Demand high in Whangarei
Monday 31 July 2017
Whangarei Town Basin marina
The northern-most city still represents a popular, affordable entry-point into the market, writes Louise Richardson.
By The Landlord
With its warm, temperate climate, friendly locals, thriving arts and culture scene and solid business infrastructure, Whangarei – New Zealand’s northern-most city - has lots to offer, especially to those investors who have lost hope of achieving their dream amidst the steadfastly upward trajectory of the Auckland property market, two hours’ drive away.
Indeed, the winterless north has become increasingly popular with big-smoke-escapees and downsizers in recent years, attracting, amongst others, couples who are selling up in Auckland and releasing assets for their retirement. Ditto for young people.
The city (population approximately 57,000) has recently undergone a facelift and the town basin is now a lively place with lots of shops and cafes. A colourful ceramic theme can be seen at various places in a tribute to one of Whangarei’s most legendary personalities, Austrian artist Friedensreich Hundertwasser. The art centre he designed for the local council back in 1993 is now being planned for the former Northland Harbour Board building and it’s hoped that construction will begin soon.
While much of Northland’s property market, in general, has slowed down a bit recently, things are still ticking along extremely well in Whangarei where the median price for April was $430,000, up from $347,000 in April 2016, an increase of 23.9%, year-on-year, according to REINZ statistics. However, sales volumes for April fell by 29% for Whangarei, when compared to April 2016, suggesting that demand from first home buyers and property investors too, may not be being met. The compound annual growth rate was 9%.
Roger Raymond of I-Rentals confirms that there are definitely many tenants out there, looking for somewhere to live.
“Last week we had four properties on our books and they were all snapped up. This week we have none and the shortage is getting worse.
“We vet tenants very carefully with credit checks, TNZ checks, and we also google everyone and look at their Facebook page because it’s amazing what information you find there.
“Someone might look OK, but when they’re photographed in an untidy home, or have gang-related symbols on their page, you know they could be bad news.”
Raymond says that an influx of doctors at the beginning of each year means more demand for high-end properties, especially in Maunu, near the hospital. Recently there was a flood of immigrants from South Africa, which seems to be tailing off now, and in general, there are still lots of Aucklanders coming north to check out the Whangarei property market.
“The only time that’s a problem is if these JAFAs buy a house for their retirement and put tenants in, then when they eventually arrive to live here themselves, that property is lost as a rental.”
He adds that rents are going up because landlords have a captive market and can now afford to charge more, covering off higher rates bills, insurance for possible P contamination, and the cost of insulation.”
According to Raymond, every suburb in Whangarei is in demand right now. “One-bed, two-bed, three-bed or four. It doesn’t matter where, it will be snapped up quickly.”
As an investor himself, Raymond has begun looking at relocating dwellings from elsewhere to Whangarei. “There’s such a construction boom going on, getting a new house built could take well over a year. Relocatables seem a better option,” he says.
Loan Market mortgage broker, Carie Townley says in terms of the local market she is seeing buyers of investment properties who were looking in the high $200,000s bracket last year, are now looking at properties over $300,000, knowing that the yields will be consistent and will potentially improve as the market tightens.
Harcourts Just Rentals business development manager Renee Wilkinson arrived in Whangarei in 2015 when the average rent was $330 per week; this year it has broken through the $400 barrier.
She says many of her clients are getting yields of 5.5 – 6%, especially those with investment properties close to the CBD in Kensington, The Avenues, Morningside and Riverside.
“I had one client last year who was getting about 8.5%, so these properties are generally doing a lot better than similar ones in Auckland.”
Wilkinson also suggests investors buy in areas (preferably close to town) that are not perceived as being salubrious because the houses are cheaper, yet the yields can be high. On the other hand though, the capital gain mightn’t be as impressive.
“I have a rental in Kamo in a very good school zone which I bought in March 2016 for $330,000. It’s very simple with a small section that’s easy to maintain and I’ve got a very reliable tenant in there.
“We painted the bathroom and I have only added a heat pump, HRV and am working on insulation in the ceiling as it’s already insulated under floor. It was a pretty tidy investment property
“When we leveraged it to buy our own current home, in June 2016, I had a registered valuation that came in at $368,000. Recently the house across the street was advertised as ‘enquiries over $410,000’, and it sold within days.
“The rent for my Kamo place was $350 per week to start with, but now it’s $370, and the property would be cash flow positive if we hadn’t borrowed against it.”
Mark Workman from Pacific Homes says that he just loves talking about the Whangarei property market because it’s such an up-beat story.
“Quite simply, I think things are just going berserk and to be honest, while the savvy investors who bought here about 18 months ago are probably pleased with themselves, it’s never too late, as prices just keep going up.
“We do about thirty house and land packages each year and 18 months ago 40% of our business was with first home buyers. Now that’s down to just 10%, while 60% of what we’re doing at the moment is for investors.
“It makes perfect sense to build when a $450,000 property can bring in $420 per week.”
Workman says 50% of his customers are from Auckland and because Pacific Homes deals in smaller homes he’s seeing lots of empty nesters from suburbs like Glenfield and Mairangi Bay buying in Whangarei where they can build a new, modern dwelling and still have $400,000 in the bank.
He notes that other Aucklanders are working from home in their new Whangarei base and only going back down for meetings. With high-speed fibre-optic access across the city that sort of flexibility is possible.
Suburb-wise, he says Kamo is very popular at the moment, as is Tikipunga.
“Ridgeway Drive, Pebble Beach Boulevard, Totara Parklands; all those subdivisions are going crazy and to be honest, I can’t see this ending any time soon.
“As long as Aucklanders are getting squeezed out of their own market and coming up here, maybe taking pay cuts which are offset by lower rent – perhaps while they save to buy, demand will continue to outstrip supply.”
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