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Far From The Madding Crowd

Far From The Madding Crowd

Whangarei has experienced a huge value increase when it comes to house prices, but this is starting to stall, as Sally Lindsay discovers.

By: Sally Lindsay

30 June 2022

Dubbed the “winterless north” Northland is far away from crowded roads, noise and the pressures of big-city living. Daily commuting in Whangarei takes minutes rather than hours for people working and living in a safe, clean, peaceful and calm environment.

Whangarei is regarded as a large regional city in a stunning area close to the Bay of Islands and Tutukaka Coast and one of New Zealand’s most desirable locations, offering unspoilt white sand beaches, native bush and scenery and spectacular fishing in a warm, sub-tropical climate with outdoor living year-round.

Just one glance at the weather forecast on any given day shows just how warm Northland can get: humid summers and mild wet winters, with the country’s highest average annual temperatures. Summer maximums range between 22-26°C; winter maximums vary between 14-20°C.

And the big orange ball in the sky isn’t the only thing Northland has going for it. Steeped in Maori culture and tradition, Northland was first “discovered” by the explorer Kupe 800 years ago.

Today, about 30 per cent of the Northland population identify as Maori, and Whangarei has a sizeable Maori contingent. It was also in Northland that the Treaty of Waitangi was signed in 1840.

Fishing, boating, cycling and hiking are all hugely popular pastimes in Northland, and with a population of just 150,000, people can often drive or amble for hours in splendid isolation.

The lifestyle attracts skilled migrants to Northland. About 10,000 people from the UK and Ireland call Northland home, with Europeans and Asians making up the rest of what is already a hugely diverse population. In fact, 125 people a month are reported to move to Northland, taking advantage of family homes, townhouses and apartments, particularly in Whangarei.

Whangarei is benefiting from Auckland’s expansion north, as well as promising developments around the port.

Prices Ease

Good demand for houses is shoring up the Whangarei and Northland market, although prices are starting to ease, says John Fairley, owner of real estate company Team Tait.

“Rising interest rates are starting to take a toll,” he says.

However, his company sold two beach houses near Whangarei for record prices recently; one at Tutukaka for $4.5 million and another at Taiharuru for $3.5 million.

“At those prices, interest rates don’t make much of a difference and there is still good buying activity at the top end of the market,” says Fairley.

Rising interest rates are affecting the middle and lower end of the market, particularly as the official cash rate (OCR) is expected to rise several times before hitting the Reserve Bank’s ceiling of 3.9 per cent. Banks are expected to lift interest rates further, which are already biting into the ability of first home buyers to secure mortgages.

“Obtaining mortgages, being able to service them, and the removal of interest deductibility for investors is having a big effect,” says Fairley.

“If interest rates rise by 2 per cent on a $500,000 mortgage that is an extra $10,000 a year, or nearly $200 a week, a home owner has to work out how to find somewhere. It is not easy.”

He says in Whangarei, as elsewhere, more properties are for sale but there are few buyers and those who are looking for a new home are more cautious and taking their time.

“There are good properties on the market but agents are having to try harder to sell them. Many agents have never been in this type of market before.”

Selling a property in Auckland often allows someone moving to Northland to buy two houses and that has been a feature of the Whangarei market for the past couple of years. Fairley says there has been a big influx of Aucklanders taking advantage of the city’s properties on offer.

‘Most renters’ first consideration is school zones’

He expects the market to be quiet and house prices to drop 10-15 per cent over the rest of the year. “The cost of replacing a property is huge and going up by the day, so existing stock is good value when compared to new houses.”

Fairley, who has more than 30 years real estate experience, has seen the market in all its guises and says this cycle will pass, but buyers and sellers just have to ride it out. “As long as people can service their mortgages there won’t be a massive downturn.”

Back To Normal

Whangarei’s rental market is going through a change as people get back to a more normal life.

Quinovic Property Management is gaining back properties it lost during the country’s lockdowns when owners moved back in to work from home or returned from overseas.

Quinovic Whangarei general manager Andrea Phelan says many people are now moving out and returning to jobs they had in other areas of New Zealand, looking for a more normal lifestyle or going back overseas.

The company is also picking up properties to manage from owners who have been unable to sell for the price they want and have decided to rent and wait out the falling market.

Phelan says Aucklanders and Wellingtonians are moving to Northland every week for the lifestyle and realising they can get more house for their money, or cheaper rent while they decide to buy an existing house or build.

“Most renters’ first consideration is school zones,” she says. “It is by far the biggest concern for a lot of people because Whangarei is such a diverse city and market.”

Quinovic attracts a lot of enquiries from larger families for four to five-bedroom houses, and Phelan has noticed more renters have an older parent within the family mix. She also recently had an older woman giving notice because she could not afford the rent and was moving in with her son.

Investors with money are still buying, but rising interest rates and removal of tax deductibility are squeezing out mum and dads who might have bought one or two rentals. “It’s now only the more serious investors in the market.”

She says there are not enough properties at the lower end of the rental market for higher risk tenants.

Quinovic is receiving on average 40 enquiries for every rental house advertised on Trade Me. “While we are getting inquiries daily a lot of those people are not turning up to open homes. We might have 10 people register to attend, but only four turn up.

“There are definitely some desperate renters who are finding it difficult to take time off work and pay for the petrol or transport costs to attend open homes. It’s an extremely difficult situation as we need to have face-to-face viewings for rentals on our books.”

An average three-bedroom house in Whangarei rents for $480 to $550 a week. When Phelan started in real estate in 2012 the average rent was $280 a week. An average four-bedroom home rents for $600 a week and is where most of the inquiry is. For a new house with four bedrooms, two bathrooms and a double garage, rents range from $700 a week.

Phelan believes Whangarei is a good place to invest. “Aucklanders instead of buying one house can buy two, but rising interest rates are making it more difficult for landlords.” She says most Whangarei landlords do get market rents. However, some are selling mainly because of the removal of interest deductibility.

Deals In Market

The city’s investment market has been tough for a few months, but is getting a little easier, says iFindProperty Whangarei agent Penny King.

“Interest deductibility has deterred investors recently,” she says.

There are deals in the market, but they are harder to find, especially with house prices plateauing and weakening. “Houses are taking longer to sell and buyers are being more cautious than they were last year.”

Popular Whangarei areas for investors have always been the central suburbs close to NorthTec, Whangarei Hospital and the CBD. “There are better longerterm rental prospects in these areas,” says King.

Aucklanders, people in other parts of the country, and expats are always looking to invest in Whangarei. King says it has become an alternative to Tauranga as a retirement destination. “Tauranga is basically full; prices have increased rapidly and are now out of the range of many people.”

Returns for investors are in the 5-6 per cent range, but King says many properties are not necessarily cash-flow positive, given the removal of tax deductibility. “For people who have not locked in interest rates, they are in a bit of a pickle.”

A few investors want to sell to move on, while others have added value to their rentals by adding extra rooms or undertaking full renovations. “Whether they were planning to sell or the change in tax deductibility rules pushed them in that direction is uncertain,” says King.

Multi-income homes are popular with investors as there is more chance they can become cash-flow positive, but they command higher prices. “There are several on the market now and they have not been snapped up because finance is difficult to get. It is far easier to get a mortgage on a stand-alone house.

“The investment market is definitely harder now than it was two years ago and that is directly attributable to the removal of tax deductibility. Buyers need a lot of fat in their deals now as well as a good income for serviceability.”

Despite this King says Whangarei is still a good market in which to build a portfolio because there are a growing number of renters.