Upper Hutt - on the up for investors

While the first half of 2014 was flat for both sales and rents, the latter part of the year saw prices stabilise and tenant demand take a jump.
The Reserve Bank's loan-to-value restrictions are working in the investor's favour: first-home buyers aren't competing with investors for affordable family homes, and they're renting for longer as they save for a deposit. 
The lack of first-home buyers has also contributed to Upper Hutt's affordable prices, Graeme Collinge, manager of Harcourts Upper Hutt, says.
Without those buyers, homeowners wanting to upgrade to a bigger second home can't make a move.
"It's clogging up the market; you can't move up the ladder if the first rung is missing," Collinge says.
Not great news for homeowners, but investors can make the most of stagnant house prices and cash in on rising rents, while interest rates remain low.

Perfect time
Mark Coffey, owner of Tommys Real Estate in Upper Hutt and Lower Hutt, says it's the perfect time to invest in Upper Hutt.
"There's never been a better time to get into the market,” Coffey says. “There are so many good things about Upper Hutt. Despite the fact that the prices are 10% lower than Lower Hutt, the demographics are very much the same – there are plenty of good tenants."  
Business is brisk for property managers, who are able to fill vacancies more easily than they’ve done since 2007, Debbie Bentley, franchise owner of Ray White Upper Hutt, says. “Rentals are fantastic.  When someone moves out we put the rent up by $20 and it rents straight away."

What to buy
For excellent yields, Bentley recommends two-bedroom units.  Recently her clients have been able to pick up two-bedroom units with a garage or car port for around $180,000, which will rent for $260 a week, providing an impressive off-the-shelf yield of 7.5%. 
Another option for investors is the traditional three-bedroom standalone house.  You can buy a well-constructed three-bedroom family home for around $300,000 in Upper Hutt.  Look for properties with plenty of sun, a garage, and good heating, advises Karen Stevens-Bevan, property manager at Oxygen Upper Hutt.  There is significant demand for properties which allow pets, adds Stevens-Bevan.  Any owner who will accept a tenant with a dog will find it easy to rent out their property and can command a slightly higher rent, she says.
The most desirable rentals are those with the shortest commute to Wellington.  For this reason, the more northern suburbs are a fraction cheaper to buy and rent.  The city centre is a good place to buy, as are Trentham (highly recommended), Totara Park, Maoribank and Te Marua.  Local experts note that Timberlea is an area to avoid for homeowners and investors alike. 
"You could get a low-maintenance 1970s home in Totara park for around $300,000 – that's an area with a good middle-class socio-economic mix," Coffey says. "Or you could get something similar in Trentham for the mid-$300,000s, which is handy to the motorway for the commute.
“A three-bedroom home will rent for about $370 a week, typically to a young couple with one or two kids."
Collinge had previously sold his rental properties, but conditions have been so favourable in Upper Hutt that he has recently purchased a three-bedroom rental property for under $300,000.  He says the rent has covered the mortgage from day one, and he plans to buy more similar properties this year to build up his portfolio.
"There are good bargains around and good solid homes in Upper Hutt," says Collinge.  "You get a lot of bang for your buck and there's strong demand from tenants across the whole range.  For a 1960's solid weatherboard house, the rent ranges from $240 to $340 a week for two-bedroom homes, $290 to $400 for three bedrooms, and $490 to $560 for five bedrooms."
 

Economic incentives
Many Upper Hutt residents commute daily to jobs in Wellington, allowing the maximum income and the most house for their dollar.  Although this works well for many, more jobs are needed in Upper Hutt.  Hopefully, with a new emphasis on economic development, residents could soon be finding work even closer to home. 
Last year was something of a pivotal point for Upper Hutt’s economy.  The 2012 Business and Economic Research Limited (BERL) rankings revealed Upper Hutt’s economy was under-performing, but the Upper Hutt City Council reacted swiftly, allocating $4 million for economic development.
“The BERL report was pretty damning, but since I joined the council 12 months ago, we’ve seen positive changes that have been the byproduct of the stimulus package,” economic development manager Phil Gorman says.
“We have two craft brewers here [they like Upper Hutt's soft water], and they have tripled in size in the last 12 months. The South Pacific Industrial Park has 35 different diverse businesses. A new subdivision of 700 houses is going in adjacent to Trentham Racecourse.  We’re fielding calls all the time – there’s plenty of opportunity here.”