TelferYoung (Hawkes Bay) Limited
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Hawkes Bay Newsletter - April 2007
30 April 2007
This year is shaping up to be an interesting one for the property market.
Introduction
After a prolonged period of relative stability, the Reserve Bank has acted aggressively to substantially lift interest rates in an attempt to dampen inflationary pressures, particularly within the residential sector. Further interest rate rises have been signalled and economists are split in their views as to what the impact of these and tightening economic conditions may be on the property sector.
We advise caution and recommend that you seek valuation advice in respect of property related decisions.
We hope you enjoy this newsletter.
New Premises
We are currently completing a fitout of our new premises on Pandora Road. We anticipate a move by early June. The new site will offer easy access to our clients and modern convenient layout for our staff. Once we have moved, feel free to call in and have a look.
Our contact details will be unchanged. The physical address is 25 Pandora Road, located between Stephen Hill Motors and Firth Industries.
Pastoral Market
Our newsletter in December indicated a feeling of a general easing in rural farm values and while this sentiment continues, adjustments to date seem to have been modest. Nevertheless issues that were facing the rural sector in December still remain, these including a strong New Zealand dollar and relatively high interest rates. However, while there appears to be pressure on some product prices, others have good outlooks.
We would anticipate the market will continue to show some caution but would be surprised to see major movements in the near future.
Some recent sales of note include:-
Tait Road, Maraekakaho - 130 hectares. Sold in January for $1,500,000 or approximately $990.00 per stock unit.
Mangatarata Road, Central Hawkes Bay - 505 hectares. Sold in March for $4,700,000 or approximately $870.00 per stock unit.
Kaiwaka Road, Kaiwaka - 202 hectares. Sold January 2007 for $2,100,000 or approximately $950.00 per stock unit.
Rural Lifestyle Market
The rural lifestyle market is moving steadily. There is a large supply of good quality and well set up vacant lots in the Bay View area with these generally saleable in the upper price bracket in excess of $350,000. Although there have been some strong sales in excess of $500,000 for lots with spectacular views, there is a relatively limited number of purchasers in this market and while sales are likely to continue at a steady rate, supply will meet demand for some time yet.
Improved lifestyle blocks are selling at relatively good levels and particularly so for properties that offer some income options. The more outlying smaller rural lifestyle holdings are likely to come under increasing downward price pressure, with limited demand and increasing fuel costs impacting on their desirability.
Nevertheless there is reasonably steady demand for improved properties ranging from 4 hectare lots in the Meeanee area through to 1.5 hectare holdings in the Poraiti or Bay View area with these sales generally occurring at a steady level.
Recent sales of note include:
Holt Road , Bayview - 4 hectares. Sold in February 2007 for $911,000
Ellis Wallace Road -11 hectares. Sold in February 2007 for $1,275,000
Horticulture Market
The horticultural property market remains steady with market activity reflective of other property sectors with lower sales volume but values holding. Values have remained steady and have lifted slightly on the back of better returns. Productive orchard values are up slightly from our last newsletter. Our analysis indicates that tree and productive land values have lifted to the $70,000 per hectare mark. There have been two sales of note, ENZA have purchased a large scale orchard and packhouse operation and a 28 hectare orchard on Trotter Road sold for $3,250,000.
The high value of the New Zealand dollar remains the main constraint on higher returns for growers. We have had a very favourable growing season with good sized fruit and a larger crop than initially predicted. We are now nearing the end of the production phase and await the final payouts for the 2007 season. We anticipate the market values for orchard properties to remain steady in the short to medium future.
Industrial/Commercial Market
Demand for developed industrial space and bare industrial land appears to have eased a little from the very high levels experienced in 2005 and 2006. There is however still a good level of interest, including that from outside the region for existing space, especially with profile to the busier roads.
We are aware of a new industrial buildings presently under construction and in the planning stages in both Napier and Hastings, so activity in the industrial sector looks set to continue in the medium term.
Rental rates for industrial space on review are still showing solid increases over levels set two and three years ago, this being due in part to the present low vacancy rates and continuing increases in building and compliance costs.
There is a pending sale of a vacant rear industrial site in Omahu Road, Hastings at around $137.00 per square metre for an area slightly in excess of 4000 square metres, and a vacant site situated in Austin Street, Napier recently sold at auction for $835,000, containing a land area of 5785 square metres and of an irregular shape. The sale analyses to $144.00 per square metre overall or could be further analysed to the front 1163 square metres at $201.30 per square metre with the rear 4622 square metres at $130.00 per square metre.
The investment market however remains strong with a 3214 square metre site in Onekawa accommodating a modern workshop building recently sold, with vacant possession for $770,000, this sale showing a 7.86% net yield on our assessment of market rent. A small warehouse unit in a secondary location in Onekawa recently sold with vacant possession for $270,000, this sale showing a net yield of 7.55% on our assessment of market rental, while a new development with ten year lease and a CPI rental review clause is under contract on the basis of a yield slightly below 7.00%.
In the commercial sector occupancy levels continue to be strong on the back of continuing good economic conditions.
The redevelopment of the Mitre 10 store in Taradale is moving through the planning and consent stages with one tenancy leased and the other two under negotiation and looking positive at good rental levels.
On the investment scene, the demand in this sector also continues at strong levels with the Mastertrade development on Karamu Road, Hastings having sold this month in the $4.0 million plus price bracket.
Of major interest currently within the market is the proposed sale of the British American Tobacco site at Ahuriri involving a total land area of approximately 4.6315 hectares over 33 separate freehold titles all of which, with the exception of the bond store (which is being leased back by BAT) are for sale with vacant possession and contain approximately 38,200 square metres of accommodation. The 'National Tobacco Company' building part of the site comprises one of the 'flagship icon' Art Deco buildings of Napier City carrying a Category 1 Historic Places classification. The property is for sale either as a single line purchase or as seven individual parcels and is attracting very strong levels of interest.
Residential Market
The first quarter of 2007 has seen improved sale prospects in most price brackets across Napier, compared to a relatively slow period in the latter part of 2006. This is in contrast to a noted lessening of demand for properties which have infill development potential. These have mostly met with significantly less demand than experienced in 2006.
While most regions in New Zealand have seen a steady increase in residential values over the last 12 months, Hawkes Bay prices have been stable or with modest increases. Those areas showing the greatest rises are mainly where median values are below Hawkes Bay levels.
Early 2007 has been notable for the sale of three residential properties, significantly in excess of $1,000,000, which have occurred in beachfront situations in Napier City.
A large supply of competitively priced new home packages within Napier's newest residential subdivision of Parklands have impacted on the saleability of existing houses in the $350,000 to $450,000 price bracket.
Residential investment blocks and complexes of residential flats have been popular within recent months, these having recently been able to generate higher rental returns with yields for smaller tidy blocks of flats now in the range of 5.5 to 7.1%.
An investment block of 10 units recently sold on Marine Parade for $1,555,000, reflecting 4.03% yield on existing rents. However with the prospect of increasing interest rates from the Reserve Bank and limited capital appreciation over the last 12 months, yields may increase to reflect the additional risk.
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.