Upper Hutt - on the up for investors
Beautiful parks and reserves, a handy commute to Wellington, and fantastic value-for-money property, Upper Hutt is an ideal place to raise a family or buy an investment property. With high yields, solidly-built properties and strong tenant demand, property investors will find plenty to love here.
Monday, February 2nd 2015, 12:00AM
by Amy Hamilton-Chadwick
While the first half of 2014 was flat for both sales and rents, the latter part of the year saw prices stabilise and tenant demand take a jump.
The Reserve Bank's loan-to-value restrictions are working in the investor's favour: first-home buyers aren't competing with investors for affordable family homes, and they're renting for longer as they save for a deposit.
The lack of first-home buyers has also contributed to Upper Hutt's affordable prices, Graeme Collinge, manager of Harcourts Upper Hutt, says.
Without those buyers, homeowners wanting to upgrade to a bigger second home can't make a move.
"It's clogging up the market; you can't move up the ladder if the first rung is missing," Collinge says.
Not great news for homeowners, but investors can make the most of stagnant house prices and cash in on rising rents, while interest rates remain low.
Perfect time
Mark Coffey, owner of Tommys Real Estate in Upper Hutt and Lower Hutt, says it's the perfect time to invest in Upper Hutt.
"There's never been a better time to get into the market,” Coffey says. “There are so many good things about Upper Hutt. Despite the fact that the prices are 10% lower than Lower Hutt, the demographics are very much the same – there are plenty of good tenants."
Business is brisk for property managers, who are able to fill vacancies more easily than they’ve done since 2007, Debbie Bentley, franchise owner of Ray White Upper Hutt, says. “Rentals are fantastic. When someone moves out we put the rent up by $20 and it rents straight away."
What to buy
For excellent yields, Bentley recommends two-bedroom units. Recently her clients have been able to pick up two-bedroom units with a garage or car port for around $180,000, which will rent for $260 a week, providing an impressive off-the-shelf yield of 7.5%.
Another option for investors is the traditional three-bedroom standalone house. You can buy a well-constructed three-bedroom family home for around $300,000 in Upper Hutt. Look for properties with plenty of sun, a garage, and good heating, advises Karen Stevens-Bevan, property manager at Oxygen Upper Hutt. There is significant demand for properties which allow pets, adds Stevens-Bevan. Any owner who will accept a tenant with a dog will find it easy to rent out their property and can command a slightly higher rent, she says.
The most desirable rentals are those with the shortest commute to Wellington. For this reason, the more northern suburbs are a fraction cheaper to buy and rent. The city centre is a good place to buy, as are Trentham (highly recommended), Totara Park, Maoribank and Te Marua. Local experts note that Timberlea is an area to avoid for homeowners and investors alike.
"You could get a low-maintenance 1970s home in Totara park for around $300,000 – that's an area with a good middle-class socio-economic mix," Coffey says. "Or you could get something similar in Trentham for the mid-$300,000s, which is handy to the motorway for the commute.
“A three-bedroom home will rent for about $370 a week, typically to a young couple with one or two kids."
Collinge had previously sold his rental properties, but conditions have been so favourable in Upper Hutt that he has recently purchased a three-bedroom rental property for under $300,000. He says the rent has covered the mortgage from day one, and he plans to buy more similar properties this year to build up his portfolio.
"There are good bargains around and good solid homes in Upper Hutt," says Collinge. "You get a lot of bang for your buck and there's strong demand from tenants across the whole range. For a 1960's solid weatherboard house, the rent ranges from $240 to $340 a week for two-bedroom homes, $290 to $400 for three bedrooms, and $490 to $560 for five bedrooms."
Economic incentives
Many Upper Hutt residents commute daily to jobs in Wellington, allowing the maximum income and the most house for their dollar. Although this works well for many, more jobs are needed in Upper Hutt. Hopefully, with a new emphasis on economic development, residents could soon be finding work even closer to home.
Last year was something of a pivotal point for Upper Hutt’s economy. The 2012 Business and Economic Research Limited (BERL) rankings revealed Upper Hutt’s economy was under-performing, but the Upper Hutt City Council reacted swiftly, allocating $4 million for economic development.
“The BERL report was pretty damning, but since I joined the council 12 months ago, we’ve seen positive changes that have been the byproduct of the stimulus package,” economic development manager Phil Gorman says.
“We have two craft brewers here [they like Upper Hutt's soft water], and they have tripled in size in the last 12 months. The South Pacific Industrial Park has 35 different diverse businesses. A new subdivision of 700 houses is going in adjacent to Trentham Racecourse. We’re fielding calls all the time – there’s plenty of opportunity here.”
Looking ahead
If Upper Hutt succeeds in drawing new business and creating new jobs, that could transform the local housing market. In the meantime, though, the city's yields and well-built houses are the major drawcards. Collinge forecasts price rises this year, but Coffey believes that while statistics have been showing higher values, these are usually dragged up by a small number of top-end sales and don't reflect the flat state of the more affordable end of the market.
Well-positioned
At the moment, Upper Hutt's main attraction is its proximity to Wellington and the Wairarapa. But as it becomes an appealing location in its own right, it stands well-positioned to grow into a thriving city that is sought-after by families.
"I've lived in Upper Hutt all my life," Gorman says.
"I spent 20 years working on Lambton Quay, and I like Upper Hutt because it’s away from the hustle and bustle. It's fantastic for bringing up a family, it's 10 minutes to river, parks and reserves, and now my commute takes 45 seconds. I think we take it for granted. Upper Hutt is becoming more and more of a destination."
Continuing growth in rents, however, is a strong likelihood. Bentley feels confident that she will be able to continue putting up rents as properties vacate, and says she expects high tenant demand to remain as long as LVR restrictions keep first-home buyers in rented accommodation. She suggests those people should get onto the ladder any way they can. Bentley's property portfolio is proof of a successful Upper Hutt investment.
"Am I happy with my rentals? Absolutely,” Bentley says. "I've subdivided and built houses, I've hung on to a couple; it's definitely a good market and a good place to put your money. Even younger couples could afford a two-bedroom unit. They should just buy a unit and rent that out. Then they're in the market."
STATSHOT: UPPER HUTT
• The population of Upper Hutt at the most recent Census was 40,179, up 4.6% from 2006.
• The population is projected to grow by up to 11% by 2021; up to around 45,600 residents.
• There are 16,056 dwellings in Upper Hutt; 72.1% of households own their dwelling (or hold it in a family trust), higher than the national rate of 64.8%.
• A 2012 BERL report concluded that an additional 3,900 dwellings will be required by 2021.
• The top industry is wholesale and retail trade, accounting for just under a quarter of the city’s gross domestic product.
• Upper Hutt relies less on the primary industries than any other part of New Zealand, bringing in just 1% of GDP.
• Upper Hutt is home to more than 70% of all the parks and reserves found across the greater Wellington region.
• A 2012 survey found that 95% of residents felt safe in Upper Hutt all or most of the time, and 98% felt safe in their homes.
NEW PROJECTS FOR UPPER HUTT
• Construction is scheduled to start this month on a new $3.5 million train station. It will open in 2016, creating a more modern and appealing transport hub for the centre of the city.
• The Wellington Regional Council has released a draft flood protection plan for the Hutt River Floodplain. The Hutt River has a history of flooding; it is estimated that 70,000 people live on the floodplain, and assets worth $6 billion are at risk if a major flood occurs. The project will will cost $10 million and take 10 years to complete.
• A new landmark will welcome visitors to Upper Hutt: A giant fantail sculpture. The six metre by 14 metre metal sculpture will be installed on State Highway 1 at Silverstream, and will represent the tail feathers of fantail.
• Around $4.2 million is being spent on cycling and walking paths around Upper Hutt.
Sources: Statistics New Zealand, Upper Hutt City Council, The Hutt Leader, Greater Wellington Regional Council.
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