Gisborne was one of the most depressed areas of New Zealand. Now its future is looking bright with increasing employment and investment opportunities, as Kristine Walsh discovers..
Monday, January 1st 2007, 12:00AM
by The Landlord
From a region nearly crippled by hard times in the late 1980s and early 1990s, Gisborne is emerging as a star player in economic growth in recent years – particularly in terms of the property market.
Property values have doubled in the past five years, and although the market appears to have plateaued, there are still good buys to be had. And if economic indicators are anything to go by, there are solid reasons to snap up property in the region.
The latest figures available from the Real Institute of New Zealand reveal that in September of this year, the median sale price for houses in Gisborne was $210,000. That was down $14,000 on the median recorded the month before and the houses took longer to sell (56 days compared to 49). But Gisborne recorded nearly 5% of all sales throughout the country as opposed to 4% the month before. So while the median price may have slumped, the region is doing comparatively well.
Yet there’s little room for complaint. The $210,000 median is $22,000 more than the median for the same month last year, $79,000 more than the $131,000 in September 2004, and double the median price for September 2001.
Annual growth in residential property values in Gisborne over the three months to September this year was 19.2% (compared to national growth of 10.4%), a rise from the 18.2% growth recorded in August, Quotable Value says.
Listings are harder to come by but those at local agency Walker Realty late last month show a good mix of properties on the market. At the higher end is a renovated villa in the sought-after suburb of Whataupoko, which has a rateable value of $238,000, though price expectation is well over $300,000. Then there is a grand homestead less than half an hour out of town for more than $600,000, a low-maintenance family home in an average area with a rateable value of $160,000, and a three-bedroom home with garage and attached rumpus room in Kaiti – a desirable area for some renters – with a rateable value of just $120,000.
There are plenty of good reasons to live in Gisborne, including long sunshine hours, stunning beaches, unspoiled bush and beautiful lake and river areas. Recreational facilities include excellent golf courses and facilities for other sports including tennis, speedway, swimming, polo, bowling and cricket. The Gisborne District Council maintains two theatres and an outdoor stadium for arts and entertainment. And the strong presence of Maori – about 50% of the population – has helped make waka ama paddling almost as popular as the classic Gisborne pastime of surfing.
Gisborne is made up of the city proper – with 30,000 inhabitants – and rural and coastal areas that boost the population to just over 45,000 people. There are a large number of young people in the city and, consequently, a large number of tenants.
Figures from Massey University’s Real Estate Analysis Unit show that median rents in Gisborne went up $15 from August 2005 to August 2006, from $180 to $195 – just over 8%. But a look through classified advertisements reveals that a renter looking for a three-bedroom house in Gisborne in 2001 would have been paying about $160 a week, $80 less than the $240 generally sought today (the range stretches from under $200 to over $300). So while house prices have doubled, rents have increased half that amount. Meanwhile, rates have continued to climb along with insurance, maintenance, and all the other costs a landlord has to carry.
Though the area has traditionally been considered depressed that is fast changing – the population is rising, unemployment is down, the economy is growing and both businesses and private households are reportedly optimistic that things are going to get even better.
There are more than 2500 businesses in the region and, in the early years of the new millennium, Gisborne was recording the highest economic growth of any area in New Zealand. More flights to and from Gisborne Airport are a reflection of increasing demand, particularly from the business community. Agriculture remains important, but forestry, viticulture, horticulture and related industries such as food processing are becoming increasingly important. And with the recent building boom tradespeople, like elsewhere in the country, are keenly sought after.
All of this means jobs. Jobs mean people and people need somewhere to live.
With house prices in Gisborne still rising and a tight rental market, further development is inevitable and the council is approaching it with caution.
Planners are working on an infrastructure plan for housing at the Taruheru Block, on the city fringe. According to council staff, subdivisions of as many as 80 houses are being considered for the 60 hectares, and it is the site of the new residential Beetham Village. The plan indicates the council’s commitment to allowing for growth, while avoiding suburban sprawl.
Opportunities for development within the city borders remain sought after. A developer recently bought half a bowling club in leafy Whataupoko – premium land on which he plans to build five townhouses.
At Wainui Beach, just five minutes’ drive from the city centre, the council has just approved a reticulation scheme that will do away with septic tanks and give residents access to town water supplies. This will open the way for further development in the next few years. But it will be a high-end investment – already Wainui sections are listed at around $400,000 and modest houses on the beachfront have sold for more than $1million.
Industrial rezoning will soon free up residential sections close to the town beaches of Midway and Waikanae. The changes are more likely to have an impact in a few years than in a few months, but an early foot in the door could pay off.
And in a city where there were once no apartments, there is now extensive development around the harbour area. What was once an industrial area is now open area with apartment buildings and hotels overlooking the water.
Units and studios are still available in Portside Hotel – they are sold to investors who lease them back to the hotel operators. One investor reports that her one-bedroom Portside unit has enjoyed high occupancy in the few months she has owned it and is turning out to be a profitable investment.
There are also opportunities for commercial investors. Most of the city’s main street structures are early 20th century character buildings, many held by owners in it for the long haul. But just last month there was hot bidding for a block of four shops in the suburb of Kaiti, the buyer clearly thinking the return of $32,318 a year more than justified the $395,500 he paid.
Analysts at Bayleys Real Estate say that while Gisborne’s property boom began slightly later than in many other regions, during 2004 and 2005 the market outperformed the rest of the country.
So if that was the boom, Bayleys believes that, despite the current slowdown, Gisborne may have been spared the bust.
“There is no doubt that the housing market is slowing on a national basis and that this will impact upon the Gisborne market,” they said. “Unlike previous cycles, however, a significant fall in property values looks unlikely. It is more likely that there will be a consolidation of the gains achieved over the past two years, with median values set to fluctuate within a fairly narrow band for the short to mid-term future.”
The cooling indicated by recent figures should bring Gisborne into line with the rest of the country where, according to Quotable Value New Zealand, the market is “steady”.
This steadying off comes after increases in property values fell from 24.2% in June and 21.5% in July to August’s low of 18.2%.
The slowdown around the country has been blamed on a number of factors. It was a miserable winter – even in Gisborne, where a few days of rain can see residents hollow-eyed and hankering for the sunny days they are accustomed to.
Then there’s the elephant in the room – houses are just getting too expensive.
It’s too late for some. The growth of house prices in Gisborne has put home ownership further out of the reach of many.
And although employment opportunities in Gisborne have increased markedly in recent years and the number of beneficiaries has dropped significantly, there are still too many families in need to be catered for by Housing New Zealand.
In the Gisborne region – from Potaka in the north of the East Coast to Nuhaka in the south – Housing New Zealand manages more than 1300 properties. They are in big demand – HNZ reports that, as at the end of July, they had a waiting list of more than 80 applicants.
Then there are the students. Organisations such as Tairawhiti Polytechnic attract people to the region, and they too need somewhere to live. Many rent homes as groups while others live in homestay situations. A local investor is turning the upper floor of an inner-city building – just around the corner from the polytech – into nearly a dozen small flats for students.
That sort of short-term accommodation is a new option for investors in Gisborne and there is now plenty available.
Philip Searle, principal of real estate firm Harvey’s and president of the Gisborne/Waikato/Bay of Plenty branch of the REINZ, believes that spring and summer will bring out the buyers, and that the 25 new homes in the Beetham Village – due for completion by March next year – will further stimulate the market.
“Also, the new subdivisions proposed in Gisborne will inspire people to build new homes,” he says.
Recent projects like the Marina View apartments near the harbour and the conversion of the city-centre post office building into high-end apartments has made people realise that Gisborne is a “vibrant, go-ahead city with huge potential”, Searle says.
“These developments have given others confidence to invest, which seems to have developed a snowball effect with each development or refurbishment taken as an indication of confidence that encourages the next person.”
The rental market in Gisborne remains strong, “as has been the case over many years”, Searle adds. “Very few houses remain empty for long. A new trend in Gisborne is the renting of some of the new apartments. It was an unknown market up to a couple of years ago, but is now up and running very well.”
And while investment is strong from local buyers, like most provincial areas, outsiders closely watch Gisborne, Searle says.
“Outside investors are always keen to buy industrial or commercial property, as our rates of return are quite a bit higher than the main centres. We have also seen a number of the new apartments go to overseas buyers as they see them increasing in value and demand in the future.”
And that interest is not restricted to the high end of the market.
“We often see the more moderately-priced rental properties sold as investments to out-of-towners. All in all, outside investors are looking in all price ranges, but most strongly in the under $250,000 and over $400,000 areas for residential property.”
Searle’s confidence in the development in Gisborne is borne out by council building consent figures, which reveal that consents issued in September added up to the highest value for any September on record.
Just over 100 consents were issued, with a total value of $9.6 million, a figure consents officer Ian Petty said was primarily driven by the residential sector, with 20 dwelling consents valued at a record $3.2 million.
And he believes that, while 2006 is shaping up to be a big one for development in Gisborne, there is a lot of talk about more projects on the horizon. “Even if 50% of what is being talked about happens, next year will be even bigger,” he says.
SIDEBAR Regional Economic Scoreboard
The latest ASB/Main Report Regional Economic Scoreboard (August 2006) gives Gisborne a “be there or be square” rating of four stars, based on its recording of the strongest annual economic growth in the country (3.7%), a 3% increase in employment, leaps of 19% in retail activity and 21% in construction. Figures recorded to the end of June, 2006.
SIDEBAR Property managers’ perspective
Leanne Clarke and Angus Glengarry moved to Gisborne in 2004 and by the end of last year had set up property management firm Angus Glengarry.
Both are well qualified – Clarke is a former real estate agent and Housing New Zealand tenancy manager, and Glengarry – who is originally from Gisborne – was an assets administrator with a Bachelor of Property. They say their research pointed to Gisborne having a need for an independent property management service.
Clarke believes Gisborne remains positive for investors, though yields have been dropping.
“There are still reasonable returns to be had in comparison with other areas. Cash flow-positive purchases are getting harder to find but savvy investors realise that property is a long-term investment and are prepared to wait for capital gain. And there are more development opportunities for investors willing to think outside the square with, for example, subdivisions or multi-cash flow properties.”
Of the investors she comes across in her business, buyers today are in it for the long haul. “As the market has recently gone through a period of substantial growth, investors are aware that this will level off and are holding their investments,” she says. “In fact, we have experienced no relinquishment of current investments. If anything, we have investors wishing to be kept informed of further opportunities to buy.”
Angus Glengarry has no trouble finding tenants for the houses it managed in Gisborne, she adds.
“There is not enough supply and a healthy demand for good quality rental properties,” she says. “And people are looking at all levels of the market. Three-bedroom homes – especially those that are fenced, have garaging and are close to schools – will always be sought after, but we have also been experiencing a shortage of executive homes as people at managerial level relocate to Gisborne to take up work and lifestyle opportunities.”
