Investing in holiday hot spots
Friday 3 February 2017
Jenny Keown looks at key holiday destinations and finds golden investment opportunities.
It’s official: the property market in New Zealand holiday hot spots is booming.
A desire for a better lifestyle, low interest rates, and the Auckland ‘halo’ effect mean buyers are flocking to the beach areas of the Bay of Islands, Coromandel, and Bay of Plenty and areas such as Raglan in the Waikato.
Canny investors are buying up in these areas, such as the Coromandel, and succesfully leveraging their properties via online holiday home booking sites, while other investors are enjoying good returns in towns such as Kerikeri where demand is very high.
Further south, in the Tasman area, investor interest is on the up across the region, yet the jury is out on whether real money can be made in the smaller beach settlements of this region.
Bay of Island
Demand for Northland housing is rising as people go there for a better lifestyle, buoyed by low interest rates.
In October, Northland recorded a price increase of 11 percent to $399,000 compared to October 2015, with prices rising in Otamatea County (44%), Whangarei County (27%) and Whangare City (21%).
Data released by the Real Estate Insitute of New Zealand show average sales prices in Kerikeri, a popular tourist spot, were up 13% to $560,000.
Real estate agents say that low interest rates, value for money and lifestyle in and around Kerikeri are driving up demand, with investors snapping up listings up to $500,000.
Kerikeri investor Davina Smolders began investing in the picturesque, historic town 18 months ago when Auckland yields were getting lower.
She owns two houses: a two and three bedroom weatherboard stand-alone, with yields at 5.3% and 11%.
From an investor perspective, the challenge is low stock availability, but the biggest advantage is there is ‘no such thing as a bad tenant in Kerikeri’, she says.
“There are 50+ families applying for each vacant rental so you can choose the best of the best,” she says.
Kerikeri is a magnet for international families with its restaurants, eateries, wineries, boutique shops and good private and public schools.
She recommends Waipapa as a good investment option for Aucklanders or others, as an example of prime Northland land and only a five-minute drive to Kerikeri.
Since October 2014 there has been a 21.5 per cent boost for property values in Thames/Coromandel District according to QV figures. The majority of this increase occurred in the last year with an annual increase of 15.5 per cent.
Harcourts Thames principal Ian Kemp says Auckland buyers, particularly retiring or semi-retiring, are flocking in for affordable living and investment purposes.
There is high demand and low supply of rental properties, so anything from $350,000 upwards is popular and will generate yields of about 5%.
The Coromandel is very cosmopolitan, with people ranging from sixth generation pioneer families to ageing hippies who have nurtured the arts culture, to Waikato cockies who have seaside baches and great big boats.
One of the interesting growth areas in the Coromandel is the holiday accommodation industry which has grown from a casual ‘lets rent out the bach to pay the rates’ basis to a highly professional business.
Investors are attracted to serviced apartments and beach homes which they can put on the online holiday home booking sites such as Book-a-bach and AirBnB.
Harcourts Coromandel and its associated company, Coromandel Accomodation manage about 50+ Bookabach/AirBnB properties and serviced apartments for clients in town and at the beach.
“Many attract huge numbers of overseas (mostly South East Asian) guests as technological advances have revolutionised the booking process, with many guests booking upon arrival at the airport or even while en route,” says Kemp.
Higher quality apartments (with average rates of $250 per night) and beachfront holiday properties return about 12% gross a year, he says.
Bay of Plenty – Ohope and Waihi Beach
The Auckland effect on Tauranga in the Bay of Plenty is well documented, prices are rising (up 17% to $550,000 for the October year, according to REINZ), and shutting out some investors.
This has caused investors to turn their eye to the beach spots around the Bay of Plenty, namely Ohope, and Waihi Beach.
Ohope Beach Realty principal Liz Williams says many Wellingtonians own holiday homes in this community, where beachfront properties range from $1 million to $1.5 million, and nice holiday homes from $450,000 to $600,000.
Jennie Elstop, a property manager at Ohope Beach Realty, says holiday rentals tend to attract families and more mature people and night rates range from $120 to $150 per night.
The Ohope township is vibrant as employment is provided by Fonterra’s Edgecumbe factory and the Tasman mill, which produces pulp and paper.
Property investor Shannon Tawhiti says they have developed three subdivisions in Waihi Beach in the last couple of months.
“The market is very active with Auckland buyer influx, many cashing up and retiring and getting better bang for their buck,” he says.
He is selling low maintenance modern houses with good indoor/outdoor flow for between $400,000 to $550,000.
“We are doing a new transportable 120m2 beach house in one of our developments that has had good market response and we will sell before we deliver them,” he says (see image)
Raglan, a small beachside town, about 50 kilometres west of Hamilton is another sleepy hollow which has experienced major jumps in property prices in the past two years.
Local real estate agent Dave Hanna says the dollar value of properties has gone through the roof since February this year.
“Last year, properties that would have struggled to get $800,000 for on the waterfront are getting in some cases, $1.2m plus.
“We sold a property the other night at auction, with no view of the water (in fact, opposite the cemetery), 70 years old for $522,000. In mid last year we would have got $350,000,” he says.
Two years ago, the agency had between 150 to 180 listings, and now has 30 properties on its books.
“We used to be a bach market, with about 70% of sales in this area, now people are moving here to live. Last year a third of our sales were from Auckland, a third from Hamilton and about 25% from Raglan,” he says.
He estimates only 10% of the buyers are investors who are buying a property to rent out.
“This is the reason we have lost the number of listings we had and probably why the market is strong here, and out of kilter with Auckland. Listings are so tight that people are just grateful to buy almost anything anywhere, ” he says.
Much of the housing in Raglan are baches which need a makeover, and some subdivisions which are filling up with new housing. Subdivision sections are selling for up to $250,000.
Rents are high and there is a massive rental housing shortage, he says. Many owners of baches are starting to use online booking companies, seeing this as a better option.
Golden Bay, Kaiteretere
In the beautiful region of Tasman in the upper South Island, property prices are romping along, with a 12% jump to an average value of $485,666 for the October year, according to QV.
REINZ spokesperson Ryan Thomson says the number of first home buyers and investors appear to be increasing across the region. “Vendor expectations are rising in light of the lift in prices across the region over the past 12 months, with strong growth in the numbers attending open homes,” he says.
Golden Bay First National branch manager Sharon McConnon says it has a population of about 4,000 with the number of absentee versus permanent owners being 50/50.
People tend to buy holiday homes in settlements across the Bay including Pohara, Tata Beach, Ligar Bay, Patons Rock, Parapara, Collingwood, Pakawau and Puponga.
Many of the holiday home owners list their properties on online booking sites such as holidayhomes.co.nz and holidayhouses.co.nz.
“Some of these properties would be heavily booked, very early on, especially over the peak of summer, being mid-December through to mid-February, but would be very quiet over the winter months. Some homes are made available over the winter for longer stays, as a fixed weekly rental though,” she says.
Golden Bay has experienced a buoyant sales year. First National has had more than 90 sales from January this year, and about half of those sales were to out-of-town buyers.
“Our sales are up from the last few years, and some good prices have been realised, but we are yet to see the huge price increases, even though enquiry is strong,” she says.
An hour’s drive from Golden Bay is the popular family summer destination, Kaiteretere beach.
Sandy LePine, of Kaiteretere Holiday Home Rentals, says it attracts owners from Christchurch, Wellington, Queenstown, Timaru and even Australia and England.
Owners of holiday homes find that the properties tend to pay for themselves, covering mortgage payments, rates and insurance fees, and anything they make over that is a bonus.
However there are some houses which are making a decent income of between $25,000 to $30,000 per year, and they tend to be upmarket with sensible nightly tariffs that attract people from Nelson and Blenheim for two to three nights, she says.
“Some of the holiday home owners charge unrealistic tariffs in the off season,” she says.
Comments from our readers
No comments yet
Sign In / Register to add your comment
New Zealand may now have a government but uncertainty over what that might mean for the housing market is set to linger for some time.
Housing affordability in regions around New Zealand may have improved over the last quarter, but price to wage ratios are still sky high.
Commercial property syndicates give investors options and risks they might not otherwise have access to – but they do come with risks.
New Zealand’s lower economic growth was acknowledged by the Reserve Bank in its OCR statement today – which means there's a chance their next call could be more doveish.