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Investment gems in Lower Hutt

The lower price point and solid yields in Lower Hutt make it an attractive proposition for out-of-town investors, reports Jenny Keown.

Friday, June 2nd 2017, 6:00AM

by The Landlord

Lower Hutt

A lack of investors active in Lower Hutt means the area is ripe with opportunity, yet those who are in a position to secure lending will be competing with the rising number of first home buyers in the market.

In nearby Wellington, average values have risen to over $700,000, creating a flow-on effect that has resulted in significant value increases in the Hutt Valley.

Many first home buyers are looking to Lower Hutt as a way of getting their foot on the property ladder at a lower price point – the average value in Lower Hutt is $496,314 according to qv.co.nz data and REINZ data has the median sale price rising 21% In the 12 months to February.

REINZ Wellington regional director Mark Coffey says the recent tightening of lending to investors has had an impact in Lower Hutt.

“Anecdotal evidence suggest brokers are struggling to get deals through with the banks. As a result the market has been quite volatile over the past few months with large changes in the median price and sales volumes, with good evidence there are few investors active in the market,” he says.

Veteran Lower Hutt investor Steven Goodey agrees, saying the banks stricter criteria has impacted smaller investors especially, who are spending money on their own home instead.

Tommy’s real estate agent Kelly Field says the number of Mum and Dad investors in the market has dropped, leaving the savvy, veteran investors.

“A few of the investors have upped their game and become more competitive with first home buyers. These investors are paying more, so yield might be less initially, but many are looking to add value and flick it over,” she says.

She warns investors that people can see through the thin coat of paint, and to not take short-cuts with renovations. “Traders do work hard, but it’s higher risk and they aren’t all winners,” she says.

Solid potential

For investors willing to take the plunge, there are several up and coming suburbs with solid investment potential.

Goodey believes Petone, located at the southern end of Lower Hutt, holds great investment opportunities with four major retailers - Kmart, Briscoes, Rebel Sport and Kathmandu – moving in recently.

A 42-unit Quest Hotel was completed on the corner of Jackson and Richmond streets in October, while 42 apartments are nearly finished in central Petone.

Goodey paid $573,000 for a three-bedroom house in central Petone a year ago, and gave it a cosmetic makeover, with new carpets and curtains. Six weeks ago, he had it revalued at $850,000 (see photo).

Houses are still selling in the $300,000 bracket, says Goodey, who runs Property Choosers an agency that buys houses predominantly for first-home buyers. In the first week of April, the company bought three houses around this price bracket in Totara Park in Upper Hutt, Naenae and Petone.

Ray White Lower Hutt managing director Rupert Kemeys, who also has a personal investment portfolio of 12 properties in Hutt Valley says if investors can get pre-approval, there are good multiple investment property opportunities in Wainui, Naenae, Stokes Valley and Moera.

Most properties were being sold by tender or auction, but now many vendors are choosing negotiation, as buyers are weary of tenders.

“There are so many buyers that have missed out on multiple tender and auction properties and they are simply discounting these properties and refusing to view them,” he says.

Field reckons Moera hasn’t hit its stride yet and is in the perfect location, close to the Lower Hutt CBD, and with easy access to the motorway. There are many older houses, with sub-dividable sections.

Words of caution

Meanwhile, the traditionally Mum and Dad investor suburbs of Taita and Avalon are overachieving in terms of prices, says Field.

Some local property investors say suburbs, such as Wainui and Stokes Valley, have a reputation for gang-related activity, yet Field thinks these suburbs shouldn’t be stereotyped in this way.

“There are pockets of less desirables, but these suburbs are mainly made up of decent, law-abiding working families – my advice to investors is drive around after hours to get a sense of what the neighbourhood is like,” she says.

Field bought her first property when she was 21, and has a portfolio of properties across the Hutt Valley, with yields ranging from 6% in Upper Hutt to 9-10% in Petone.

She issues a word of caution to investors looking at properties in the Western Hills of Lower Hutt. “You need to make sure these properties have a good aspect, there is an issue with some of the housing being damp. Many of these properties lose the sun mid-afternoon,” he says.

High yields

At the end of last year, investor Ginny Douglas, who lives in Auckland, went looking for investment property in Lower Hutt, as the yields on her Auckland rentals were “dreadful”.

“I like Lower Hutt, because it meets my criteria of being a sizeable city, with good schools and infrastructure,” she says.

In the middle of last year, she bought a compact three-bedroom ex-state house in Naenae for $248,000, with a 7.5% yield. Since she purchased the rent has increased from $360 to $400 per week.

At the time of writing, she successfully purchased an adjacent dwelling for $308,000 at tender (the two houses are a duplex).

“I had to offer considerably more for that, an additional $60,000 to $70,000, as the market had become more competitive,” she says.

She plans to do some cosmetic renovations and tenant the adjoining property for a similar rent.

One of the key reason for her interest in the property is the combined land at the rear – 1100sqm combined properties– which is now subdividable, and with potential to build two similar adjoining units.

Future prospects

While Lower Hutt’s population isn’t expected to increase significantly in the next ten years, it does have a solid employment base working in science, technology and high value manufacturing businesses.

Lower Hutt is home to Crown Research Institutes and business accelerator Callaghan Innovation Ltd.

A significant proportion of the working population commute to Wellington to work in Government services.

Tony Alexander, chief economist at BNZ, often invites investors to look into population growth figures when weighing up potential property investment opportunities.

“[We invite] people interested in investing in regional residential property markets to refer to these numbers when considering whether the low prices of an area represent a bargain or simply reflect the dynamic of weak population growth or in fact population shrinkage,” he says.

Between 2013 and 2024, Lower Hutt City’s population is expected to grow 5.4% (5,500 people), compared to a national average of 33%, according to Statistics New Zealand. These figures are based on an area’s trends in age profile, death and birth rates, internal and international migration.

Hutt City Council aims for an increase of at least 6,000 homes in the city by 2032.

It is developing 24 hectares of greenfield residential development in Kelson and Wainuiomata, targeting infill housing and a growth in low-rise apartments, investigating the potential for development in the southern portion of Manor Park and lowering upfront costs for homebuyers and developers.

Looking ahead, Field believes the market will slow down in the lead up to October’s national election.

A significant number of government employees live in Lower Hutt and commute to Wellington, and consequently Wellington is very government-focused.

“People won’t know how secure their jobs are until after the election and that always has an impact,” she says.

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ASB Bank Special - 3.55 3.45 3.89
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Credit Union Baywide 6.15 4.95 4.95 -
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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% - - - -
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HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 4.04 3.95 4.39
Kiwibank 5.80 ▼4.14 ▲4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - ▼3.39 ▲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 4.86 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 5.34 4.04 4.09 4.39

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