Wellington South: Positively diverse

Wellington

With its close proximity to the airport, the CBD, Wellington hospital and Massey and Victoria universities, demand for rental properties is consistently high in Wellington South.

The development of Miramar as a centre for film production and special effects has helped put Wellington South on the map and the area has seen an influx of young professionals. But the fluctuating nature of the local film industry means demand can often outweigh supply.

Quinovic Vivian Street principal Jenny Tamplin says Berhampore, Seatoun, Brooklyn, Lyall Bay, and Island Bay-Owhiro Bay are in demand by renters. “In terms of overall supply and demand there is a reasonable balance except when the film industry is in town, and the impact on demand then depends on the size of the film,” she says.

Location location

Films aside – location and lifestyle are the main reasons people choose to live in the area, according to Grahame Duffy, general manager at Oxygen. “Wellington South is close to Wellington CBD for commuters, has good schools and is close to beaches and good supermarkets,” he says.

The top five suburbs for rental demand in Wellington South over the past six to eight months, in order, are Miramar, Hataitai, Mt Cook, Evans Bay and Strathmore Park. “Demand outweighs supply in these top five suburbs and we often have a list of people waiting to tenant properties in these suburbs,” he says.

Quinovic Kent Terrace general manager Robbie Mitten says the suburb that stands out most in Wellington South is Seatoun. “The best streets are consistently found in Seatoun. It's frequented by executive families and movie industry contractors,” he says.

Some areas, particularly those with separate housing stock, are dominated by families. “Miramar-Maupuia, Strathmore Park, Breaker Bay, Kilbirnie, Rongotai, Lyall Bay, Karaka Bay, Seatoun and Berhampore tend to attract families and professionals in need of bigger properties,” says Duffy. “These suburbs offer weekends that can be spent near the beach, local playgrounds and parks.”

Student accommodation

Other suburbs with denser housing stock - Newtown and Mt Cook in particular - have significant numbers of single person households and couples without dependants. These properties - generally multi-bedroom multi-units - are close to the hospital and universities and are in high demand. “Students are looking for cost effective, secure properties that are less modern,” says Duffy. “Properties that are within walking distance to Massey or Victoria universities are in high demand and there is always high activity at the start of each year that lasts until early March.”

Julian Inch, a property investor who owns a number of rental properties around Wellington, says his tenants in Wellington South are predominantly young couples and older professionals. “I have a range of renters depending on the size of the flat and especially the time of the year. Mostly young couples and older professionals. I have had some very stable long term renters (one came with the property!) and some short term six monthers.”

Inch owns a home in Brooklyn and has two rental properties in Evans Bay-Hataitai with five flats between them - three in one and two in the other - ranging from a bedsit to three bedrooms. He has owned them for 10 years.

“Both the rentals are on the seafront with good views and have a nice aspect and feel to them. I got each of them at a good time and so the price worked in terms of investment,” he says. “Buying multi-flat properties can work very well in this respect. Both properties have 'potential' in terms of development.”

Densification

Inch suggests the better investments in Wellington South are multi-flat properties with good outlook and space, rather than chopping up sections and in-filling. According to the Wellington City Housing and Residential Growth Study (September 2014) southern suburbs have been transformed by infill housing, conversion of existing housing into flats and (more recently) an upswing in multi-unit construction. A surprising number of houses in Wellington South are also original, although many have subsequently been divided into flats.

In Miramar and Strathmore infill development has been rampant, so much so that single house lots are now the exception rather than the rule. However, some of the development and designs are poor, and in response the council has imposed stricter development controls on infill dwellings and subdivision. Newtown and Mt Cook have also provided a substantial proportion of infill housing in the region.

The move towards medium-density housing in Wellington South is seen by council as an important component of their town planning and urban development strategies and the council is actively looking at suburbs that meet the criteria for medium-density development. The criteria include a town centre with shopping, services and local employment opportunities; good transport links; room for residential buildings and proximity to schools and community facilities.

The criteria also includes commercially-viable options for developers to produce residential developments at an affordable price for potential owners.

The council also aims to ensure that public works, infrastructure capacity and private development occur in these suburbs. A notable example of the council's approach is in Kilbirnie where the medium-density zonings are supported by town centre upgrades and programmed infrastructure upgrades.

“Wellington South and eastern suburbs will begin to develop high density units and apartments (up to 12 metres high) due to city planning regulation changes,” says Professionals Wellington agent Paul Dickason. “Medium density plans are being executed in some suburbs to increase the maximum site coverage close to the suburb centre.  This will encourage medium density townhouse style developments.”

With demand for housing constantly rising, the Wellington City Council has identified Island Bay-Owhiro Bay as an area that suits medium-density housing and is currently working with the community to develop a draft plan.

Mitten says they have seen an increase in movement and density in such suburbs as Island Bay-Owhiro Bay, Lyall Bay and Miramar. “Developments that have occurred or are in the process of being built have focused on the townhouse style of living,” he says. “Townhouses with a small amount of land and a garage are popular.”

In December 2015 the Government gave the green light for a potential 300-home development at Shelly Bay, on Miramar Peninsula. The government has designated the area a special housing area, which, under the Wellington Housing Accord, is designed to fast-track the consent process and provide 7000 new homes in Wellington over five years.

Ideas mooted for the 2.8-hectare site - formerly owned by the New Zealand Navy and Air Force - include modelling it on San Francisco's Sausalito, with a mix of residential and commercial, art galleries, cafes and restaurants, boutique shops, craft brewery, and a cable car. A ferry service to the CBD is also being considered.

Capital gains

According to the latest CoreLogic data, capital gains for the Wellington South region have remained fairly static for the year to September 2015. Suburbs with high rental demand, however – Berhampore, Vogeltown, Newtown and Island Bay-Melrose – have seen some growth. A two-bedroom house in Berhampore, with a median capital value of $319,450 saw a gain of 6.4%, while a three-bedroom house in Island Bay-Melrose with a median capital value of $614,740 saw a gain of 7.3% over the past year, and a tidy 21.2% over the past five years.

Duffy says that Miramar is a suburb to keep an eye on. “Capital growth areas are specifically Miramar due to Weta Workshop being so close and generating jobs for the local economy,” he says.

REINZ data for the Wellington South region shows a 3.6% increase in median house prices since December 2015, and 7.6% since January 2015. Dickason says that since 2007, Wellington's capital growth has been conservative or neutral but the market is showing signs of improvement.

“If an investor with a buy and hold strategy of between five and 10 years is looking at property in Wellington's south and east then now would be a good time to look at these areas of Wellington. Suburbs offering a good return on investment are Kingston and Berhampore,” he says. “Lyall Bay has become less industrial and more desirable suburb in the last decade. It is now popular for both renters and home owners.”

For those looking at investing, gross yields since September 2015 for Wellington South range from 4.2% for a three-bedroom house in Island Bay with a median capital value of $614,750 and a median rent of $500, to 6.1% for a two-bedroom flat with a median capital value of $319,450 and median rent of $375 in the Vogeltown-Berhampore-Newtown region. “Berhampore is becoming a trendy suburb that joins neighbouring Island Bay, and is close to the city and the coast,” Duffy says. “Recently the shopping centre has been upgraded which is a sure sign of progress.”

Hataitai also has a good yield over the same period. There, a two-bedroom flat with a median capital value of $346,600 and a median rent of $390 saw a 5.9% yield – and a 16.5% yield over the past five years, the highest in Wellington South.

Tamplin says that an influence on demand - which applies to the Wellington region in general - is the upswing in people moving from Auckland to Wellington as a result of Auckland house prices and traffic. Overall she believes it is a good area to invest in, as it will see growth as people like to move to the city fringe when families arrive and they wish to have a change from the city.

“Kingston is relatively well priced considering its proximity to the city, Berhampore is an up-and-coming area and Strathmore Park is underrated given the stunning vistas available from some parts,” she says.

According to Duffy, investment properties that are snapped up quickly by tenants are those that are insulated, heated, have open plan living and have either off street parking or garaging.  “Well maintained properties will be appealing to working professionals in these specific areas as commuting times are short and beaches are close-by, offering great lifestyle,” he says.

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