TelferYoung (Taranaki) Limited
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Taranaki Newsletter - April 2007
13 April 2007
Taranaki Residential Market Overview
North Taranaki Residential Market Overview
The residential real estate market in North Taranaki remains buoyant despite the tightening of monetary policy by the Reserve Bank since the end of 2005. House prices are steady or, in certain price ranges, still increasing, but the growth that prevailed over the previous two year period has slowed. Strong demand is continuing for properties in the lower to medium range, $180,000-$300,000, while demand for higher priced properties has slowed recently, although in new subdivisions sales of houses in the $400,000-$600,000 range are steady.
Of major concern is the issue of housing affordability for first home buyers. Over the previous five years Taranaki house prices have doubled, see graph. This increase is far in excess of wage rises. Young people on low incomes who want to get their foot on the property ladder are forced to either purchase a property in an less desirable suburb, or borrow more money than they can really afford. House prices are now at a point where at least 60% of an average wage is required to service the loan. Therefore it is not surprising that many young people choose to rent.
Residential dwelling prices for New Plymouth, Stratford and Hawera have all doubled over the previous five years.
This has caused demand for rental properties to rise, creating a shortage of rental accommodation and lower vacancy rates. Ironically, this means that there should be more people investing in residential rental property but while there are investors still looking for residential investment, accommodation that delivers a realistic return is scarce.
Inevitably if investors are to remain in the market, rents need to rise and this has become evident over the past 12 months with many landlords issuing rent increase notices.
Overall, the residential property market in North Taranaki is still buoyant and, despite the tightening of monetary policy, people are remaining confident about house prices increasing further and seem to be paying little attention to the increase in interest rates. While we cannot see the growth continuing at previous levels, there appears to be sufficient confidence in the market at least for stability, if not for moderate growth.
Market Conditions - South and Central Taranaki
Throughout 2006 and into 2007 prices in Central and South Taranaki have increased for most classes of property and there continues to be a high level of demand. The rural sector appears to be an exception to this in that supply is now beginning to outstrip demand.
Understanding the Market
Recent statistics show that residential property values in South Taranaki increased by over 24% during 2006, while in Stratford residential property went up by some 20%. While these figures do indicate a healthy increase in property values we point out that averages are misleading and the mere application of a percentage increase to past value levels is unlikely to provide the market value of any particular property.
Each individual property has its own unique characteristics that will impact on saleability, some will be refurbished and upgraded to above average condition, while others may have deferred maintenance requirements. Nonetheless the upward trend in Central and South Taranaki values is positive for the region as a whole.
Rateable Values
In September 2006 new rateable values (RVs) were released for South Taranaki. We are often asked the significance of these values which are provided to the local authorities at three yearly intervals for rating purposes. Firstly it must always be borne in mind that these RVs, which replaced government valuations (GVs) some years ago, are set for the purpose of collecting local body rates. RVs are analysed using mass appraisal techniques without the individual inspection of a property. This indexing from the previous assessed value levels can result in outcomes that do not equate to current value levels. Some councils rate on land value while others rate on the improved or capital values, so this further complicates the issue.
The calculation of Rateable Values also requires certain assumptions:
1. The tenure of each property is regarded as freehold
(This applies even where the tenure is perpetual leasehold)
2. Commercial properties are valued as if leased at market rent
Decision Making
While adequate for an equitable spread of rates RVs should not be used for major property decisions such as buying, selling, mortgaging, or leasing. If independent advice as to market value levels is required there is no alternative to a registered valuer's report which is carried out in terms of the profession's practice standards. These reports include a full property inspection and a detailed assessment of all matters relating to the property and to the market, including current tenancy arrangements.
The recent gazetting of new South Taranaki District Council rating valuations makes the above comments very relevant in that there are instances where the market value can be established at levels well above the RV, while a number of properties in the rural sector would appear to have RVs that cannot be obtained in the marketplace at the present time.
As always, the best advice is to get some advice when making decisions on property. Registered valuers have the training, experience and impartiality to assist and the team at TelferYoung Taranaki is noted for high standards of service and expertise.
Back issues of the newsletter can be obtained from TelferYoung (Taranaki) Ltd
143 Powderham Street,
P O Box 713,
New Plymouth,
New Zealand.
email: telferyoung@taranaki.telferyoung.com
| Telephone: | 06 757 5753 |
| 0800 VALUER | |
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| www.telferyoung.com | |
+ John Larmer + Mike Myers + Ian Baker + Mike Drew + Adam Boon + Dave Luxton
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.