, so you don’t have much choice right now.”
Rents moving up
Prices and rents have been sitting quietly for the last few years following the recession, but are now beginning to nudge upwards, says Hunt.
“In a few cases we have had to reduce rents over the winter to get tenants in, but the mid-level properties have done quite well,” says Hunt. “A good three-bedroom home will rent quite easily, especially if it has good heating. Even at the low end of the market tenants want new modern kitchens and bathrooms, and they will pick ‘new and modern’ over ‘old with character’ every time.”
If she had a choice, Hunt would like more new family homes in Aotea and Whitby to rent out. The suburb is dominated by executive-style houses which sell for around half a million and rent for around $550 per week, although prime properties can fetch up to $585. It’s these smart middle-market houses where the rents are most likely to be rising, while both the top and bottom ends of the market have seen rents remain the same since 2011. For example, a house with rent set at $625 per week had to be reduced to $600 per week to find a tenant, says Hunt, who notes that anything over the $600 a week threshold takes longer to rent.
Thomas-Teague agrees that it’s been a mixed bag over the past year: “Rents are sneaking up in places,” she says. “The market isn’t thriving overall. It’s doing well in some places, and the others will catch up.” She says she’s noticed a few bidding wars over hot properties in the last few months, but adds that this depends on property managers getting the price exactly right. Bidding wars have been the hottest in the previously-less-fashionable suburbs of Wellington, so it’s reasonable to expect some ripple effect out into Porirua.
Tenant demand is still strong, says Keats, particularly in Cannons Creek, where rents have crept up by about $20 per week over the last two years. The experts concur that tenants all want the same features, across the whole market: Warm, dry, comfortable homes with garages and a bit of land. Of course, the same could be said for tenants and homeowners all over New Zealand.
Porirua acts like a cluster of villages, and each village has its own character and style. Prices between these little villages can vary enormously, with rents to match. Any investor considering a Porirua purchase will need to do his or her homework – you could choose cashflow positive in Cannons Creek or capital gains in Plimmerton or all-round performance in Titahi Bay.
In the long-term, though, Porirua should be a no-brainer in terms of improvement. Its close transport links to Wellington, combined with its outstanding sea views, mean that it’s likely to have increasing appeal as rents and prices increase in Wellington.
Thomas-Teague hits the nail on the head: “Don’t be distracted by bad press. Porirua is seriously underrated. People don’t realise how beautiful it is.”
| « Remuera rent rises trump nationwide levels | Turnover down more than expected: RBNZ » |
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