TelferYoung (Wellington) Limited
Wellington Newsletter - May 2006
31 May 2006
Items on our Office Market Survey, Wellington Residential Market and Insurance Cover.
Welcome to this edition of our newsletter in which we highlight some points from our latest Office Market Survey, provide comment on the Wellington residential market and give some valuable information on insurance cover. We hope you find it useful.
Office Vacancy Report
The vacancy rates of the main quality segments of the Wellington CBD are:
Jun 05 | Dec 05 | |
Overall | 9.02% | 8.24% |
Premium Sub-market | 0.71% | 0.86% |
Good Sub-market | 7.15% | 5.89% |
Average Sub-market | 9.69% | 8.56% |
Fair Sub-market | 8.71% | 10.59% |
Poor Sub-market | 39.12% | 35.23% |
The refurbishment of buildings continues to be a feature of the Wellington market. Pastoral House on Lambton Quay has undergone a major refurbishment and upgrade of services and has now been occupied. Urbus Tower, 117 Customhouse Quay has been upgraded and currently has vacancies, although some space has been re-let. The old AMP Head Office building has been vacated and is being advertised as refurbished. A significant area of the upgraded accommodation has been re-let but is not yet occupied. The Public Trust Building is going through a similar process. A number of floors in several buildings have also been upgraded pending their occupation by new tenants.
The increasing occupation of offices by Government throughout Wellington City is likely to intensify with significant expansion in the state workforce. Many Government agencies are seeking to improve the quality of their accommodation and larger areas of space within reasonable proximity to the Government centre have been rapidly taken up. Some leases have been negotiated but the Department concerned has not yet taken up occupancy pending completion of fitouts etc. Taking a wide definition of 'Government' they have expanded their occupation in the city by nearly 28,000 m2 during the last year. In the 4 years since December 2001, Government occupation in the CBD has increased by over 100,000 m2, or by nearly a quarter. Government now occupies 37.22% of the total available office accommodation in the Central Business District. Over the next 2 years, further expansion is expected.
The expansion of Government occupation is well illustrated in the following chart. New occupancies by some agencies will continue to exert pressure on space for better quality buildings able to offer larger areas of space, especially in the northern areas of the CBD.
If you require further information or wish to obtain a copy of the Vacancy Report please contact Martin Veale or Phil Tomlinson at our office.
Residential Market
Despite predictions of a 'cooling off' in the Wellington residential market has continued to show strong buyer interest across most sectors during the first four months of the year. There have been some outstanding results recorded, particularly for properties with special features such as good location, waterfront aspect, high quality design and presentation factors.
More recently however there have been signs of slowing activity as winter approaches. Turnover volumes have dropped and prices appear, in many instances, to have plateaued. Premium prices have been recorded frequently in the past, however as a result of less competition there are now indications that buyers are becoming a little more circumspect and analytical. The following table shows a general increase in the number of days to sell properties in Wellington City and provides some support to this.
| Days To Sell | ||
Zone | Apr 06 | Apr 05 |
Southern Wellington | 24 | 19 |
Eastern Wellington | 28 | 30 |
Western Wellington | 28 | 17 |
Northern Wellington | 25 | 23 |
Central Wellington | 29 | 28 |
Average | 27 | 23 |
The Wellington average is still well below the New Zealand average of 34 days, an increase of six days from the previous year. This may be an indication the pendulum is beginning to show signs of moving in favour of the buyer for the first time in a number of years.
As reported in an earlier newsletter, strong value growth has been most prevalent in the traditional better quality suburbs including Kelburn, Karori, Wadestown, Roseneath, Oriental Bay and Khandallah, due largely to better quality housing stock and amenities on offer. This trend is continuing with schooling, security and status key 'drivers' for prospective buyers within the higher price ranges. This value growth is illustrated in the following two recent on-sales:
- 47 Homewood Avenue, Karori sold in March 2006 for $1,050,000. This is an attractive 2-level character residence with a stated floor area of 240 m2 occupying a well-developed 544 m2 section with detached double garaging. It last sold in March 2005 for $870,000 in a similar condition.
- 10B Hobson Street, Thorndon sold in March 2006 for $1,201,000. This is an older style, semi-detached residence measuring some 370 m2 inclusive of integral garaging, which has been renovated to a superior standard. It forms the rear portion of a unit titled section with a limited outlook and yard. This property last sold in August 2004 for $956,000, and is largely unchanged although balconies had been upgraded.
Competition from first home buyers and investors has resulted in a significant lift in values at the lower end of the market. As a result Wellington's outlying suburbs such as Johnsonville/Newlands and parts of the Hutt Valley and Porirua have been particularly buoyant, with greater than average price increases.
While media reports predict a downturn in the residential market, the Wellington property market is traditionally more stable than most other major centres. We believe Wellington will not experience a significant drop in values largely due to the continued growth of the Government sector. Further, Wellingtonians, being amongst the higher income earners per capita in the country, have the ability to cushion increases in interest rates.
Insurance Cover
Over the last two years New Zealand has seen some significant increases in building and plant replacement costs due to rising labour, compliance and material costs. Simple indexing by an insurer may not provide adequate cover as procedures of that type do not distinguish between the many variable factors influencing individual building costs such as the current supply of, and demand for, construction services, construction specifications, site access and building scale. These are areas of specific expertise. Further, historical details may not take into account alterations to the buildings since the original inspection/valuation.
TelferYoung have the expertise to provide insurance certificates to reflect current building costs.
Property owners who do not obtain new insurance valuations on an annual basis could find themselves under-insured if they were to suffer a loss after their last valuation had expired and their insurance policies were not adjusted.
Back issues of the newsletter can be obtained from TelferYoung (Wellington) Ltd
Level 9,
85 The Terrace,
PO Box 2871,
Wellington.
Ph: 04 472 3683,
Fax: 04 478 1635
www.telferyoung.com
email: telferyoung@wellington.telferyoung.com
+ Adrian Brady + Chris Barnsley + Martin Veale + Jerome McKeefry + Lindsay McAlister + Graeme Kirkcaldie + Stephen Batt + Jason Lochead
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.