TelferYoung (Waikato) Limited
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Waikato Newsletter - February 2006
1 February 2006
Hamilton City recorded record volumes of residential sales during 2005.
Residential - Market Commentary
Hamilton City recorded record volumes of residential sales during 2005. Whilst some commentators were reporting on the cooling real estate activity during 2005 Hamilton City maintained a high volume of sales and good demand. Often we see the local market responding in different ways from the major news articles which are generally Wellington, Auckland or Christchurch based, Hamilton continued to have growth in the latter part of 2005 despite national trends. This should be a reminder to obtain local professional advice.
Market commentators have been commenting of a slower market for 2006 and this has now become evident in Hamilton City. Some real estate firms are now experiencing a greater number of listings than sales. One company indicated listings available for sale in October 2005 at approximately 350 and February 2006, 500 homes.
It would appear that the supply of homes is above sale volumes. We would expect that if this trend was to continue through the first half of the year it may have some impact on pricing.
Recent sales in February 2006 still indicate strong demand for properties that are well presented and allow purchasers to move in with no work being required and offer a high quality complete package.
The residential rental market has consolidated rental gains from 2005. The top end market with properties rented over $350 per week remains strong. Commentators have indicated a lower number of overseas new student enrolments which to date has had little impact on the overall market.
The residential sections continue to be developed with a large subdivision in November selling out within 14 days. These sections were priced competitively and values are indicating moderate land value increases since mid 2005. The timing of future development and the supply of City services may still be a limiting factor for ongoing development.
Hamilton City Council have indicated an approval is likely for up to 500 section s to be developed on the southern fringe of the City. Growth to date has been to the north.
Rural
The Waikato continues to experience strong rural property growth, in line with National average farm values that continue to reach record levels as reported by The Real Estate Institute.
In the Waikato some recent pre Christmas properties sold very well. For example a dairy farm at Hinuera, Matamata was tendered, and prior to the close of the tender, received an offer of $4 million. The 64ha property had a modern house, average herringbone cowshed and was producing around 63,000kgs milk solids. Another property sold under the hammer at auction just prior to Christmas sold for $3 million. The 50ha property was producing around 53,000kgs ms. These sales are generally the exception, with most dairy farm sales, selling around the $38-$42 per kg ms.
We have however noticed that the smaller one man units are commanding a premium, and a number of dairy farms are being purchased by adjoining farm owners for amalgamation with their present units.
Grazing properties also continue to be in strong demand. A 183ha grazing farm 20kms east of Hamilton recently sold for just over $4million. The property included an old 1880's villa homestead and our analysis indicates it sold for around $1,880/s.u. Again this is at the top end of the market, with most sales ranging from around $800/s.u for properties with more extensive grazing land, to around $1,350/s.u. for well developed properties.
Commercial
A shortage of quality listings in the City with good investor demand has seen market returns of around 7.25%. The lack of listings in the City has seen provincial Town investment increase and returns of around 8.0% for tenanted and well located property. A new level of 6.3% has been recorded in Cambridge for a multi-tenanted investment well located with good attributes.
Vacant land in Hamilton appears to have levelled in value after dramatic rise through 2004 and 2005.
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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.