Gore vs Tokoroa: Gold in towns of timber and trout

Here’s the scenario: a sharp-eyed kiwi from Whangamata takes his skills across the Tasman to Perth. He experiences intense buoyancy in the local market, then a slowdown, and observes a shifting attention span by Aussie investors who turn to Godzone. He decides how lucky kiwis are with no stamp duty or capital gains tax – casts an eagle eye back home – and strikes gold in Gore.

So starts the story of Campbell Price – owner of a house he hasn’t seen, in a place he hasn’t been to. So confident was he, however, Price paid 5% more than the asking price – outbidding four other offers made within 24 hours.

Is Price happy? Surprisingly, yes – despite knowing the house sold in 2002 for $19,000.

“We paid $93,000 for the three-bedroom house, as it had been renovated and will rent for $140-$150 per week – approximately 8% return.”

Price looked long and hard – and is queuing for another deal under $100,000 – if he can find one. He reckons Kiwis would be surprised by Gore’s Aussie invasion.

“I was astounded with the amount of turnover and sales Gore has – mainly under the $100,000 price bracket – due to investors, many of them Australian.”

Price says properties with large sites like his at around 1000sqm are subdividable – not viable now, he concedes – but he’s in for the long term, believing land values will continue to soar. Or, he could build a granny flat to increase return.

Gore resident Richard Preston and his partner began buying property four years ago – joining Southland’s Property Investors’ Association and being coached before venturing into their first rental. It was about the same time as the Aussie invasion. Preston says capital gain and high yield was very achievable four years ago, but as time has gone on, yield isn’t so attractive, with values rising. There is a shortage of quality houses under $100,000 – Preston emphasising ‘quality’. He says it’s easy to buy cheaply; finding a tenant is another story. Preston’s also aware of a heavy out-of-town presence, and says while current yield isn’t as good as in Invercargill, he’s still looking for good property in Gore.

Ray White Realty director Fergus Nicholson wonders whether saturation point has been reached in terms of outside investors. With house values doubling in the past three years, bargains aren’t the same. Nicholson says Ray White’s area of focus locally is strong – the odd tidy homes under $100,000 are still available, but most are now ranging between $150,000-$250,000.

Meanwhile, president of Southland Real Estate Institute and licensee of Gore and Districts’ Real Estate, Val Tytler, recently sold a three-bedroom house for $48,000 to an out of town buyer – nice location, but poor condition. She estimates that if the buyer spent around $15,000, it could then fetch around $130,000.

Good homes under $130,000 don’t exist in Gore anymore, according to Tytler. And she says there is a shortage of rentals. Current median rentals range from $130pw for a two-bedroom home to $160pw for four bedrooms. Tytler believes Gore’s big insurgence of Australian investment is waning, but she also believes there is room for growth. It’s a very different market than five years ago – and figures reflect that.

She says February’s median selling price was $130,000 – 40 sales in total and median 20 days on the market. Last February, the median selling price was $104,000, compared with $80,000 in 2005, $85,000 in 2004 and $63,500 in 2003. Volumes are remarkably static – ranging from 36 in 2004 and peaking at 50 last February.

Turnover is constant, however, and Tytler sees a huge hole for new housing. But then, people aren’t exactly flocking to Gore – and that’s how some locals like it. Census 2006 put the population at 10,548. Add close neighbour Mataura’s 1560, and you have 12,108, lower than the 12,459 in 2001 and even less than 1996’s 13,278.

Things are similar in Tokoroa
Look for a North Island comparison and Tokoroa comes to mind. It’s inland, fertile farm country; near rivers, lakes and mountains – and has a history built on forestry.

Like Gore, State Highway 1 runs through it and all roads lead to Tokoroa. Currently home to 14,000 – the population dropped 8000 in the past 10 years, though less was lost in the past five, according to South Waikato District Council economic development manager Marion Smith.

Gloomy forecasts followed massive redundancies at Kinleith’s timber mill in the early 2000s, but Smith says Statistics NZ’s predicted decline didn’t eventuate. What was to have been an 11% slump based on the drop from 1996 to 2001 was only 3.5% – and most of that occurred prior to 2003.

The ‘ghost town’ prophecy never eventuated – and Smith cites two reasons why. Farming is a $220 million export business, set to be bolstered with Carter Holt Harvey’s impending release of 22,000ha of forestry land for farming. “This equates to 90 more farms,” says Smith. Bridging that is a highly skilled engineering base, with not one, but two, big engineering firms in Tokoroa.

Other key factors include Tokoroa’s rail link to Tauranga and Auckland’s ports, plus SH1. Smith says plans by Transit New Zealand to bypass Taupo will make Tokoroa a first hit for motorists, estimating Tokoroa will benefit by 10,000 vehicles a day.

With more than 25 ethnic groups in Tokoroa, council is driving a positive future – multi-cultural diversity hinged around art, culture and tourism. Tokoroa’s innovative carved “talking poles” project is not only an emblem of the town’s diverse ethnicity, but one bent on worldwide recognition – bringing international business and training opportunities to the area. And with 130km of Waikato River bordering South Waikato district, a planned river trail from Hamilton to Taupo also poses prospects.

Lures are there to tempt developers – a window of opportunity for greenfield potential, thanks to a levy-free policy. How long that will stay, Smith can’t say. But for now, she says Tokoroa’s infrastructure enables growth – unlike some areas, caught behind the eight ball.

“The town was built to be a city. The infrastructure is there.”

Heritage ranks among the differences shaping Tokoroa and Gore. Where Gore clings to its deep southern character, country music crown and moonshine folklore, Tokoroa’s rugged timber town mantel is fraying – no longer reliant on Kinleith’s mill to fuel the economy or image.

Early opportunists appear to have reaped the rewards when Australian and Asian investors swamped the market four years ago. Smith says those who bought between 2002 and 2005 have done extremely well, 200-300% gains common, while 2005 to 2006 was still profitable with 100-150% gains.

Valuer Dan Jones says Tokoroa has averaged 40% gain over the past three years. Yields have come down measurably, however, and he says buyers are happy to get 9%. Jones believes Tokoroa is still very affordable and sees values rising. Its image is improving and he likens the town to New Zealand, ‘70s’ style – in a positive way. He believes investors who buy well and improve their asset can find reward.

Harveys Realty Waikato manager Linda Churchill says Tokoroa’s property market is buoyant – $130,000 the median selling price for an average three-bedroom home with one bathroom and double garage. Bargains can still be found for around $75,000 on sites of 800sqm, and with 1200sqm the subdividable minimum in Tokoroa, Churchill says there is buyer interest.

Top end average is around $360,000 – modern, four bedrooms, two bathrooms and in nice streets. Churchill says Tokoroa’s north side is known as the “Wai” area, due to street names starting with Wai. The south side of town bears the timber mill façade with “Mark I, II and III” versions of forestry houses built by Carter Holt Harvey.

They make good pickings for the likes of Wayne and Fiona Dickson – who are in the business of renovation and property management. Last year, after being constantly asked for rentals, Fiona set up Rentassured Tokoroa, and now picks up houses to manage for other investors – finding little difficulty filling them. Wayne senses renewed interest in Tokoroa.

“Three years ago I could have bought a stage III Kinleith house for $55,000. Now I pay $100,000-$110,000. The cheap stage I houses were $20,000-$40,000 and now they are $65,000-$90,000.”

The Dicksons average $120pw rent for a two-bedroom house, $120-$150 for a three-bedroom Mark I house, $150-$180 for a three-bedroom Mark II house, and $180-$220 for a Mark III house. A good four-bedroom home in Tokoroa fetches $190-$220. Dickson says the key is “nice” – houses in poor condition will stay vacant.

Churchill says Tokoroa has a lot of absentee landlords. And while overseas’ interest is still keen, she has noticed a decline among Australians. Churchill says the numbers don’t stack up as much and suspects that’s why spots like Gore became flavour of the month.

Dickson agrees, having already bought some properties from Australians. “They basically rolled into town when everyone was asleep. They saw what us locals were unable to see – that it was undervalued.”

But where does that leave Gore?
There is high expectation for Gore’s future with significant mining likely, due to a large lignite belt south of Mataura, according to consultant planner for Gore District Council Keith Hovell. Solid Energy has already scooped up significant amounts of property – securing land for the long term as the company investigates the lignite’s usage.

TrustPower is also investigating a wind farm in the Gore district, according to Hovell, and he envisages a labour force in future. That will bring a demand for good rentals, which he says are in short supply.

There are two main areas of residential development taking place – the slower of the two larger greenfield blocks, according to Hovell. Around 120 new sections have been created in the past 18 months and these are expected to filter through over the next few years. The more active growth area is the subdivision of large sites within town. With no minimum size restrictions, Hovell says council tends to look at the nature of each area and approve accordingly. With much of Gore’s housing in the older bracket, he says flats and townhouses are tending to replace older dwellings.

An active niche market in vintage aircraft restoration also has its spin-off with land adjoining Mandeville airfield north of Gore being made available for lifestyle blocks for aircraft enthusiasts, says Hovell.

Forty-five minutes from Invercargill, Gore is a natural neighbour and has a satellite campus to the Southern Institute of Technology. Mataura still has a meatworks. Its paper mill closed in 2000, but an MDF plant handles timber processing in the district and Fonterra has a big presence with the Edendale Dairy Factory. In terms of tourism, the Mataura River is acclaimed worldwide for its brown trout and attracts international fishers – particularly Americans.

Council actively attracts business and Hovell says there is an expansion of childcare and early education facilities. He believes Gore is essentially a retirement area, however – one built on its special character. The country and western atmosphere is fierce – the annual quest to win New Zealand’s Gold Guitar just a small element of an overall tourist theme.

“The music image is strongly supported by local people,” says Hovell.

And with moonshine festivities another annual ritual, Gore’s Hokonui whisky still seems to be the only relic of note in town.