TelferYoung (Hawkes Bay) Limited
Current | 2008 | 2007 | 2006 | 2005
Hawkes Bay Newsletter - December 2006
5 December 2006
Welcome to our December 2006 newsletter.
Introduction
This year has been characterised by lower buyer demand in most sectors, some softening in value levels but continued sound levels of confidence.
While the market now appears to be in the midst of a period of adjustment and consolidation, we are not anticipating any major realignment in values, particularly in view of some of the underpinning forces.
We are interested in feedback on the service we provide to our clients and to this end we have been conducting a client survey. Thanks to those who have participated. We appreciate the time that completing surveys take and in recognition of this, we have been running a lucky draw. The winner of our one dozen wine prize is Godfrey Watson.
We invite you to read the following overview of the market and to contact us with any property specific queries you may have.
Pastoral Market
Recent noises from the traps indicate a general feeling of an easing in rural farming values, the result of decreasing farm profitability over the last few years. An adjustment in the market has been anticipated but this was also the case 12 months ago, however sales in early 2006 remained strong.
The property market is now global and farm profitability is only one factor affecting farm values. Though values may come under pressure, we would not expect to see major adjustments in value from present levels. However there are several interesting listings currently available and the resulting sales will be of interest.
Recent sales of note include:-
- Ellis Wallace Road, Eskdale - 720 hectares. Sold in November for $5,020,000 or $820.00 per stock unit.
- Ugly Hill Road, Central Hawkes Bay - 404 hectares. Sold in October for $2,800,000 or $622.00 per stock unit.
- Matheson Road, Tikokino - 308 hectares. Sold in August for $2,325,000. Approximately $690.00 per stock unit
- Blackburn Road, Onga Onga - 223 hectares. Sold in August for $2,300,000 or $718.00 per stock unit.
- Dasent Road, Maraekakaho - 261 hectares. Sold in June for $3,000,000 or approximately $1,000 per stock unit.
Horticulture Market
The final payouts for last season's fruit are being firmed up at present with returns up on the previous season. Based on the best information we have at present it appears that the average price per export carton, across the main varieties will be around the $24 to $25 mark.
There have been a number of sales since our last newsletter with the previously mentioned trends being an ongoing feature, i.e purchases for lifestyle reasons and existing growers looking for economies of scale.
The market value of the productive portion of orchards is showing a lift in line with higher forecast returns. Productive land and tree values have lifted to within a range of $60,000 to $70,000 per hectare. This is still some way off the peak of 2003/2004 where some sales were up to the $80,000 per hectare level.
Industrial Market
The demand for both vacant and improved industrial property appears to have remained steady in recent months. We believe there are two pending sales of vacant industrial sites in secondary locations in the Onekawa area, one proposed to sell at $150.00 per square metre with the other of a slightly larger area at $160.00 per square metre. There appears to be continuing strong interest for industrial land within the traditional industrial locations of Hastings, and we are aware of a recent sale of a smaller improved industrial workshop property located in a secondary area of Hastings which sold for $350,000 on a vacant possession basis.
A smaller basic workshop structure in the Onekawa industrial area has recently sold at $260,000, this property having a land area of only 359 square metres. A more substantial and quite specialised building on a prominent corner site in Onekawa recently sold by Bayleys at auction for $702,000. This property was subject to a five year unexpired lease term with net return on sale price showing 8.4%.
A substantial and relatively specialised industrial property in Napier recently sold for $2,900,000. This property is subject to a fifteen year lease from 2006 and indicates a net yield on sale price of 8.1%.
Very recently an industrial building subject to a small number of tenancies and situated in Havelock North sold by Collier's tender in excess of $1.2 million.
Commercial Market
The commercial property sector continues to experience strong demand but only moderate activity as investors find it harder to find investment opportunities that warrant their attention.
As a consequence of the period of strong national and local economic conditions rental increases and lowering yields have been providing appreciation in commercial property values of some significance.
The investment property market in New Zealand continues to experience a flood of money coming from Australia with institutional investors seeking opportunities within the main centres which leads to the displacement of main centre investors into provincial areas and consequent competition with the local investors.
Recent commercial yields on retail type property within the Napier market have fallen between 5.70% net and 8.18% net with suburban shops in Onekawa and Taradale featuring around 7.0% and below.
It should be remembered that in 2001 yields for commercial property within the Napier district were generally between 9.75% and 11.50% with an 'outstanding sale' in Taradale in January 2001 showing a yield of 9.07%. Recent Napier sales of interest include:-
- Taradale Medical Centre - 9/06 - $1,200,000 - 7.83% yield
- Onekawa Pharmacy - 10/06 - $380,000 - 7.18% yield
- Surf 2 Earth, Taradale -10/06 - $430,000 - 5.70% yield
Large format retail has continued to attract developers in Carlyle Street with the former 'Shell Carlyle Street' site having sold for $950,000 pending redevelopment to two units while the former 'Gleeson's Motor Supplies' sold for $1,003,000 also for redevelopment to two units. Both these sites have building improvements suitable for use in the new development.
The new development of the Mitre 10 Mega Store and the roundabout on Prebensen Drive have enhanced that locality and the consequent sale of the Mitre 10 properties in Taradale and central Napier present opportunities for new players or developments on those sites. The sale of the properties with vacant possession at auction in October saw bidding being 'sluggish' compared to that which could have been expected with the properties being tenanted. This along with the somewhat 'soft' price for the 'Shell Carlyle Street' site may be suggesting some fall off in development interest in the market.
In Hastings a central city block of three ground floor retail tenancies with an upper floor club/gymnasium premises sold in September 2006 at 230 Heretaunga Street West for $1,190,000 showing an 8.15% yield on existing rentals.
TelferYoung believe that the recent appreciation in market values is sustainable on the basis of the huge volume of funds still seeking placement globally in the property sector.
Residential Market
The residential property market in Napier has seen a continuation of the pattern established in early 2006 where prices across most price brackets have flattened with some properties remaining on the market for extended periods. The last quarter of 2006 saw an upsurge in residential activity following a very quiet start to the year.
Some properties within the upper medium price bracket (generally between $350,000 and $450,000) have been coming under some downward price pressure from purchasers wishing to move into new dwellings within modern subdivisions in Napier. In the lower price bracket (below say $275,000), residential investors are not showing significant enthusiasm to buy, this being a combination of higher interest rates and subdued capital growth prospects in future years.
The upper price bracket has been impacted by three new apartment developments competing with existing high priced residential housing already on the market. As these apartment developments are completed or are near completion, anyone who purchased an apartment off the plans or prior to completion looking to on-sell with the prospect of a short-term capital gain will hopefully have taken into consideration the increase in supply of apartments on the Napier market, at this time. The effect on apartment values will become evident in the next 6-12 months as re-sales begin to take place.
In summary, we expect the residential sector to remain relatively active in the short term leading into Autumn 2007, though prices are not expected to show any upward movement in this period.
Back issues of the newsletter can be obtained from TelferYoung (Hawkes Bay) Ltd
email: telferyoung@hawkesbay.telferyoung.com
+ Max Plested + Mike Penrose + Trevor Kitchin + Derek Devane + Andrew White + Andrew Chambers + Hugh Peterson + Kayan Ho + Mark Apperley
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.