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Tauranga: The lure of the golden hue

It’s been named the fastest growing region in the country but it’s not just sun, surf and sand making Tauranga attractive.

Monday, February 1st 2016, 12:00AM

by Dana Kinita

Tauranga has well and truly shed its reputation as a haven for retirees. 

After enjoying a buoyant market nearly a decade ago, it was hit hard along with the rest of the country by the Global Financial Crisis. But the property market in Tauranga, Mount Maunganui and Papamoa is now backing on track – and then some. Real Estate Institute of New Zealand (REINZ) figures show sale numbers have been on the rise.

In November, sales volume leapt 36% compared with the same period last year. Median house prices in Tauranga reached $450,000 while neighbouring areas of Mount Maunganui/Papamoa reached $582,000.

Associate member of REINZ and Bayleys salesman Dickie Burman says things are much brighter this year. 

“Volumes are better [than last year] and if you look at the median prices in Tauranga, 12 months ago, you were looking at $390,000 so that’s been a pretty major uplift,” Burman says. “There’s been a real push in values and sales in the lower end of the market, stuff that may have been $380,000 or $390,000 in November last year is now $450,000 or better.”

AUCKLAND EFFECT

Harris Tate director and Tauranga Property Investors’ Association president Grant Harris, say they see an Auckland influence in the local market.

“There are lots of Aucklanders buying properties in the Tauranga market,” Harris says. “A huge proportion of those going to open homes are Aucklanders. But it’s not only Aucklanders, there are investors from other regions as well,” he says.

“I would have to say, the over inflated prices in Auckland are definitely making the Tauranga market more attractive. Whether they are moving to live here or just buying property here with the long term plan of getting a foothold in the market.

“The Reserve Bank has taken active steps to cool the Auckland market. The loan-to-value ‘speed limits’ which have been put in place by the Reserve Bank have been loosened in the regions and toughened in Auckland. Reducing the loan-to-value restrictions in the regions is no doubt making the Tauranga market more attractive.”

iFindProperty co-owner and sales manager Maree Tassell says the majority of her clients hail from north of the Bombay Hills and have quickly identified the investment opportunities in the region. “We’re the busiest we’ve been,” Tassell says. “We have a lot of people wanting Tauranga and Rotorua [properties]. They’re predominantly Aucklanders and offshore investors. Offshore investors are not yield driven, Kiwi investors are. Offshore investors are growth focused. They’ll be looking at high growth areas,” she says.

“The reason I think Tauranga is good, is because it’s kind of like an affordable Auckland for investors. Because the prices are a lot lower than Auckland, there’s more opportunity for people. In Auckland now if you don’t have at least $500,000, you can’t get your foot in the door,” she says.

“It’s a lower price market but like Auckland, it’s a strong growth market. I’ve had investors tell me they have a property on Trade Me and are getting 30 enquiries a day. You might get 6% yields in Tauranga, but it’s more affordable, the entry price is lower than Auckland.”

“For people who want to buy in a region that is growing, Tauranga is very safe in that regard,” Tassell says.

IDEAL TIME

Realty Services Group chief executive Ross Stanway says it’s a prime time to invest.

“From a borrowing point of view versus what yields there could be, arguably there has never been a better time for investors to be in the market,” Stanway says.

“Now there’s opportunity for good yields. In the [Tauranga] residential property market, a good yield would be seen as 7% give or take. Average price increases just announced, year-on-year end of 15%. So have rents risen 15%? In some cases they possibly have, but even so I think it’s still a good climate here for investors,” he says. “There is a huge demand for rental properties.”

Stanway says the Tauranga area is witnessing huge population growth which is driving the market. Statistics New Zealand’s latest population estimates have the population of Tauranga City growing from 121,800 people in June 2014 to a population of 124,600 at the same time this year.

“Population growth drives the property market, it’s that simple. The number of people coming into the area has been well publicised in terms of trends, particularly from Auckland. In some instances people that are coming here are either coming straight away, they’ve sold their house in Auckland, they’re cashed up and [they] move here.

We represent very good value for money from an immediate yield point of view but also from a capital gain point of view.”

INDUSTRY DRAWCARDS

Diversity in industry is boosting the local economy. And Stanway says the region isn’t solely focused on their busy port.

“Major industries attracting people here would be the health sector, the professional services, the banking industry (which have expanded and grown), the construction industry, both residential and commercially. The kiwifruit industry has bounced back from the PSA hit, it’s now operating at a very buoyant level,” he says. “Also the education sector – there’s a number of new schools out at Papamoa for example.

“There are a number of legs to the economy. We haven’t even talked about the manufacturing sector, the export sector – which are expanding.”

Grant Harris says all economic indicators are looking positive. “Across the board there’s been massive growth in the Tauranga economy,” he says.

“Priority one, a local economic development agency, has been focusing on growing high tech and innovative industries.  Overall, Tauranga is New Zealand’s fastest growing economy, the fastest growing job market in New Zealand.

“Building consent values are currently at record levels. Not only the values ($200 million in projects underway) but the number of consents is incredibly high as well.”

IN HOT DEMAND

Property managers say they are being bombarded with potential tenants for stock that is just not there.

It’s “the demand, the absolute demand of people,” Nigel Walker of Bay City Rentals says. “In some ways it’s heartbreaking because you can only give one person a house. It’s nothing to have 20, 30, 40 people applying for a home. 

"There’s a huge lack of supply. Even homeowners are getting caught. People have sold a house and think, ‘Great, I’ve sold a house and have gotten a great price’. Then they think, ‘I better get a rental’, now there’s a problem, they’re back in the mix.

“In the last few months, I’ve picked up corporate managers and other corporate professionals that haven’t had a look in,” he says. "The demand is right across the board. I was very amazed recently that these tenants took a property in an area that I wouldn’t have thought. But it’s because they’ve been looking for so long and they couldn’t get anything else.”

Walker says their high-end properties are paying in excess of $600 per week and it is rare to find anything under $320 on the rental market.

Connect Realty owner Chris Jenkins says there is a shortage in all types of properties at every price level. “We get many inquiries from out-of-towners and overseas tenants looking to live here,” she says.

“For us, Papamoa tops the bill for locations where tenants would love to live; however, there is such a shortage that anywhere tidy, sunny and warm is in high demand.”

Easy to maintain properties are also in high demand for families. “You’ve reasonably low maintenance brick-and-tiles that double as good family homes or good investment properties. At the moment what we’re seeing here in my office is a real strong demand in Matua. That’s where your families are going,” Dickie Burman says.

“Others that are selling quite well are properties at the Mount [Maunganui] that can be subdivided. The beach areas seem to be in hot demand. But the Mount seems to have a market of its own at the moment. I think the younger people like to go there, you have your holidaymakers and I think a lot of people will retire to the mount.

“Papamoa is also very popular. It’s new, quality houses – easy care, close to the beach. A few new schools out there and that’s the growth area.”

Harris says anywhere central like the avenues; Bellevue, Brookfield and Otumoetai are good areas for rentals. “The central area has got good potential as there is a new tertiary institution to be developed in the CBD. There is a potential upside in demand for rentals in that area,” he says.

“The transport links out to Papamoa have also improved significantly and will only get better with the construction of a new flyover at Girven Road. That will have an appeal for tenants as well as investors.”

COMFORTABLE LIVING

Warwick Mackay has been an investor in the Tauranga market for over 35 years. The retiree holds a portfolio of 11 properties with an estimated value of $4 million.

“I classify most of my rentals as ‘ticky, tacky’ boxes. Mostly hardy plank or similar, tin roof on a chipboard floor,” Mackay says. “The long term value is the land. There’s no real point on putting it on a slab of concrete or brick because these things can be lifted up and put on a truck and taken away.

“Basically we stayed with the lower valued areas and the houses we have are the sort of things that people used to buy as their first family home. We have some in Papamoa, Hartford Ave, which is somewhat a depressed area, but is coming up and getting texture with trees growing and long term residents,” Mackay says.

“Welcome Bay is another area with a number of cheapies out there. But again, it’s amazing how areas lift over the years. I have a Gate Pa property that is sort of a kids and dogs type area.”

Mackay says they entered into property investment early on as they realised they would need an income to support them in their retirement.

“By staying in the lower echelons of rentals, when we had the big crash in the mid-80s, mid-management lost their jobs, things were pretty tight. Most of my tenants, if they couldn’t cope left home and lived with mum and dad. The people of middle management living on the great sea views moved in and lived in my properties. I didn’t have any empty houses in that squeeze.

“That’s another reason why we’ve stayed where we are. If we wanted to strategically purchase, we would probably look at properties that are adjoining for future development for the grandkids.”

VALUE FOR MONEY

Harris says many attractive features make the region good value for money:

“Because of its central location and excellent work and lifestyle balance, because it has one of the nicest, if not the nicest, beach in New Zealand. It’s still got good access to transport to Auckland and has one of the busiest ports in New Zealand.

"Businesses are looking to relocate to Tauranga and the flow-on effect [means] we get the people looking to move here as well.”

Subscribe to NZ Property Investor magazine here to get great stories like this delivered to your mailbox every month.

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Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 3.95 4.49
ANZ Special - 3.55 3.45 3.99
ASB Bank 5.20 4.05 3.95 4.39
ASB Bank Special - 3.55 3.45 3.89
BNZ - Classic - 3.55 3.45 3.99
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 6.15 4.95 4.95 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
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 4.80 4.95 -
HSBC Premier 5.24 3.35 3.35 3.35
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 4.04 3.95 4.39
Kiwibank 5.80 4.30 4.20 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.55 3.45 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 - - - -
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.86 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - ▼3.55 3.39 3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
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 4.35 4.25 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.55 3.45 3.89
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.55 3.45 3.99
Median 5.35 4.04 4.02 4.39

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