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West Auckland: Investing in the wild West

Diana Clement reports on investing prospects in the land of the wall-to-wall panel beating firms where the local residents are ribbed as being “Westies”

Tuesday, May 1st 2007, 12:00AM

by The Landlord

From a property investment point of view, West Auckland is South Auckland’s ‘poor’ cousin – not in terms of economy, but as a focal point for investors. Yet as a relatively low socio-economic area in general, Waitakere City, as it’s officially known, has a growing band of long-term renters.

Waitakere City stretches west/north-west from the Whau Creek, which separates Avondale and New Lynn, to the far reaches of the northwestern motorway at Westgate and is bordered by the Waitemata Harbour on one side and Waitakere ranges and Manukau Harbour on the other.


Economy and development
Unlike other parts of Auckland, Waitakere City has been relatively stagnant in terms of expansion. Although the northern end of Te Atatu Peninsula (now simply called “the Peninsula”) has been opened to residential development, little else has happened to the city’s borders in a decade. But that’s about to change.

Having been left behind east, south and north Auckland in the development stakes over the past few years, Waitakere City has its skates on and is looking to redevelop a massive swathe of land on its northern border. The Auckland Regional Council (ARC) is currently hearing submissions for a change in zoning to “metropolitan urban land”.

The land in question includes a new industrial/residential development at Westgate – right at the current end of the northwestern motorway, and a large industrial/commercial development at the old Hobsonville airbase. The former defence land is in the hands of Hobsonville Land Company, (Housing New Zealand), but earmarked for residential and commercial development.

Simultaneously an extension of the northwestern motorway from Westgate parallel with Hobsonville Road to Greenhithe to join the northern motorway at Albany is currently in progress.

The strip of land between Hobsonville Road and the new motorway extension is also under consideration by the ARC, says Sophie Heighway, investment manager at Enterprise Waitakere, the local development agency. “We desperately need that land, but the ARC is resistant,” says Heighway.

The hearings will run until partway through April, with decisions expected in July. John Mackay, Waitakere City Council’s urban development and design manager says (assuming the decisions are in favour of expanding the city) that barring any unexpected appeals to the Environment Court, the land could be ready for development immediately after the July announcement.

The region has been complacent about employment in the past, says Mackay, but recognises now that more land is needed for industrial and residential development.

Economically, a recent Business and Economic Research Limited (BERL) report suggests that the city has dropped down the list against other regions in the past year. It dropped from 12th in 2005 to 341st in 2006.
“One of the possible reasons could be that this land we are talking about hadn’t yet come on stream,” says Mackay. While the North Shore has developed Albany, and East Auckland the Sylvia Park/Tamaki area, Waitakere hasn’t brought any new land into use for a number of years. “One of the things that has amazed people is how quickly the North Shore has filled up its employment land,” says Mackay.

The improved motorway link currently underway will have the effect of enabling more West Aucklanders to commute to Albany in the north to work, rather than dealing with the sometimes snarled rush hour traffic heading towards central Auckland.

The rail line from central Auckland to Waitakere is also being improved, which will help improve commute times for Westies and boost the areas serviced by train. The work includes double-tracking of the railway connecting West Auckland with the centre of the city, a new interchange at Henderson beneath a brand new Civic Building and also a partial under grounding of the train line at New Lynn, to prevent major traffic snarls every time a train passes over a major arterial road that crosses between the station and Lynmall, the shopping centre.

Because it is generally cheaper to rent in West Auckland than the north or central city, rental demand could be boosted once the current work is completed. “This will stimulate interest in West Auckland,” says Andrew King, president of the Auckland Property Investors Association (APIA).

When it comes to employment, 48% of Westies are in full-time employment, compared to 46% nationally. To a certain extent many Westies have to travel out of the area for employment. Having said that local employers are struggling to get staff. “In the last six months I have been to our top 50 companies and the majority are in expansion,” says Heighway. But recruitment problems are a real issue. “Our employers are desperate,” she says.

While West Auckland is an area of lower socio-economic housing (albeit not as low as some parts of South Auckland), there is one part of the region that stands out as being utterly different: Titirangi. Set high above the city at the southern end of the Waitakere Ranges this erstwhile artistic/bach community with a pleasant village at its centre is characterised by houses built in dense bush, often raised on piles. There is a very high rainfall and many homes suffered from dampness long before the current crop of leaky homes were built.

Titirangi commands much higher property prices than most other parts of West Auckland. The suburb boasts many, many $1 million plus homes and also rents that can be $200 a week or more higher than in neighbouring suburbs. Nonetheless for many investors, the area simply doesn’t produce high enough yields to be considered.

The trick, however, is to work out how far towards the neighbouring Westie paradises of Glen Eden, New Lynn and Green Bay it’s possible to go and still convince potential tenants that they’re paying a premium for the Titirangi lifestyle. It’s a bit like the Trumpet togs, togs, togs, undies, undies, undies advertisement: there is a point away from the centre where it’s no longer decent.

Green and leafy Kaurilands and Waiatarua are also popular with better-heeled tenants, but again the togs and undies equation is an important one to consider when buying. “It is still very difficult to pick up cheaper housing under $300,000 in Kaurilands,” says Steve Miles, property investor, and Barfoot & Thompson Glen Eden franchisee, which is predominately what the investor market wants.

One key factor in pushing up prices in the suburbs of New Lynn and Glen Eden is yuppies who have been priced out of central Auckland and are looking for somewhere they can afford. They’re willing to pay top West Auckland dollar for a decent house, because the properties cost considerably less than a similar home in the more desirable inner suburbs such as Mt Eden or Ponsonby.

Miles believes that the most underrated suburb in West Auckland is Te Atatu South. Outside of rush hour it’s just 10/15 minutes by car from there to central Auckland by motorway link all the way, and also located very close to the civic amenities, shops and shopping mall in Henderson.

One of the big problems for many residents in West Auckland is the schooling. Few of the schools have an outstanding reputation and many parents choose to send their children out of the area for secondary schooling.

A brand new private school, Sunderland School, opened its doors this year. If the success of nearby Kristin School (over the upper harbour bridge at Albany) is anything to go by, the school will be oversubscribed in years to come. There has been much talk in Waitakere City of the need for such a school, which is sited in Waipareira Avenue, Lincoln South, near Henderson.

Initially the school role will be limited to primary school students. But as time goes on a secondary division will open, with the limit capped at 1,000 students. School buses will collect children on dedicated routes that reach as far as Helensville, Titirangi, and the Peninsula, which might boost interest among well-heeled parents living in those areas.

Prices, yields and more
According to Infometrics Property, West Auckland had an average gross property yield of 4.9% in 2006, ranking it 12th among 72 regions nationwide. In terms of capital gains, the region is ranked 42nd over 72 regions. For total returns, West Auckland is ranked 35th. For total returns, the region rose to nearly 20th in 2006, but went into freefall to just above 55th, then started to rebound.

Other data of interest to the investor includes the mean number of days to sell, which was around the 33-day mark as the NZ Property Magazine went to print. House price inflation fell dramatically below the national average in 2006.

As far as house price growth went last year, QV figures show a 6.7% rise in West Auckland. This isn’t as favourable as Auckland Central at 7.9% or Manukau at 10.6%, says King, but ahead of North Shore at 6.3%. That compares with Christchurch: 10%, Palmerston North: 15% and Hutt Valley: 17%.

King believes that West Auckland, along with the rest of the country, will “quieten down” in 2007.

In terms of specific pockets of West Auckland, King says the “gentrification” of Hobsonville, which currently has a lot of state-house style defence properties, will pull up nearby suburbs of Massey and Ranui.

Demand for property has remained fairly stable over the past 12 months says Miles. The pockets that have excelled in the investment stakes include Ranui “because the yield was very, very good over the past 12 months,” and Glen Eden. In those areas, he says, it’s still possible to pick up rental properties for around $280,000 and get a $300 rent, whereas in other parts of West Auckland you may get the same rent, but have to pay $350,000 to buy the property.

Miles believes that the expansion into the Hobsonville corridor, if it happens, will pull up some of the surrounding areas. “It will be quality housing and it will attract higher prices overall for the whole area.”

The area that Miles believes may not be fully valued is Te Atatu South, which has become the poor cousin of the Peninsula, which has totally transformed itself in recent years. He says that people often forget that by motorway, it’s quicker to get to central Auckland from Massey and Te Atatu than it is from New Lynn, which is much closer as the crow flies.

With so little affordable investment property on the market, competition can be hot. Six bidders were involved in the recent auction of a block of three flats at Te Atatu South roundabout, opposite Foodtown. It sold for $753,000 resulting in a 5.5% yield for the purchaser. As the NZ Property Magazine went to press, Barfoots Glen Eden had a couple of sub-$300,000 properties for sale. For this sort of price, says Miles, you’d expect a cross-leased site, which may not be bad for investors. A low maintenance brick and tile property on a full site was more likely to command around $400,000. “The owner occupiers have really driven up prices,” says Miles.

On the rental front, many landlords and management agencies saw a slight slip last year, but a bouncing back of the market this year. Vicki Wright, property manager for Glover Real Estate, says she’s seen rents rise “significantly” by between $10 and $20 this year.

The easiest suburbs for which to find tenants are Titirangi and New Lynn, says Wright. “Titirangi, because it is Titirangi and so different. New Lynn and Glen Eden because they are so central and convenient.”

King adds: “It is difficult to accurately measure how much they have risen. It appears to be around 5%, which isn’t too bad and better than in central Auckland, which has been very flat, although yields have fallen”.

The advantage over South Auckland where you’ll generally get a better yield, says King, is that the tenants down south are often “rougher” and come with “more hassles. In general you have a better class of tenant in West Auckland”.

When it comes to positive cash flow, there isn’t an awful lot to pick up. APIA life member and west Auckland investor since 1970, Coral Wong, says she hasn’t been buying since last year and nor are many of her clients through her chartered accounting firm Pioneer Consulting Group.

It’s something that Harcourts business owner for Te Atatu South and the Peninsula Di Love concurs with. While a lot of new investors are looking for their first rental property, the experienced landlords aren’t as active in the market. Some have been selling and realising profits.

Even so the new landlords are buying at the $300,000 to $400,000 mark and “being sensible”, says Love. Although negatively geared, they are buying for the long haul.

Love adds: “Over the last six months sophisticated investors have been jumping out and have been taking the capital gain”.

On the rental front Love has noticed that tenants who realise they can’t afford to buy themselves have been demanding a higher quality of accommodation, meaning that lesser quality properties are more likely to be vacant.


Commercial property investing

Increasingly, residential investors are looking to invest in commercial property. In West Auckland, says Mike Bristow, commercial property valuer of Bristow, Barbour & Walker, the next 12 months look mostly stable in retail and office developments and firming for industrial.

Bristow says the following will buy you:

$500,000:
· Industrial: about 300-400 sqm in a good area such as Lincoln Road; 300-400 square metres or 400-500 sqm in a secondary area such as Henderson Valley.
· Commercial: a block of two to four shops in a suburban area, or a double shop in a fringe CBD location in Henderson or New Lynn.

$1 million:
· Industrial: 600-800 sqm in a good area or 800 to 1000 sqm in a secondary area.
· Commercial: large block of four to six tenancies or a standalone shop or office in a central CBD location.

Statistics New Zealand information

Whichever region you’re researching, the Statistics New Zealand Quarterly Regional Reviews might be useful for investors. Some statistics from the most recent West Auckland Quarterly Regional Review included:

Population
Waitakere’s population was sitting at an estimated 194,700 at 30 June 2006. It’s projected to rise to between 232,100-272,700

Crime

Waitakere district’s annual recorded offences have dropped since 2002. Violence, sexual offences, drugs and antisocial behaviour, dishonesty, property abuse and administrative crimes have fallen. Property damage has risen in that time.

Employee count
Waitakere has a total of 44,420 employees. The two largest employers are manufacturing, closely followed by accommodation, cafes and restaurants.

Building consents
Building consents for private dwellings for Waitakere have oscillated between 150-250 a month throughout 2005 and 2006. In December 2006 there were 155 consents for dwellings. There were 204 consents that same month for total building and construction.

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Lender Flt 1yr 2yr 3yr
AIA 4.55 ▼2.29 ▼2.59 ▼2.65
ANZ 4.44 2.89 3.25 3.39
ANZ Special - 2.29 2.69 2.79
ASB Bank 4.45 2.29 2.59 2.65
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.29 2.59 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 2.89 3.19 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 2.50 1.99 2.35 2.45
Heretaunga Building Society 4.99 3.50 3.40 -
HSBC Premier 4.49 2.25 2.35 2.65
HSBC Premier LVR > 80% - - - -
HSBC Special - 1.99 - -
Lender Flt 1yr 2yr 3yr
ICBC 3.69 2.25 2.35 2.65
Kainga Ora 4.43 2.79 3.04 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.20 3.50 3.50
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.35 2.65 2.65
Liberty 5.69 - - -
Nelson Building Society 4.95 3.20 3.24 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
SBS Bank 4.54 2.79 2.79 3.15
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 2.29 2.29 2.65
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - 2.09 - -
The Co-operative Bank - Owner Occ 4.40 2.29 2.59 2.79
The Co-operative Bank - Standard 4.40 2.79 3.09 3.29
TSB Bank 5.34 3.09 3.29 3.45
TSB Special 4.54 2.29 2.49 2.65
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.09 3.29 3.39
Westpac - Offset 4.59 - - -
Westpac Special - 2.29 2.69 2.79
Median 4.55 2.79 2.99 2.80

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