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Regional review: Our best-kept secret

The Wairarapa is a growing region with immense potential. Patricia Moore looks at the state of the market and how the locals view their pocket of the country.

Monday, April 7th 2008, 8:00AM

by The Landlord

The Wairarapa may only be an hour over the Rimutaka Hill north of Wellington, but to many it’s a world apart. It is an area rich in history; a region where New Zealand’s pioneering landed gentry sought to recreate the world they’d left behind.

Change came with the railway as it snaked its way up the Wairarapa, and the region was exposed to a different type of farming.

Farming is still essential to the region’s economy, but its importance is decreasing as pasture gives way to more modern drivers, such as the grape and olive industries, cuisine and more recently lifestyle developments.


The region’s proximity to Wellington has seen a change in more modern industries that support the local economy, and has also paved the way for a developing property market.

“In the last couple of years, more and more people, especially ‘Wellingtonians’, are choosing to move to the Wairarapa whilst continuing to commute, or moving here for the lifestyle,” says Sarah Brooking, sales manager at Harcourts Hamill Realty in Masterton.

It appears to have also become a place of choice to retire to with several villages catering for retirees – and special provision for mobility scooters in the towns.

Along with the rest of the country, temperatures in Wairarapa soared over the summer months - but there’s been a definite chill on the housing sale front. So how do the region’s real estate professionals and investors see the year ahead?

“Activity picked up in January with more sales in South Wairarapa. However sales are expected to be behind last year,” says REINZ representative Paul Joblin of Property Brokers. “On the positive side, December medians show prices are holding up well.”

Brooking also reports more sales in January as locals come back from holiday. “However, compared to the number of sales in recent months – and looking back to the previous year, sales volume has decreased a lot.”

Residential sales in December 2007 were 52, while December 2006 recorded 102 sales. The December statistics also highlight an increase in days on the market; 56 in 2007, compared to 34 the previous year.

Sales may be down but prices are up. QV’s December statistics report annual growth of 22.4% in Masterton (up from 13.2% in December 2006, but down 1.5% on the previous month). Average sale price was $274,400 – up from $220,100 in December 2006.

Carterton recorded 20.7% growth from 18.5% the previous year, and an average sale price of $253,900 ($220,100 previously). South Wairarapa lead the region with 25.4% growth on an annual basis (against 19.5% in December 2006) and an average price of $348,800 compared with $243,900 the previous year.

“Masterton was a late starter in the property cycle and has continued to catch up,” says QV’s Blue Hancock. “The other districts are at a similar level in growth to a year ago but have had big lifts in average sale price.” However, he cautions that low sales volumes in South Wairarapa and Carterton make statistics unreliable.

It’s a region comprising of several different markets, says Hancock, “All inter-connected and influenced by each other.” There’s the commuter interest from the Wellington market on the southern towns, wine interests in the Martinborough area and general farming influences in the other areas, he says.

Brooking believes the provinces tend to ride out the waves of the real estate cycle a lot better than the larger cities. She doesn’t expect any major changes in the short term. “Overall, the market in Wairarapa remains stable with prices holding and a general rise in properties for sale.”

The market has gone through a ‘correcting period’ and the opportunities are out there, says Dick Quinn of The Professionals, Masterton. “Because prices didn’t soar in the Wairarapa, there are still properties within reach of the average investor.” There’s also positive news on the industrial front, with the successful development of Waingawa Industrial Park - the former freezing works – says Quinn. “Of the 32 sites, all bar three are under contract – at less than half you’d pay for comparable properties in Wellington.”

As reported in last month’s NZ Property Investor DBH rankings, Masterton is the top-performing rental area in terms of growth. The suggestion has been made that this is because Trust House, with 529 properties in the region, no longer exerts the same ‘control’ over rents charged in the area; an influx of new landlords has resulted in a hike in rentals.

However, Trust housing operations manager Andrew Whitehead, believes this is not so. Although he does acknowledge that while Trust House has regular rent reviews for existing tenants, the level of rents charged has not kept up with that charged for new non-Trust House tenancies. “Our rents are in the lower quartile of the figures quoted by DBH and we are comfortable with this position,” says Whitehead.  He also notes that while the figures quoted for the period (1 July to 31 December 2007) indicated Masterton had 363 bonds lodged, only 42, or 11.6%, were theirs. “So we have a small impact on the overall data.”

Prospects are good, says Whitehead. “Masterton is currently experiencing a good economic climate with almost full employment and still affordable housing. Several big-box retailers have confirmed they will be opening in Masterton this year, a new industrial park is well underway, and several large sub-divisions and many smaller ones are going ahead with up to 400 sections becoming available.”

Whitehead says Trust House has more demand than it can meet. “Our occupancy rate for Masterton is often 100% and across our entire portfolio - including South Wairarapa and Tararua - rarely falls below 98%.”

Ace Property Management, one of the largest privately owned property management companies in the Wairarapa, also reports high demand for rental property, although director Phillipa Walsh points out this reflects the availability of work.

Demand is highest in Masterton where there are employment opportunities, and in Carterton because of its proximity to Masterton. “Houses do not sit empty.”

Greytown is a different story she says. “The price to purchase in Greytown means that the return is not great for an investor so few houses are ever available.”

In Martinborough, a fall in grape production over the past couple of years, has reduced demand in that area she says.

Eric Voice of Agile Property Services believes, “Rents are on the increase. Tenants are prepared to pay more but also expect quality houses.” He reports a ‘huge demand’ for rental properties with interest from both locals and those moving into the area either to work, be close to family or for the lifestyle. “I have over 50 wait-listed enquiries, although admittedly some of those will no longer be looking."

A good three-bedroom house in Masterton currently lets for around $240, says Voice. Walsh quotes figures of  “$145 – held low by the owner – to $340. The executive market is limited in Masterton so that keeps the rent on those properties low.”

Trevor Pearson, former president of the Wairarapa Property Investors Association, sees a lot of potential for investors in the region with the development of an industrial park just out of Masterton, and the completion of over 500 new houses being built on subdivisions throughout the Wairarapa. And, he believes, as traffic on the motorway to Kapiti continues to worsen, more and more Wellingtonians are looking over the hill to the Wairarapa.

“It’s creating a real demand for rental properties,” he says. But Pearson admits it’s difficult for investors to get a good return, as rents are still not as high as main centres. “But this is gradually changing. Houses are slower to sell now and it’s definitely turning into a buyer’s market again. But vendors are still in denial as to the slow-down and seem to be sticking to their asking prices.” However, Joblin says there is some excellent buying in the low to medium $200,000 bracket. “Interest from outside the area is steady.”

Census figures from 2006 indicate that after a long period of decline Wairarapa’s overall population had stabilised and that South Wairarapa in particular, is showing growth.
 
However, Mayor Adrienne Staples says unless there are some very large-scale industrial or commercial developments which create jobs, there is unlikely to be a major increase in population. Nevertheless, people are moving into the area – although many move out again each day to work. “We are only one hour from Wellington and commuting is a very viable option.”

And things are happening in South Wairarapa. “Our planning department has more Resource Consents being processed than ever before, so somebody is investing,” says Staples. “South Wairarapa attracts people because of its climate and lifestyle.”

However, it’s still a predominantly rural district with the majority of economic return coming from rural industries – mainly dairy, sheep and beef. “Farming isn’t sexy but it is our mainstay. This is often forgotten because of the high profile of Martinborough as a wine district and Greytown’s trendy shopping.”

One of the more exciting developments in South Wairarapa is the International School of Cuisine, scheduled to open in 2009. It’s the result of a partnership between Universal College of Learning (UCOL) and France’s Le Cordon Bleu. Fiona Chard, UCOL’s manager strategic projects, says Martinborough was their choice of location because of its excellent international reputation for fine wine and the natural linkages this provides to cuisine. “In addition, Martinborough is already host to a number of highly successful culinary events and the School will link in to these.”

It’s a development that has stimulated investment interest, says Walsh. “If it creates a high number of jobs for local people, these will not sit empty for long.” Whitehead agrees. “One of the challenges facing the school will be accommodation for both the staff and students. Estimates suggest within four years it could attract up to 300 international EFT students and approximately 30 staff. This should create investment opportunities. However, it is difficult to find a local property offering positive cash flow for investors.”

In Masterton new mayor Gary Daniells is upbeat. “Our commercial and industrial bases are all in good heart and our new hospital and the range of great educational facilities make Masterton and the Wairarapa a place to envy.”

Masterton has always provided dormitory accommodation for workers in Wellington who prefer a provincial lifestyle says Daniells. “Residential sections remain in demand, new industrial subdivisions have quickly sold and the development of lifestyle blocks has provided a further ratepayer base to progressively develop both infrastructure and recreational facilities.”

Coastal sales have slowed in Wairarapa, but as with the rest of the country, they demand a premium. And supply is short. Limited access to the coast and land contour both contribute to this says Ian Redshaw, developer of Awhea Coastal Estate at Tora in Southern Wairarapa. The 55ha development is somewhat unique in that there will be just 24 sections sold with 41ha going to the QE2 Trust as a wildlife sanctuary.

Interest has been ‘huge’, says Redshaw, with an even 50/50 balance from within the region and elsewhere. “A lot of locals used to come over to the coast for holidays so they have an affinity with the area. This is balanced by interest from the Wellington region where there’s both the highest income per capita and few holiday home options.”

“I think the market for this type of product has declined as the discretionary dollar is tightening up. However we know there is a very limited supply of these sections on the East Coast – we engaged geological and nuclear sciences to do an extensive survey of areas that can be developed on this coastline - and therefore prices will go up over time. And with the huge growth of Martinborough and Greytown as holiday destinations for Wellingtonians, the coast areas are the next frontier for holiday homes.”

“The Wairarapa is seen by Wellingtonians as a trendy weekend rural escape,” says Barb Hyde, marketing manager for Destination Wairarapa. “With five distinctive towns and a population of less than 40,000, it’s a peaceful retreat from city life.” 2006 figures indicate 1.17 million domestic visitors to the Wairarapa with 78% from Wellington.

And, Hyde says, events attracting visitors to the region are big business. The Golden Shears, held annually in Masterton, is now a world class event; the International Balloon Fiesta, and Wings over Wairarapa also draw huge audiences. And in November, some 10,000 visitors will Toast Martinborough as they celebrate the region’s wines and food.

Wairarapa is one of New Zealand’s best-kept secrets, says Brooking. “Further investment and development can only be good for the region. There is incredible untapped potential here for investors.”

“Indeed,” says Daniells, “we live in a wonderful part of the world.”

 




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Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 4.05 4.49
ANZ Special - 3.55 3.55 3.99
ASB Bank 5.20 3.89 4.05 4.39
ASB Bank Special - 3.39 3.55 3.89
BNZ - Classic - 3.49 3.55 3.89
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union North 6.45 - - -
Credit Union South 5.65 4.75 4.75 -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 ▼4.65 ▼4.80 -
HSBC Premier 5.24 3.54 3.54 3.69
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 3.97 4.05 4.39
Kiwibank ▼5.15 4.20 4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.45 3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 ▼4.45 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.39 ▲3.55 3.89
Sovereign 5.30 3.89 4.05 4.39
Sovereign Special - 3.39 3.55 3.89
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
TSB Bank 6.09 4.19 4.35 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.39 3.55 3.89
Wairarapa Building Society ▼5.50 ▼3.95 ▼4.05 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.39 3.55 3.99
Median 5.34 3.97 4.05 4.39

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