Marlborough: Days of wine...and scarce rentals

The Marlborough region is renowned for its sunny climate and fine wine.

It’s also well known for aquaculture and tourism, with the Marlborough Sounds being the jewel in its tourism crown.

The region has a population of about 42,000 and two main urban centres, Blenheim and Picton. Blenheim, the heart of commercial activity, is by far the larger, with about 27,000 residents. Picton’s population is less than a quarter of that, but it swells markedly over summer with the influx of holidaymakers.

Picton is the main gateway to the Sounds and an important transport hub, providing ferry connections between the North and South Islands.

Marlborough Mayor Alistair Sowman says the region is fortunate to have a diverse economy. Besides wine, aquaculture and tourism, it also has farming and horticulture and a growing aviation engineering industry.

Aquaculture is the biggest income earner, but the wine industry has been the star performer in recent years.

“The viticulture industry has exploded, and that’s attracted a lot of people here to work,” Sowman says.

In the past five years, the region’s population has grown 7.9%, well above expectations, and Sowman says growth projections are equally as strong.

Summit Real Estate Blenheim branch manager Darryl Harper says the wine industry has done much to make Marlborough, and particularly Blenheim, a desirable place to live.

“Grapes have put Blenheim on the map, not just nationally but internationally. People come to visit and then decide to live here,” he says.

Climate and lifestyle are big drawcards too, plus the affordability of houses compared with some other places in New Zealand and overseas, Harper says.

“We’re getting a lot of Britons, and people from Europe in general. Basically they’re coming for the lifestyle and property opportunities – for instance, they can’t afford to buy a lifestyle block where they come from,” he explains.

Real estate institute statistics show that, as of August, the median house sale price in Marlborough was $277,500, compared with the national median of $310,000.

Marlborough prices have risen significantly in the past four years – the median in August 2002 was just $137,000, and in August 2004 was $252,500 – but that doesn’t seem to have deterred buyers.

The number of house sales dropped from 125 in August 2002 to 99 in August 2004, but then rose again to 142 in August this year.

“Most of our properties are attracting multiple offers. We are very short of stock, we’ve got buyers to burn,” Harper says.

In the Blenheim area, demand is particularly strong for lifestyle and coastal properties, such as at the seaside community of Rarangi, 20 minutes’ drive north of Blenheim, he says.

Within Blenheim township, the well-established suburb of Springlands and the newer suburb of Witherlea are popular, as are properties in walking distance of the central business district.

However, Harper believes residential properties just about anywhere in Blenheim are a good investment.

“Everything is going up in price,” he reasons.

Mariette Knudsen, senior property manager at Mark Stevenson First National’s Blenheim branch, says many investors who have bought houses as rentals in the past two or three years have made “enormous” capital gains.

“But I would say we’re at the top of the property cycle,” she cautions.

“You should only be involved in investment if you’re prepared to stay in it for the long term.”

Knudsen says demand for rental accommodation in Blenheim is extremely high at the moment, due to the booming wine industry.

Marlborough Property Investors Association president, Peter O’Keeffe, goes even further, describing the shortage of rental accommodation as “severe”. He cites a recent case which hit the news recently where 18 people were living in one house.

“The supply just hasn’t kept up with demand. People aren’t building new houses quickly enough,” he says.

That’s despite increased building activity – in the year to March, 463 new residential building consents were issued in the region, which was 8.9 per cent higher than the previous year.

As of August, the average rent for a three-bedroom house in Blenheim was $267 a week, according to Tenancy Services figures.

O’Keeffe says there are moves to fill the accommodation gap, with two major apartment developments proposed for central Blenheim.

One is for a seven-storey apartment-retail-backpacker complex on the site of the City Hotel. The other is for a 22-apartment complex overlooking the Taylor River, with retail and office space on the ground and first floors. Prices for the latter apartments range from $535,000 to $1.1 million.

In Picton and the Marlborough Sounds there’s also strong demand for residential properties, although Harcourts Picton Property Centre principal Brenda Davey says it has eased a little in the Sounds in recent years.

“Three years ago it really hit its straps. There was just nothing on the market. It was a crazy time,” she recalls.

About 80 per cent of Davey’s buyers are from outside Marlborough, and 70 per cent are cash buyers, wanting either a holiday home, a second home, a place to retire to or a rental or investment property.

“We have quite a few buyers from overseas who will spend six months a year here and six months in their homeland,” she says.

The high number of cash buyers means the residential property market tends to be quite stable.

“We’re sheltered from downturns in the economy because there’s not a lot of people mortgaged to the hilt. After 22 years of selling real estate in this area I’ve never seen prices go backwards.”

Davey says Sounds properties tend to be more expensive than those in Picton.

Harcourts Picton Property Centre sales over the past year show the average price for a holiday home in the Sounds was $520,000. In Picton the average price for a three-bedroom home in a desirable area was $393,800 and in a not so desirable area $233,318.

Many properties in the Sounds can only be accessed by boat, and many are on hilly and bush-clad terrain, which can make building a home or bach relatively expensive, Davey explains. Many are also zoned rural, so have relatively large sections.

Real estate institute figures show that median sale prices for sections in the Sounds ranged from $155,000 to $455,000 in the year to August. (The medians fluctuated a lot from month to month because of the relatively low numbers of sections sold.)

In comparison, median sale prices for sections in the Marlborough/Kaikoura district ranged from $111,000 to $175,000.

Davey says the most desirable areas in the Sounds are those within a 30-minute drive of Picton.

In Picton, properties with good views and sun or within walking distance of the town centre are popular. Waikawa Bay, slightly north of Picton, is also sought after.

Davey believes Picton offers particularly good property investment opportunities because the town is ``just starting to take off’’. There is also a shortage of long-term rental accommodation, she adds.

“We have a waiting list of people wanting to rent and it’s been like that for years. There’s a real hole in the market,” she says.

Currently the average rental for a three-bedroom home in Picton is $250 to $260 a week, she says. Not many houses in the Sounds are rented out on a long-term basis.

However, Sounds homes are very popular for short-term holiday rentals, says Kathie Aldridge, who runs holiday home rental business Kulak Rent a House.

“The Sounds is a really special place, people love it. We never have enough houses in the summer,” she says.

Aldridge, who has more than 100 holiday homes on her books, says rentals range from about $120 to $300 a night in the peak summer period from December 20 to mid-January.

Off-peak rentals are generally lower, and demand drops right off in winter.

However, popular homes can still earn up to $20,000 gross a year, she says.

Those wanting a steady rental income need to take into account factors such as ease of access. Size is important too – 95% of her inquiries are for homes which sleep 8-10 people.

Popular locations are bays along Queen Charlotte Drive at the southern end of Queen Charlotte Sound and a short drive from Picton. Anything within a 20-minute boat ride of Picton is also desirable.

As for Marlborough’s future prospects, Sowman says all the indications are that the current growth phase will continue.

He adds that there are some exciting projects in the pipeline, such as the development of a $16 million convention centre in Blenheim, and a proposed multimillion dollar revamp of Picton’s waterfront.

However, the region also faces some major challenges, he says.

“One of the biggest constraints on growth is the shortage of labour, both skilled and unskilled,’’ he says. “The viticulture industry needs a large number of seasonal workers. There’s barely enough workers at the moment and with the growth that’s forecast it’s going to have to attract a lot more labour.’’

The lack of affordable housing for such workers is also a concern, he says.

A recent study highlighted the growing gap between incomes and house prices, pointing out that house prices in the Marlborough, Nelson and Tasman regions rose a massive 70% between 2002 and 2004.

It suggested a number of measures to create more affordable housing in all three regions, such as allowing more infill housing and providing incentives for developers to set aside portions of land for affordable housing.

The Government has now agreed to fund the appointment of an affordable housing co-ordinator to ensure the recommendations are followed through.

Sowman says another major challenge is a looming shortage of land for residential development in Blenheim. Much of the land surrounding the township has already been swallowed up by vineyards, he says.

“We have enough land [for residential development] for the next 10 to 15 years, but beyond that, we’re in trouble. We need to identify where the future residential growth areas will be,” he says.

A lot of the recent development has occurred at the southern end of Blenheim, at the base of the Wither Hills. It includes two large subdivisions carried out by the council itself - the Forest Hill subdivision, with about 200 sections, and the Taylor Pass subdivision, which will comprise about 400 sections developed over several years.

Sowman says another pressing issue for the council is the demand for more land for commercial development, since the central business district is “bursting at the seams”.

In the last couple of years it has received two requests to rezone rural land for large format retail developments.

Both proposals involve the creation of business parks – one on 17ha on the western side of town and the other on 28ha on the eastern side of the town.

The council is now considering a possible variation to the proposed Wairau/Awatere Resource Management Plan to allow for such developments. Options include creating a new business park zone.

“This is going to be a major challenge, deciding where the future growth of the town will be. The council can’t afford to do nothing; it’s going to have to make a call. We don’t want ad hoc development,” he says.