TelferYoung (Auckland) Limited
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Auckland Newsletter - June 08
2 July 2008
Welcome to the TelferYoung (Auckland) Ltd June 2008 Newsletter
The Housing Market
The annual REINZ medium sale price in January 2008 (as noted in the attached graph) and subsequent monthly statistics for in 2008 have confirmed that prices are falling in Auckland in 2008. The number of houses for sale has risen, the number of days for a house to sell is increasing and the number of sales has halved. In our opinion values have already fallen around 10% and a further decline is possible. We note that this is a generalisation of the market and not all areas and price brackets will suffer at the same time or by the same amount.
The Barfoot & Thompson annual average sale price, as recently published, shows that since 1968 there has been only 4 periods when the market has levelled following sustained periods of growth and these coincided with world crisis events. This time, it appears the sub prime mortgage market collapse in the USA, rising inflation and the tightening mortgage lending criteria following the collapse of second tier lenders in NZ have initiated this market slowdown.
Property is a long-term asset, and it should be viewed as such. The attached graphs show that both the top 50 companies (NZX50) and property have achieved similar gains over the period 2000 to 2007, but are declining in 2008. Most financial investors take a long-term view to shares and property investment is no different. If this approach is taken, is this not the time to leverage downwards in a company and the time to buy further property? This year and 2009 will offer opportunities to purchase properties at discounted values.
Auckland City - Plan Change 163
Auckland City Council has recently amended the District Plan (Isthmus Section) to "protect houses built prior to 1940 where they significantly contribute to the special character of the streetscape".
The plan change states that either substantial or total demolition or removal of a house/building in a Residential 1 or 2 zone is now a controlled activity and therefore you must apply to Council, being a notified consent process. Previously, you could demolish your home ‘as of right' in these zones. The new rules apply to more than 16,000 homes within the heritage suburbs of mainly inner Auckland City.
We note that there have been a number of applications arising seeking demolition, which have sparked interest in the community. A house at 18 Ronaki Road Mission Bay, a 1935 English cottage-style home, was allowed to be demolished as council planners found "there will be no more than minor adverse character effects from the proposal", and as the new rules were in the early stages of statutory process little weight could be given to them.
Further, 26 Ronaki Road, is a period style house, where Council decided that demolition would not 
lessen the heritage value of the city's special character as it had been substantially reconstructed since 1940 and little of the original cottage remained.
In April this year, another application was publicised, being an early villa at 51 Summer Street, Ponsonby. The applicant has applied for resource consent to demolish the house and replace it with 3 replica two-storey "workers" cottages. The villa was already converted into 5 flats and there is little of the original interior left intact. No decision by Council has been made to date.
We advise clients to take this plan change seriously, and as more cases like Summer Street are tested, a clear picture will emerge as to the approach Council will take on cases put before them.
The Commercial Market
As interest rates have climbed, it would be expected that yield rates on industrial/commercial property would soften (increase). But it appears for those properties, which are considered ‘prime' this has not been the case. Three examples in 2008 are:
- Botany Downs, Manukau - a stand alone retail property sold for $2,300,000 being a yield of 6.5% with a 12-year lease in place to KFC, which commenced in 2001.
- 26 Queen Street, Auckland City - a retail property sold for $1,950,000 being a yield of 6.5% with a 14-year lease in place to the Jade Factory, which commenced in 2002.
- 9 High Street, Auckland City, - a multi tenanted refurbished character office building sold for $4,450,000 being a yield of 6.4%.
Yield rates for ‘Secondary Properties' that is those properties which, do not have an excellent tenant or location, have or will soften (increase). It appears to be generally agreed in the industry that this softening at this stage is limited to between 0.5% and 1.0% on what might have been expected in say 2006/2007.
Auckland City Proposed District Plan 2010 - Isthmus Section Source: Auckland City Council
If you are intending to seek changes to the zoning or the development controls of a property you own, within the Auckland City Council boundaries, be aware that the Auckland District Plan is due for review in 2010. Later this year, Council will run public meetings detailing in very broad terms "area plans". This is the first public consultation process and the dates for these will be published on their web site later this year. Following this and any feedback from the public, the first draft of the district plan will be issued. There will be further opportunities to offer submissions during the issue of draft plans throughout 2009. Dependant on the scale of any changes you wish to submit, it may be appropriate to engage the services of a professional planner.
Back issues of the newsletter can be obtained from TelferYoung (Auckland) Ltd
Phone: 379 8956
Fax: 309 5443
PO Box 5533
Auckland
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+ Evan Gamby + Lewis Esplin + Trevor Walker + Ian Delbridge + Dave Regal + Phil White + Regan Johns + Glenn Dyer + Bob Hawke + Weston Kerr + Patrick Beasley + Nick Thompson + Matthew Straka + Mark Maginness
Opinions expressed in this newsletter are of a general nature and should be used as a guide only. TelferYoung should be consulted before acting on this information.