If you thought property values across New Zealand had stopped growing, then you’ll be surprised to hear that some rural outliers have been going great guns over the past year, with many rural hotspots experiencing growth of around 20%. Better still when you look at three-month value rises, there are groupings of towns/suburbs that have experienced up to 8% growth.

The verdict: for some regional locations, the cycle still hasn’t reached its peak. This is great news for property investors who’ve been priced out of the market in the main cities; for those who want to grow their portfolios despite the LVR restrictions; and for newer investors who want to get a foot on the ladder.

But not all locations are created equal: it’s important to understand the economic drivers (and therefore stability) of the area you’re investing in and what kinds of tenants you can expect to house.

CoreLogic has provided a table with the top 20 locations with the highest rate of value growth over the past 12 months; and a table showing top 20 locations with the most growth over the past three months. Examining these two statistics can give some clues as to the short term and long term movement in the market. However, it’s equally important to hear from those at the coal face, so we spoke to investors and agents who have the inside scoop on their local market.

‘They hadn’t been able to sell [last year], we put it on the market, it attracted multiple offers and sold for $10,000 over ask price’ TIM HOCQUARD

The General Picture

In both top 20 data for three-month and 12-month growth, the North Island shows a stronger trend for rising values – however in the South Island, Naseby in Central Otago has experienced 18.5% growth in the past 12 months and nearby Roxburgh has experienced 6.5% growth in the past three months.

Both have median values under the $300,000 mark and each sit around equal distance from Queenstown, which has some of the highest values in the country, so it’s likely they represent a lower price point for those pushed out of Queenstown.

The general picture shows almost all locations in our data (with a few exceptions) have median values under $500,000 and therefore represent accessible buying for investors who are restricted by increasingly stringent lending criteria.

“Also interesting to note, is that turnover rates have mostly been higher in the suburbs where value growth has been strongest,” says CoreLogic senior analyst Kelvin Davidson.

Rocketing Raupehu

The secret is out: the Ruapehu District is one of the last tourist destinations where you can still buy a house for less than it can be built for. Over the past year, punters have taken advantage of this, with demand increasing, and listings decreasing.

In Taumarunui, values have risen 17.4% over the past 12 months (of which 7% has occurred in the last three months). National Park values have increased 5.5% in the past three months, while Ohakune’s have increased 7%. Raetihi takes the number one spot with 8.4% growth.

The median value for a three-bedroom house across the district is $181,900, making the price point incredibly accessible. But how does it stack up as an investment location?

Bayleys Ruapehu branch manager Kay Blaney says due to a low local population, it’s holiday rentals that are the key investment option and there’s very few long-term rentals out there.

Investor Annie Harvey* took up this opportunity when she bought an 11 yearold Ohakune two-bedroom house with spa pool in December last year.

“I paid $280,000 and it’s now worth $305,000 on homes.co.nz. I rent it out at about $220 per night and I’m on track to rent it 150 nights a year. That’s 40% occupancy.

“What I’m going to make for the year is a gross yield of 11.2% and a net yield of 7.9%” Harvey says there’s a unique combination of factors that make Ohakune a great place to buy holiday rentals.

“The property prices have not budged much since 2007 so I feel that they are under-priced and the Government and Ruapehu Alpine Lifts are putting quite a lot of money into the area. That combination of money, lots of tourists and under-priced houses makes it a great investment location.”

The added bonus of two free family holidays a year was the deal clincher, says Harvey.

Local employers include the Pulp Mill, Tangiwai Sawmill, the Army base, and market gardeners.

Blaney says because of the cold climate, the quality of rentals is crucial as decent quality rentals are having improved returns – “double glazing is something that is going to come to the fore a lot more.”

Blaney says the district is “definitely on the up, price wise” for the rest of the year.

Porirua Pocket Rocket

Porirua makes multiple appearances in the top 20 for both three-month and 12 month growth. Davidson says this is because “the strength in values around the lower North Island has partly reflected first-home buyers being pushed out of Wellington City and looking further afield”.

One Agency’s Naomi Brooking agrees, “It’s quite easy to see – they’ve been squeezed out of their market.”

‘We’re seeing variations of $80,000 difference between the top offer and the next cluster of offers’ NAOMI BROOKING

She says there has been a marked increase in market activity over the past six months and demand is so great, properties are currently marketed without listing prices.

“Because it’s a closed tender – we‘re seeing variations of $80,000 difference between the top offer and the next cluster of offers. That cluster is indicative of where the market is actually seeing the property, but the front runner is just not prepared to miss out.”

“That’s driving up those massive 20% increases. I’ve had local families baulk at estimated [price] ranges, they sort of feel that it’s unrealistic – we’re talking Cannon’s Creek, we’re talking Waitangirua – but then the sale happens and it hits that mark and beyond.”

Brooking says that a lot of the listings in the past 12 months have been from investors who are selling up their portfolios in the face of increased regulation and compliance issues.

Brooking says investors should aim for around 6.5-7% yield when looking to purchase in Porirua.

Her pick of suburbs is Elsdon, an area close to the CBD, which is experiencing slow growth.

“That suburb is in direct walking distance to Porirua CBD and therefore walking distance to rail and the Polytechnic. You’ll never have issues getting tenants.”

Watch Out For South Wairarapa

South Wairarapa benefits from the same “halo” effect from Wellington that Porirua does, says Davidson. Both areas enjoy the benefit of employment opportunities in the Capital city, while having the added benefit of much lower price points.

“Anecdotally, Greytown has also become a ‘trendy’ place to live with ‘outof- towner’ property demand significantly increased. Better commute times (or at least the prospect of them in future) and improved acceptance of remote working will have also helped support property values in Porirua and South Wairarapa,” says Davidson.

In Featherston, an area that until recently had seen little growth of development since the last cycle’s peak, there’s three new subdivisions underway. The area has seen 23.5% growth over the past 12 months.

Ray White Wairarapa agent Steve Chapman says investors who bought 10 or 12 years ago in Featherston are now finally selling their properties for a profit.

Additionally, “Investors selling up their rental properties has created a significant undersupply of rentals. The rents have just gone through the roof,” says Chapman.

Listings are selling very quickly and Chapman is expecting further growth this year.

“It’s not going to slow down anytime soon, just because of the pricing in Wellington.”

Whanganui On Fire

Gonville, Tawhero and Whanganui have all experienced between 5.5% and 6.5% growth over the past three months and Castlecliff has experienced 17.9% over the past year.

Ray White Whanganui’s Tim Hocquard says properties that were put on the market last year and didn’t sell are now being re-marketed and are attracting multiple offers.

“Recently we sold a property in Springvale which is a lovely suburb. The owners had been trying to sell it privately for $300,000. They gave it to us and we listed it at $315,000 and it sold for $330,000. Another one around the corner on Fox Road – same thing – they hadn’t been able to sell [last year], we put it on the market, it attracted multiple offers and sold for $10,000 over ask price.”

There’s a rental shortage currently, says Hocquard and as a result “Weekly rentals have definitely gone up – there’s some areas where they have nearly doubled.”

People shifting to Whanganui in search of a good lifestyle and lower house prices has also increased price pressure, as well as Australian investors who have strict investment criteria around yields, says Hocquard.

Whanganui is experiencing good economic growth, he says, and there’s a diverse range of industries including aluminium production and leather tanning, that support employment. The pick of suburbs? “The whole of Whanganui is on a bit of a roll.”

Looking To Buy

Lower price points and higher yields can be an attractive drawcard for investors. But it’s always key to look past the data and to understand at a local level the impact of employment and investment in an area and then at a suburb level, what types of tenants a property will attract and how easy it will be to keep a property tenanted.

Always speak to local investors and agents in the area you are looking in to ascertain which spots represent solid investment locations; look at population projections for the area and plans for further development to understand whether growth is likely to continue.