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Regional review: Gold on the wild West Coast?

Covering a huge landmass with a population of more than 30,000, the West Coast region is located on the western side of the South Island and is the fifth largest region in the country, spanning 23,000sq km from Kahurangi Point in the north to Awarua Point in the south – more than 550km.

Monday, March 3rd 2008, 5:35AM

by The Landlord

Of its three territorial authorities, Westland and Gray Districts cover the smallest land mass but have the largest population of around 15,000, encompassing the vibrant towns of Greymouth and Hokitika.

The region’s economy is driven by natural resources – mainly coal and gold, and in recent years it has also relied on a number of other industries including logging, farming, tourism and oil.

The past few years have seen the economy expand rapidly along the coast, with a growth rate well above the national average at 5.6%. West Coast employment has increased more than 13% during a period when national growth was only 2%, thanks to large mining companies like Solid Energy and Pike River Coal.

There is an estimated 4000 to 6000 people expected to move to the coast within the next two years.

Pike River Coal alone is expected to bring up to 150 people and their families to the region by the end of the year, and far more once the mine is fully operational.

Pike River has invested more than $70 million in recent years and built the largest underground coal mine in the country.

Late last year, the region was riding high on the multi-million dollar investment of Pike River Coal to upgrade Greymouth’s dilapidated port. But the proposal was canned in an eleventh-hour decision in late November, which has locals reeling.

Despite this, the company and its competitors are major influences in the rise of the West Coast market.

Greymouth is the commercial hub of the region with its surrounding industries and services, large retail precinct and population of about 8000.

Half an hour’s drive down the road is Hokitika, seen by many as the tourism hub, with a strong growth of cafes, restaurants and attractions.

The West Coast is known for its wild weather, and the region’s property market is seasonal. In winter, torrential downpours and cold winds blasting off the Southern Alps keep new investors away, hence most sales occur in the summer months.

Harcourts real estate agent Kevin O’Donnell says growth has been particularly strong in Greymouth where a lot of the region’s commercial outlets are based.

While the failure of the Pike River Coal deal has been “absolutely gutting”, there are still a lot of things to drive the market in a positive direction, he says.

Among these are the upturn in the dairy farming industry, with the Westland Co-operative Dairy Company in Hokitika one of the larger employers in the region.

And he believes the coal mining company will still be a major driving force for positive growth for the region.

“I certainly wouldn’t paint a doom and gloom picture that may be around the rest of the country.”

EV Arthur First National principal Frank O’Donnell says the region has seen an incredible increase in property prices over the past four to five years.

An average house in the suburb of Runanga, about 10km from Greymouth, is fetching between $160,000 and $200,000. Four years ago that same property may have sold for between $40,000 and $50,000.

O’Donnell says it has not been uncommon over the past two years to see property owners make more than $100,000 in capital gains from their properties.

Large developments have also grown in the region and, for the first time, the West Coast is attracting major residential and commercial subdivisions as well as large-scale contracting and building companies from outside the region.

Further south, the tourist towns of Franz Joseph and Fox Glacier are also attracting attention, with a large 100ha commercial subdivision under way at Franz Josef.

The subdivision site, 3km north of Franz Joseph has been rezoned to include a total of 50ha to be developed for tourism ventures and a further 25ha for residential sections.

Spokesman for the Franz Alpine resort development Gavin Molloy says the development will include a range of tourism services and commercial activities, as well as new tourism activities.

Of the 32 residential sections developed, 27 are under contract for an average price of $120,000.

However, local real estate agents say sales have slowed significantly in the past four months due, in part, to what they believe is an oversupply of land for the market.

Buyers have reduced dramatically and bare land prices have stagnated.

Kevin O’Donnell believes there are still people coming in to the region but commentary over high interest rates has meant buyers are more likely to sit for 12 months and wait out possible further increases.

However, with increasing employment opportunities and a subsequent increase in the number of residents, the rental market is strong, and although sales have declined, prices have not.

Solid Energy has given a timely boost to the region, increasing production and providing employees with loyalty bonuses and pay rises if they sign on for a further two-year term.

Recent sales figures show the average house in Greymouth selling for about $250,000, and could command around $300 a week in rent.

Brand new homes are harder to find but could rent out for more than $400 weekly. A house recently tenanted by O’Donnell in a new subdivision is returning $425 a week.

O’Donnell says many industry employees are given an employer contribution towards rent.
South of Greymouth is also popular with families. O’Donnell says a major change in the market has seen the outlying suburbs of Cobden and Blaketown become popular.

While these areas are close to the sea, they are colder and do not have the facilities of Greymouth and Hokitika.

Two properties recently listed in Cobden were on the market for $159,000 and $183,000 respectively and achieving rental incomes of around $220 a week.

Smaller, outlying towns such as Reefton have also seen an increase, but without the population to sustain the growth, sales declined quickly.

However, prices in Reefton are still achieving more than $150,000, where five years ago residents sold their houses for less than they paid for them.

While the higher bracket properties in Greymouth are selling for around $400,000, most are in the $150,000 to $300,000 price range.

O’Donnell says first homebuyers are making a resurgence in the region, with most buying property around $200,000 with little or no money down.

Investors range from Auckland, Hamilton and Wellington, as well as a significant number from Nelson. All are looking south for their next ‘bargain’.

“A lot more of the investors here are from outside Greymouth, rather than from Greymouth.”
Two years ago a three-bedroom house in Greymouth may have set you back a relatively small $150,000. Now that same house will cost around $260,000.

However, that is still vastly cheaper than any of the major centres and rental returns are still adequate.

Real Estate Institute figures show the median price for a house on the West Coast reached $216,000 in October, a jump from $170,000 in September.

While some investors in the region are bemoaning the fact property is expensive, he believes it is still cheap – especially when compared with the rest of the world on entry-level prices.

« Wellington: Simply SteadyCentral Auckland: Humming in the hub »

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.14 6.79 6.65
ASB Bank 8.64 7.14 6.75 6.39
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.14 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.74 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.89 6.55 6.35
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.65 7.25 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.09 7.59 7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.74 ▼7.09 ▲6.95
SBS Bank Special - 7.14 ▼6.49 ▲6.35
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.84 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.24 6.75 6.39
Median 8.64 7.19 7.17 6.65

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