TelferYoung (Waikato) Limited
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Waikato Newsletter - July 2007
12 July 2007
April saw TelferYoung's Waikato team move premise to the first floor of 489 Anglesea Street, opposite Repco.
Situated on the corner with Rostrevor Street, you can not miss the distinctive + + = signage when driving by. The move meant new phone numbers which are listed above. Parking is available to the rear of the offices with access from Rostrevor Street.
Market Commentary
Residential
There is no doubt that there has been strong growth with no signs of this abating in the short term. Whilst others markets maybe have had some easing in demand, Hamilton remains strong.
A premium is evident in the market for complete housing packages finished to a high standard. This applies not only to the new home market, but also older properties that have been refurbished.
Sales now well over the $1 million level are being achieved on a regular basis giving confidence to the upper end of the market.
Volumes of sales have been variable with an unusual seasonal drop in April, July and October, whilst not significant it can create some debate as to the causes.
The property market appears to be strong with agents reporting a shortage of listing and this competition between agents is increasing the marketing expectation. Demand levels remain strong with economic forecast still looking quite reasonable even with the recent interest rate rises.
The Waikato vision of the future has had a boost with the proposed increase in the dairy payout and confidence in related sectors is likely to be reflected in the market.
Within Waikato's provincial towns there remains strong demand for residential homes particularly in Cambridge with increases in sale price continuing.
Residential Investment Property
The residential investment market is divided into several sectors. The first being the developer/investor buying older residential rental blocks for refurbishment then re-letting at higher rates to reflect the higher quality of accommodation. These are coming onto the market both, as individual units or as blocks.
The demand for investment property is strong with yield rates lowering despite interest rates climbing. This has seen a more cautious approach by investors, but there is little evidence of any added margin to reflect the likelihood of increasing costs.
What to watch for to make a good investment are the compliance costs relating to Council's Earthquake Prone Policy for two storied plus properties and that the property is compliant with all the local authorities' requirements for its use as long term residential accommodation. This applies to converted garages, buildings advertised as sleep outs and motel or other conversions to long term residential use.
Anecdotal evidence within the residential market suggests that the demand for residential dwellings purchased for rental investment is slipping, due in main to the rise in interest rates. Rental levels have not increased in the short term despite rising purchase prices at all levels, with the exception of executive homes, which have seen a slight lift.
Residential Block Land and Vacant Sections
Demand for vacant residential land remains strong throughout Hamilton with strong increases in value for sections and block land.
We are aware of a number of transactions for residential blocks that after analysis are showing sale prices of $80m2 - $95m2 in the Rototuna/Flagstaff area. A majority of these properties have sold more than once with increases in sale price each time. Generally these properties have been purchased by out of town investors which have helped to push sale prices up.
Section prices are also seeing increases with the latest release in Horsham Downs Estate selling for an average of $198,600 for sites ranging in size from 590m2 to 790m2. Of note was the fact that prospective purchasers queued overnight to secure a section and all 40 sites sold within 24 hours.
There is comparatively substantial uptake of vacant residential sites in Cambridge with 25 sections within Stage 2 of the Kings Garden subdivision selling in a morning.
Coastal Property
Reports from Whitianga are indicating an easing of the market with an overall growth of the market absorbing the large number of new developments now completed. Overall growth of the town has been significant attracting a greater range of services available. There are a number of developments underway to maintain growth.
Whangamata and Waihi beach have also been a little quieter with a better choice of properties for purchasers. Where as before if you did not make a rapid decision the property was sold, negation factors have less pressure on purchasers.
Lifestyle Blocks
Changes in the Waikato District Plan in 2004 has enabled a further two sites to be subdivided from a 4.0ha block, which has seen a good supply of sites 5000m2 - 8000m2. This has kept sales prices steady despite increasing demand. In saying this blocks with river views or other positive features, particularly in the Cambridge district or in close proximity to Hamilton are selling well.
The market for improved properties remains steady for those in the mid value range. There was a flurry of activity for properties over $1 million prior to Christmas however this does not appear to have continued with demand falling.
Rural Economic Units
In general rural property values within the Waikato Region remain firm, however the number of sales continue to decline.
The announcements by Fonterra recently of higher payouts both this season and more recently for an advance payout of $5.53/kgs MS next year has injected a degree of confidence into the industry after a decline in positivity. A wet spring has seen lower yields this season which have been offset by the higher payout. There is a shortage of milk products in the global commodity market due to the drought in Australia and conversion away from dairy farming in the US pushing prices up, which has helped to combat New Zealand's strong currency.
Dairy farm sales of note include that of a 64.75ha farm supplying Tatua which sold for $4.2 million in March this year, producing 110,00kgs MS. Commentary from Bayleys indicates that the average sale price of dairy farms has increased by 127% over the last three years in the Waikato Region.
Dry stock farms in the region are generally selling at similar levels to the past three years. Beef markets remain buoyant however lamb prices have fallen.
Another sale of note is that of a substantial equestrian property of 39.39ha that sold recently for $6 million. The property was developed to an exceptional standard and incorporated a large well appointed dwelling.
Commercial and IndustrialA continuing lack of investment stock has seen returns fall with good quality property achieving yields of between 6.50 and 7.50% up to a value of $5,000,000. Investment syndicates and institutional investors have become active in the market with one sale of note being that of the Farmers building in the City Centre selling for $27.2 million at a 7.9% yield. Currently offered for sale are the WEL office building with an approximate cash flow of $1 million and the Rototuna Shopping Centre having an approximate annual income of $1.7 million. The market for property purchased with vacant possession is also buoyant with competition for good quality well located premise between investors and owner occupiers, particularly in the lower value range. Results of sales for this type of property traditionally are not as strong as for that of leased property however; analysis is showing that this does not appear to be apparent at this time. Delays in the re-zoning of land in the Rotokauri area has seen demand for vacant industrial sites not met and subsequently sale prices rise dramatically in the last six months. Due to continued buoyancy in the market, demand for premise and increased building and land costs rental levels have also increased over time. Along with this vacancy rates are also low. Demand for investment property in Waikato's rural towns is strong with there being a lack of stock in Hamilton. One sale of note was that of 'The Warehouse' premise in Matamata which sold for slightly under $5 million showing a return of 6.6%. Hamilton City Council - Earthquake Prone PolicyChanges in the Building Act have directed local bodies to implement a plan in regard to buildings at risk from earthquake damage. Resulting policy is varied throughout the different TLA's in the Waikato region. Most appear to be conducting desktop assessments based on predetermined criteria to identify buildings deemed to be at risk. The criteria seem to differ greatly ranging from all buildings built prior to 1932 in Waipa District to all those built prior to 1977 in Hamilton City. Once deemed at risk the property files are tagged and owners informed. It must be noted that LIM reports will identify categorised properties. A structural survey then must be carried out to ascertain whether the property is in fact at risk and to determine what works are required. If there are any queries in regard to this new policy it is advised that the local councils building unit is contacted. Hamilton City Council currently have set up a direct line (0800 727 389). |
Back issues of the newsletter can be obtained from TelferYoung (Waikato) Ltd
ph 07 839 2030
Fax 07 839 2029
489 Anglesea Street,
Hamilton
www.telferyoung.com
email: telferyoung@waikato.telferyoung.com
+ Doug Saunders + Roger Gordon + Andrew Don + Bill Bailey + Rob Smithers + Liz Allen + Cameron Roache + Jeff Alexander + Richard Graham + Yoon-Jin Cha + Russel Flynn
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.