TelferYoung (Canterbury) Limited
Canterbury Newsletter - January 2005
1 January 2005
Summer 2004 Newsletter
2004 City Rating Values Released
The Christchurch City Council has recently released the rating valuation roll for the city. There are two questions which arise:
How does my rating value compare to the current market value?
- We cannot emphasise strongly enough that the values are assessed for rating purposes only, on a mass appraisal basis and normally without full property inspections being done. By definition they do not represent an assessment of the current market value. We have already seen significant variations between the new rating values and sale prices. It is our view that in some areas the rating values are optimistic - Simply, vendors, purchasers and lenders should not rely on the rating values.
How does the rating value affect my rates?
- Rates may increase if your rating value has increased at an above average amount when compared to other similar types of property. So if your value increases at a level consistent with other similar properties in the area, the increased rating value will have little affect on the rates you pay. Your rates may still increase if the Council has a requirement for more funds to manage the city.
Peripheral Land Values Rocketing
Never before has peripheral rural land been in such high demand and commanded such premiums as we have seen over 2003/2004. Prices of up to $100,000 per hectare for development blocks and up to $800,000 for the traditional well located vacant 10 acre block are not unusual parameters in the current market. The flow on effect is an upward shift in values for all lifestyle properties within commuting distance of Christchurch.
Significant factors are the positive population growth, the necessity to 'expand' the metropolitan area of Christchurch and the recognition nationally and globally that Christchurch is a very desirable City in which to live.
Historically peripheral blocks were more 'affordable' and purchased as lifestyle entities. The above factors have now attracted a variety of purchasers with 'development and profit' being the motive for purchase as opposed to the traditional 'lifestyle' motive. Dominant participants in the market are the traditional 'subdivision developers'. Off shore buyers with specific alternative development proposals have also entered the market. A number of 'investor' buyers are certainly being attracted to the market for land banking.
They perceive good future development opportunities often hastened by obtaining a zone change.
The high prices now being achieved prevents most traditional life stylers from entering the market. This sector of the market has been forced to invest in areas further from the city.
The most significant premiums are likely to be paid for holdings adjoining residential or industrial land where future rezoning is almost a certainty for the continued expansion of Christchurch.
Industrial/Commercial Market
The commercial/industrial investment market has been particularly active during 2004 with very strong demand for investment property. Investment purchasers have been active in all sectors of the market including:
- Central city office
- Central city retail
- Suburban retail
- Central city industrial
- Suburban industrial
The very strong demand for investment property coupled with the limited supply placed considerable pressure on investment yields and prime investment yields are now at low levels with many prime properties selling for below 8.0%.
We have recorded a sale in each of the above categories which demonstrate the relatively low yields now prevalent.
303 Durham Street
This property was reported to have sold recently for $1,006,000 which would indicate a yield of 7.74%.
230 High Street
This central city retail tenancy sold in April 2004 for $997,500 indicating a yield of 8.36%.
70-72 Riccarton Road
This property has four tenants and sold by public tender in May 2004 for $2,940,000 indicating a yield of 7.97%.
8-12 Iversen Terrace
This central city industrial property sold in February for $2,125,000 a yield of 9.07%.
33 Birmingham Drive
A suburban industrial property which sold in August 2004 for $2,100,000 indicating a return of 7.61%.
Residential
Despite increasing interest rates and some downward pressure applied by the media we believe that the residential property market is tracking quite nicely. The market has obviously levelled off and the feeding frenzy which was apparent earlier in the year has now gone. The upper end of the market however is still quite buoyant although it would appear that the lower end and the "investment" market has softened somewhat having been successfully "talked down" by Dr Bollard.
The rental market has also softened slightly and it has been some time since For Rent signs have been seen on suburban properties.
Overall we see the market levelling somewhat and we would also comment that the Christchurch market in particular is not known for its volatility and we do not anticipate a reduction in property values to any great extent in the next twelve months.
Seasons Greetings
We take this opportunity to wish you and your families a Merry Xmas and a Happy New Year.
Back issues of the newsletter can be obtained from TelferYoung (Canterbury) Ltd
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47 Cathedral Square,
PO Box 2532,
Christchurch,
New Zealand.
Telephone: 03 379 7960,
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Email: telferyoung@canterbury.telferyoung.com
+ John Ryan + John Tappenden + Mark Dunbar + Chris Stanley + Mark Beatson + Ian Telfer + Victoria Murdoch + Damian Kennedy
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.