TelferYoung (Nelson) Limited
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Nelson Newsletter - November 2004
1 November 2004
The TelferYoung newsletter or "plus+ equals" as it is to be known, has been adopted by all eight TelferYoung firms as a way of providing our clients and contacts with topical property related information.
We hope that some of it is of interest to the reader. We welcome feedback on the publication and seek suggestions for future topics and articles. NB: It is our intention to provide this newsletter in electronic form unless specifically requested. Therefore, can you please provide your email address to carolyn.nunn@nelson.telferyoung.com
Advise your email address by 17th December 2004 and go in the draw to receive a FREE case of wine for Christmas. If you would prefer to receive our newsletter via post or fax please advise Carolyn Nunn on: Ph: 546-9600, Fax: 546 9186 or E-mail: carolyn.nunn@nelson.telferyoung.com. Alternatively, if you do not want to receive our newsletter again, please contact Carolyn and your name will be deleted from the mail-out.
TelferYoung Nelson offers four experienced registered valuers, who provide expertise in a full range of property valuation and advisory sectors. Ian, Rod, Tony and Bryan, seen below, are ably supported by Carolyn Nunn, Jill Jordan and Margaret Gowans, who will usually greet you at reception or welcome you to TelferYoung on the telephone.
 Ian McKeage |
 Rod Baxendine |
 Tony Gowans |
 Bryan Paul |
The team at TelferYoung welcomed a new valuer on board in June. Bryan Paul joins us with experience in the property and valuation industry dating back to 1978. Bryan was a valuer and director with a Dunedin based valuation and consultancy practice for 13 years from 1985, moving with his family to the Nelson region in 1998. Over the past 6 years Bryan has been engaged in sales, marketing and residential project management with a Richmond based company. His experience in the residential property sector is extensive and we look forward to Bryan being able to bring his particular knowledge to the fore in offering his professional services to you.
Residential Update
Much has been made of the exceptional gains experienced in Nelson/Tasman residential property values compared to the major centres such as Auckland/Wellington/Christchurch. Residential price movements have far outstripped the cities in percentage terms. The region has many significant natural resources. It is blessed with the most sunshine hours in the country and in many ways the gains experienced are due recognition that Nelson has been "found" in the global village. In much the same way Queenstown, Wanaka and Tauranga have been "found" in earlier times. The residential property market is a key indicator of this period of discovery. Now that Nelson is perceived as "out of reach" of ordinary Kiwis, or in other words, is over priced, the speculative element has moved on looking for fresh opportunities - where will it be next? Napier? Taupo? Invercargill? !!!
The current residential market is characterised by a lack of new cash buyers entering the market in the form of new immigrants, ex-pat Kiwis returning or transferees from other centres. All three of these groupings drove the market through 2002 and 2003.
The market has returned to a more traditional or typical pattern of a quiet winter which is expected to be followed by a consistent spring and summer marketing period.
Many home owners who had thoughts of selling to take advantage of the premiums being paid through 2003 have now withdrawn from the market as the perception of a softening in prices influences their thoughts. The reality is that the premium prices being achieved through 2003 were just that - a premium. Such prices cannot be sustained, so a market will return to sustainable levels - some commentators see that as a correction or drop in market values. We suggest that commonsense now prevails and we have, or are returning to, a healthy market place.
Location, presentation and condition have returned to the top of the list of importance when considering buying or selling. We believe that there is an under supply of well located and presented property available at present. Those properties that fulfil the above criteria and are realistically priced, are selling. Conversely, new speculative housing is not generating the market demand or premium prices of 2003 as a greater supply now exists. Prospective purchasers are also aware that builder availability has significantly improved, section availability has increased, section prices have eased and they can genuinely look at building themselves rather than buying. Also, the premiums anticipated for their own homes in 2003, have gone and with interest rate rises likely, most buyers are not prepared to extend existing mortgage commitments.
Our forecast, barring unforeseen world events or local catastrophe, is for a continued period of consolidation in residential property values where these will settle at or about current levels with the exception of those circumstances where a "forced" situation occurs or where a premium is achieved for a unique or one off situation. There will be continuing low activity in the residential investment market and with a continuing strong supply of hillside residential sections in particular, we could experience some easing of prices on those.
Commercial Industrial Property
Investment
There continues to be an unprecedented demand for good quality well leased commercial properties. This has seen a continuation of the capitalization rates, which were experienced towards the end of 2003, in the 7.25% to 8.75% range for commercial and industrial properties. The variation depends on the quality of the lease terms, number of tenancies, location and use. Recent recorded sales include the following:
- 209 Trafalgar Street, Farmers City Centre and Arcade, May 2004, $6,200,000 this comprises the final settlement of a 2003 agreement.
- 10 Church Street, IHC, June 2004, sale and partial lease back, $930,000 showing a return of 7.66% with a short lease back agreement.
- 105 Trafalgar Street, NZI Building, September 2004, $2,250,000, investment showing 7.6%.
- 73 Rutherford Street, Rebel Sports, May 2004, $3,270,000, showing 8.25%.
As stated above these sales continue to relate to the returns that were experienced at the end of 2003.
Rentals
Office rentals continue to fluctuate. Well located, premium fitted out office space, has experienced strong recovery during 2003 and 2004, achieving $150 /m2 for fully fitted premises prior to operating expenses and GST. Second and third level office space has shown only limited growth.
Industrial rentals have stabilised with good quality workshop warehouse rates in the range of $75 to $100 /m2. At the same time we have received an unprecedented demand with respect to land sales and a strong growth especially in the Nayland Road, Stoke areas.
Future
It is difficult to predict the future of the market place when we know that the interest rates are continuing to rise. Historically the Nelson commercial market is affected by a general lack of supply and a strong core of local market investors.
| Regional Statistics | ||||||||||
| Number of Residential Building Sales | Vacant Section Sales | Building Consents Issued for New Dwellings | ||||||||
| 2003/04 | Richmond | Nelson | Richmond | Nelson | Richmond | Nelson | ||||
| August-03 | 28 | 113 | 8 | 24 | 16 | 16 | ||||
| September | 28 | 120 | 7 | 16 | 12 | 36 | ||||
| October | 30 | 104 | 5 | 15 | 6 | 28 | ||||
| November | 37 | 108 | 4 | 12 | 16 | 21 | ||||
| December | 23 | 118 | 0 | 15 | 7 | 28 | ||||
| January-04 | 19 | 85 | 3 | 16 | 5 | 29 | ||||
| February | 15 | 77 | 1 | 9 | 10 | 25 | ||||
| March | 22 | 101 | 5 | 7 | 8 | 38 | ||||
| April | 28 | 92 | 7 | 5 | 4 | 19 | ||||
| May | 27 | 96 | 2 | 6 | 5 | 23 | ||||
| June | 32 | 90 | 0 | 25 | 15 | 24 | ||||
| July | 18 | 83 | 1 | 8 | 9 | 17 | ||||
| August | 22 | 65 | 8 | 4 | 6 | 16 | ||||
| September | 26 | 61 | 3 | 4 | 14 | 11 | ||||
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Back issues of the newsletter can be obtained from TelferYoung (Nelson) Ltd
Phone (03) 546-9600
Fax (03) 546-9186
www.telferyoung.com
email: telferyoung@nelson.telferyoung.com
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.