TelferYoung (Waikato) Limited
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Waikato Newsletter - April 2008
16 April 2008
Welcome to our second Newsletter for 2008.
General
After only a quarter of 2008, we are already seeing effects of the changing property climate. We have seen a greater differential between first and second tier properties, a reduction in residential market activity, especially at the lower end, and consistently high dairy farm values despite the drought. We expect 2008 to continue to show some uncertainty in all markets.
V8 Party
The TY Waikato Pre-V8 party was a tremendous success with the inaugural Playstation V8 'hot lap' champion receiving his crown from his adoring fans .....
Market Commentary
Commercial and Industrial
Recent auctions have shown that investment property, perceived to be of prime quality, continues to attract strong interest and indicates little change to market levels of 2007. Conversely, lower quality property saw little interest at auction with all being passed in, some with no bids recorded. We believe that there is a widening gap in regard to returns between top and second tier property, however this is yet to be fully recognised by vendors whose expectations, although lower than 2007, remain relatively high. Purchasers, unsure where market levels lie are discounting offers substantially, not wanting to purchase early in an uncertain market.
Sales of note were:
- KFC Hamilton East sold subject to a new ten year lease at 7.13%. The property is leasehold with a perpetually renewable ground lease in place.
- ASB Morrinsville sold at an indicated return of 5.63% on the passing rental. The property is subject to a new eight year lease.
- A number of factors appear to be affecting the market at present, which in our opinion appears to be amplified by continued negative commentary in the media:
- Interest rates are continuing to rise and the availability of funds tightening.
- Purchasers appear to have adopted 'wait and see' policies and are not prepared to commit until market direction becomes clearer.
- Reduced dairy production caused by the drought has removed a number of prospective purchasers from the market place.
Green Buildings
Two new office developments are underway in the city both looking to achieve "Green Star Ratings". This is a rating tool recommended by the New Zealand Green Building Council (NZGBC), which evaluates the environmental initiatives and/or the potential environmental impact of new and refurbished office building designs.
In our opinion, this will create a separate category for offices within the market place which is likely to become more prevalent in the future. At this time interest for accommodation of this nature is being expressed by Government Departments and Corporates looking to promote an environmentally conscious image. Rental levels will be higher initially due to increased building cost and in time due to perceived quality differentiation by tenants.
Building owners and developers should be aware of the emerging significance of creating environmentally friendly buildings whether they are proposed developments or existing structures or they may well be facing early obsolescence due to changing policy from Central Government and corporate demand.
In the UK, a new policy is about to become compulsory whereby every building has to have a publically displayed certificate (similar to a building warrant of fitness) depicting green ratings for the structure and the efficiency of its operation relative to the design. It is hoped that this system will encourage both building owners and tenants to adopt environmentally friendly initiatives, driven by public opinion/demand.
Residential
The Hamilton residential Real Estate market has eased in 2008.
- Sales volumes are estimated to be some 30% below previous years and continues the decline in sales volume from 2007 as shown above
- The medium house sales price is still greater than previous years. We interpret that this is skewed as a result of decreased market activity at the lower end of the market
- Factors contributing to the change in the market include:
- Slowing of population growth in Hamilton
- Mortgage interest rates
- Negative commentary on the property market
- Substantial increase in listing number
- Wait and see attitude by purchasers
- Demand for high density land and infill sites for development is likely to decline as a consequence of a reduction in the availability of development funding (an impact of the credit crunch), rising building costs and higher mortgage interest rates.
- Property that is a complete package of a high standard or with unique features such as view, architectural design and landscape are still well sought after and at this time show limited decline.
Rural Residential
- Whilst the median sales price is still high, sales volumes have fallen so far in 2008, from an average of 78 per month in 2007.
- Improved properties are still bringing in good prices, with the majority of the higher end properties being within close proximity to Hamilton or Cambridge.
Dairy Farm Values
Real estate agents report dairy farm auctions over the past two months have been well supported with most farms selling under the hammer at record levels between $70.00-$90.00 per kg MS.
Some recent dairy farm sales include -
Address | Sale Price (Million) | Area (ha) | Production (kg MS) | $/ (kg MS) |
| West Road, Ohaupo | $3.93 | 51.8 | 56,000 | $70.18 |
| Snell Rd, Morrinsville | $4.325 | 54.8 | 61,000 | $70.90 |
| Orini Rd, Orini | $9.65 | 137 | 133,000 | $72.56 |
| Tenfoot Rd, Whitikahu | $6.60 | 78 | 90,000 | $73.33 |
Morgan Rd, Matamata (sold prior to auction) | $4.00 | 60 | 48,000 | $83.33 |
| Waharoa West Rd, Matamata | $4.82 | 54 | 55,000 | $87.64 |
Demand for pastoral grazing properties has been mixed. A number of pastoral farms have been recently purchased for conversion to dairying and there has been some interest by the larger west coast pastoral farms to supply milk in 2009.
Sale prices for smaller dairy grazing/maize farms close to a dairying locality have mostly reflected the strong demand for dairy farms however this in part is likely to have been offset by the existing drought conditions.
TelferYoung (Waikato) Ltd thank you for all your continued support and we look forward to continuing our association throughout 2008.
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.