TelferYoung (Waikato) Limited

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Waikato Newsletter - December 2008

9 December 2008

Well 2008 has certainly seen changes to the property market in comparison to the preceding two years.

General

Global economic events, along with a slowing local economy, have meant a change in attitudes by both vendors and purchasers.  We will all look forward to 2009, which could prove to be pivotal in terms of market levels and activity due to decreases in the OCR and lower vendor expectations. 

MOVEMBER

An improved moustache quality this year has made up for the fewer number of entrants at TY Waikato.  This reduction in numbers is due to a number of wives sponsoring their husbands not to grow the all too alluring ‘stauche.

Market Commentary

Commercial & Industrial

Unchartered Waters

The market is slow but the most recent auctions have shown buyers still exist in a range of property classes and investment sizes.  We suspect as mortgage rates continue to fall, the New Year may see more activity as positive difference between lending rates and property returns occur.

The evidence to date would suggest smaller investment size of up to $2.0 million and properties with very secure tenants have maintained past levels of return below 7.0%.  Property with local tenant content or fringe City location lies between 8.0% and 9.0% and large investment of $4.0 million or more would range over 8.5% to 9.5%.  Of course these are general bands but they do reflect the activity of the current market in these uncertain times and an underlying demand that appears ready to return as confidence is restored.

Three recent sales of note have been:

533 Anglesea Street sold in late November for $2.3million.  The property, located on the northern fringe of the CBD, has four tenants, including TVNZ and the Department of Housing and Building on six and nine year leases respectively.  The property reflected a return of 7.66%.

Westpac Bank on the prominent corner of Lake Rd and Hall St, Hamilton.  The premise was totally refurbished and was subject to a new 9 year lease.  There was competition between two bidders at the auction and was sold at 6.09%.

4 Thackeray Street sold in November for $4.25million.  The property is located with in the CBD fringe. The tenant is Dick Smith Powerhouse on a nine year lease from December 2005, with the rental reviewed annually via CPI.  On passing income, the  return was 8.62%.

2009 Developments

In spite of the current economic climate, a number of developments are anticipated to be finished or to commence in 2009.  These include:

• The $30m redevelopment and extension of the Waikato University Library commencing December 2008
• The mall development at The Base is projected to start in 2009 having secured Farmers as the anchor tenant.
• The upgrade of the Claudelands Event Centre

The completion of:

• Hamilton's Deloittes Building in early 2009
• Braemar Hospital is scheduled to be operational in mid to late 2009

Residential

The Hamilton residential Real Estate market has fallen in 2008.

• October and November have shown an increase in the number of sales overall, with well presented ‘family homes' selling particularly well.  However, the gap has widened to second tier properties (i.e. homes with inferior features). 
• Below is a list of properties in the residential sector, which have re-sold within the last two years.  We believe these are indicative of the current residential market. 

Rural Residential

• The decrease in market confidence has also affected rural residential or lifestyle sales, with sales volume falling from an average of 78 per month in 2007 to an average of 49 per month for the year to date. 
•  Vacant rural sections have been hardest hit with a sharp fall in new house construction.  Depending on the circumstances of individual vendors, some vacant allotments have sold at a significant discount on previously expected prices.

Rural

A buoyant two year period for the dairy industry has resulted in some large scale farms being marketed in the Waikato Region.  Sales include the following:-

Large scale rural properties now being marketed include six tree to dairy pasture conversion properties in the South Waikato. They range in size from 344-487ha with one fully operational and the remainder are expected to become fully operational either December 2008 or for calving Spring 2009. Tenders close before Christmas.

Two large scale drystock properties include Puketotara Station at Bain Rd Huntly, an 1145ha intensively farmed property advertised as capable of wintering 12,000 stock units under good management and Awaroa Station, Richardson Rd Waiterimu, comprising a 616ha property.   

It was anticipated these properties would attract strong buyer interest, however since the financial crisis last month, sale and purchase agreements, bidding at rural property auctions has been very constrained.

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: waikato@telferyoung.com

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