by Amy Hamilton-Chadwick
Christchurch has been a unique micro-market for the past five years – its supply and demand equation has been constantly in flux, with prices and rents following suit. Fortunately, undamaged land and properties have always been readily available in the north of Christchurch, from Belfast through to Rangiora, Kaiapoi and Pegasus.
Immediately post-quake, “a lot of people moved from the east of Christchurch to Kaiapoi, and even more so to Rangiora,” Canterbury Property Investors’ Association president Stephen East says.
The population growth to the north was twice as large as was originally forecast as a result of relocations, and while some people have moved back to the city, many of the relocated residents are remaining, enjoying a laid-back classic Kiwi lifestyle with almost every amenity close at hand.
Those in Belfast and Northwood are still very handy to the city, with access to good schools, parks and other natural attractions. Beyond that it’s more of a commute to Kaiapoi or Rangiora, with around half of residents in those towns travelling to work in the city each day in heavy traffic.
Once home, they can enjoy “all the clubs and societies, sports clubs and churches, all the things you find in a New Zealand town,” Waimakariri District Mayor David Ayers says. “We have a lot of lifestyle blocks. And it never rains!”
Rents down
Overall, Canterbury has seen modest value increases compared with last year, with 3.3% growth in asking prices according to Trade Me Property. Rents have, however, dropped by 8.1% over the same period. “Christchurch is probably one of the only centres at the moment where rents are coming back, big time,” East says. “Landlords are even offering a week’s free rent to get a tenant in there.”
This isn’t, however, worrying Sonia Tafilipepe, franchise owner at Mike Pero Real Estate Belfast. She says the drop in rents is a correction - rents are returning to normal levels following earlier hikes due to a lack of rentable properties.
The supply of properties has been augmented enormously over the past year or two as houses have been repaired and rebuilt and new subdivisions created. Many of those subdivisions have been in the north where land is plentiful: the Groynes, Ravenswood, Beach Grove, Highsted, Sovereign Palms, Elm Green and many more.
With lending restrictions making new builds increasingly cost-effective, these subdivisions offer an attractively low-risk, low-maintenance investment. Claire Wilson, co-owner of A1 Property Managers, says brand new three-bedroom houses in satellite towns cost around $400,000 to $450,000 and make sense for equity-rich investors.
“Baby boomers who want to invest are happy to buy a new home and get a 5% to 6% yield – it’s much better than putting your money on term deposit. Why not buy for $450,000, interest only, it will rent for around $450 a week, then sell it when you’re 75? New homes are a breeze to manage, tenants want to live in them and satellite towns are the only places where the quarter-acre dream can still happen.”
Closer to the city, Belfast, Northwood and Sawyers Arms provide solid returns, quality tenants and great prospects for long-term buy-and-hold investors. Listings are limited, says Tafilipepe, but buyers abound.
“I generally would say that at the moment in the northern part you get more for your money,” she says. “With $400,000, in the rest of Christchurch you wouldn’t be able to get what you can in the north. There aren’t so many investors here – but it can be a great investment. It’s really a long-term thing. You’re not going to get 7% or 8% yield unless you find something with dual income or do a major renovation.”
Two- and three-bedroom properties on small, tidy sections make the best buying, Tafilipepe says. These will attract retirees or working couples, who make good long-term tenants. That’s certainly been the case for local investor Andrew Hart, who likes to buy three-bedroom houses in Redwood, Bishopdale and other northern and north-western suburbs.
He’s found it easy to find and retain high-quality tenants. “One lady has been in one of our houses for 10 years; another one who had been there eight years just bought a first home”, Tafilipepe.
Local knowledge
All our local experts are clear on one issue: tenants have plenty of choice across Christchurch and Waimakariri because of a current over supply of rental properties. The result is that only well maintained, smartly presented and insulated properties will give their owners a choice of responsible tenants. With so many recently constructed houses and subdivisions, tenants are quick to switch to a new property, leaving the older existing stock lagging behind in terms of both rents and demand.
The other major consideration is insurability, Hart says. “When you’re buying anything in Christchurch you have to think about earthquakes. I know people are sick of us banging on about it, but it’s still the big issue. You’ve got to get insurance and that’s not easy, though it’s getting easier. You’ve got to look at the earthquake repairs – are they finished? Those are the things I would look for first.”
Potential in satellite towns
While Belfast and surrounds escaped relatively undamaged from the quakes, Kaiapoi was badly damaged, with around 1,000 homes lost, David Ayers says. The red-zone recovery plan for Kaiapoi has recently been approved and is now open for comments (redzoneplan.nz). Work through the main centre has largely been completed and the recovery plan includes plenty of appealing amenities like dog parks, sports fields, recreational areas and mixed-use business areas.
Around 2,700 Kaiapoi homes have recently been labelled at high risk of flooding; depending on your appetite for risk these may be a no-go area or an opportunity for higher yields.
Pegasus town has also seen a huge growth in its population since the quakes, though less than originally forecast when the town was designed. Sold to Todd Property Group in 2012, there are many sections and properties for sale at prices close to – and in some cases below – their 2013 council rating valuations.
The town divides opinion, but it’s well situated and seven new commercial tenants have recently signed leases on retail outlets. Sections are also available in the nearby Ravenswood subdivision, which is in its initial stages with prices starting below $120,000. For investors who believe in the adage ‘cities grow towards the sun’, it’s possible there’s an opportunity right now to buy for serious future capital gains.
The same applies in Rangiora, where the commercial heart of the town has been earthquake strengthened and its lynchpin Farmers store has just reopened, twice the size of the old one. There is a wide range of property types available, with relatively high numbers of listings across standalone houses on land of all sizes, plus sections and lifestyle blocks. You won’t find many units or townhouses; as Wilson pointed out, families who want the traditional Kiwi family-house-and-garden combo can find it in Rangiora.
“The main discouragement for residential [investment] is congestion on the motorway,” Ayers say. “The completion of the first half of the bypass in 2018 will make a huge difference and send half the traffic off in that direction, so that morning tailback from Belfast won’t happen. By the time you buy a section and build a house out here, that won’t be too far away.”
That traffic tailback is a significant barrier for tenants who work in the city, with 42,000 cars using Main North Road each day. The Western Belfast Bypass is forecast to halve this number of cars. The Northern Arterial motorway will be started later this year and will connect the existing Northern Motorway with QEII Drive, east of Belfast. The Waimakariri bridges will be widened and a shared pedestrian and cycle pathway constructed – the work is scheduled to take around three years.
All these infrastructure changes are likely to make the northern suburbs and satellite towns more liveable and appealing for tenants, as well as boosting property prices in the long-term. “It’s a myth that the South Island is not growing,” Ayers says. “Parts of it certainly are and we’re one of those areas.”
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