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Sun, Sea And Sales

Sun, Sea And Sales

Post-election, the sun-soaked city of Tauranga has seen a surge in house sales, as Sally Lindsay explains. Images Tourism Bay of Plenty

By: Sally Lindsay

30 December 2023

At 232 metres tall Mount Maunganui rewards its summit track climbers with gorgeous bay views.

Nestled on the sun-soaked shores of the Bay of Plenty, Tauranga is a large city with a small-town vibe.

While Captain Cook named the Bay of Plenty area in honour of the plentiful fish, timber and generous people, he could well have been referring to the sunshine. Tauranga is one of the sunniest places in the country, receiving an average 2,200 hours every year.

Although Tauranga is classed as one of the smaller cities (by area), the rapidly increasing population has made it New Zealand’s sixth-largest city by population.

More than 150,000 people call Tauranga home. In spite of this, it generally doesn’t feel crowded.

Papamoa Surf Club, picnicking at Pilot Bay.

Development has mostly kept up with the influx of people, and there are plenty of housing options.

Job opportunities are one of the things that makes Tauranga a practical place to live. It’s part of the golden triangle along with Auckland and Hamilton, and it’s predicted these three areas combined will be home to 53 per cent of NZ’s population by 2031.

The unemployment rate in Tauranga is about 4.7 per cent, a tell-tale sign that there’s plenty of work to be found. It’s one of the country’s biggest port cities and there is opportunity in everything from business, commercial fishing, agriculture, healthcare, education, retail and hospitality.

Like every city in NZ, Tauranga has an excellent quality of life, with a mix of warmer weather, clean air, and a close-knit suburban lifestyle. For young professionals wanting to be in a central location, cycling and walking are common ways of commuting to work, while families gravitate to outer suburbs like Papamoa Beach, which are still only a 15 to 20-minute drive from the city.

It’s a popular tourist destination for Kiwis who want immaculate beaches, hiking trails, waterfalls, and water sports. It’s also a city that’s sprawling with trendy cafes, restaurants and bars, giving the perfect mix between outdoor and indoor lifestyle.

CLOCKWISE FROM TOP LEFT Tauranga Art Gallery, biking at Summerhill recreational farm, The Mt’s Izakai bar and eatery, Matariki pou carvings – The Strand, waterfront playground fun, Barrell Room on Wharf Street.

Affordable Options

There are great housing neighbourhoods throughout the entire city – suburbs, outskirts, or coastal areas. Otumoetai, Papamoa and Mt Maunganui are all coastal, so generally carry a slightly higher price tag. Yet not everywhere is pricey. Tauranga Central and Gates Pa offer great, affordable options to get you into the area.

Price drops are falling back across Tauranga; Judea had the biggest drop for the year to November 2023. The suburb fell 5.2 per cent from $752,500 in November 2022 to $731,650 in November last year, followed by Bellevue dropping 5 per cent from $817,500 to $776,950, and Welcome Bay declining 4.6 per cent, from $865,450 to $826,000. Parkvale and Pyes Pa both fell 4.5 per cent, Hairini 4.1 per cent, Gates Pa 3.9 per cent, Bethlehem 3.7 per cent, Papamoa 2.5 per cent from $944,850 to $921,400, and Ohauiti 2.3 per cent from $1,018,000 to $994,650.

TOP Spot the cruise ship, Mt Maunganui.
BOTTOM Twilight at Mount Hot Pools.

Raine & Horne director and auctioneer Paul Billinghurst says there has been much more housing market activity since the election. “There seemed to be a lot of people just waiting to see what happened. It has picked up since. We have more multi-offers on properties and more people interested in buying and selling, but it’s not the 2021 boom by any stretch of the imagination.”

More properties are coming onto the market, but the ratio of buyers to listings hasn’t changed that much.

“Vendors have finally woken up and are meeting the market as opposed to two years ago. It comes down to motivation and whether a vendor really wants to sell, but there are more willing to meet the market.”

Billinghurst says despite the difficulties for investors over the past two years with increasing tax payments and costs for insurance and council rates accelerating, there haven’t been distressed sales across the board.

He says the agency is not seeing a big flurry of investors either, probably slightly more than usual, and a lot just waiting until the new government announced last year it was reinstating tax deductibility. Investors can now claim 60 per cent this tax year, 80 per cent in 2024/25, and 100 per cent in 2025/26.

Investors agents have seen are the ground breakers – those coming back into the market before the government’s new property policies have properly kicked in. “They are definitely looking for bargains,” says Billinghurst. “Previously they would pay either just above market price or come in with ‘we don’t care what we pay, we just want to buy’ attitude. There is none of that from an investor point of view at the moment.”

Savvy Investors

If a property has issues, such as a leaking roof, and a first-time buyer is not going to get financed, then investors will swoop in. “The more seasoned investors know they can fix the problems and if they can get it at a bargain price, then it’s worthwhile, whereas a first-home buyer will be mortgaged up to the hilt and the bank will not lend because they cannot afford to repair the house. Those kinds of investors are always there.”

He says savvy and educated property investors will always look at cash flow and returns first, which generally means they are after a bargain.

“They are always going to try to get a property for the lowest price possible.

“When it is a mum and dad or not very educated investor they get caught up with the hype and believe that property prices are going to rise by 10 per cent every year and interest rates will stay low.

“They are buying emotionally compared to those buying on financials and who won’t buy if the figures don’t stack up. The savvier investors will gravitate to the ‘dunger’ around the corner because it’s a better investment and will rent for more.”

When taking offers on properties, Billinghurst says they are more often subject to sale. Not many vendors are buying before they have sold, so stock is fairly static. Several sellers are moving into retirement homes and others are moving out of the region, while there are always movers within the city.

Cheaper properties are in the $500,000-$600,000 range. Under $500,000 are typically two-bedroom homes or older style apartments. Very seldom would a buyer get a three-bedroom house under $500,000, he says. At the height of the market an average three-bedroom home would sell for $700,000-plus, but that has now dropped to between $500,000 and early $600,000.

First-home buyers are looking in the $750,000-$800,000 range, whereas a few years ago when interest rates were sub-three per cent, they would look at a $1 million house. An $800,000 mortgage was serviceable then, but now that would be fairly challenging for most people, Billinghurst says.

He says Tauranga’s housing market it just as bad as the rest of the country in that there are not enough rentals. It’s a major problem, but the new government should be a lot friendlier to landlords when tax deductibility is restored, and the bright-line test shortened.

Cyclists at Gate Pa memorial reserve.

Rental Viewings

Propertyscouts Tauranga business owner and property management specialist, Adrienne Turner, says there is a huge shortage of rental properties in the Bay of Plenty.

“Even though Kainga Ora is building dozens of houses, not everybody is suitable to rent its properties and middle-income earning families are holding down more than one job to keep a roof over their heads,” she says.

Thrown into the mix are people relocating for jobs or commuting to work in Auckland, all looking for a rental. “With a rapidly growing population the region is hundreds, if not thousands of rentals short.”

This is shown up in the number of viewings for each rental. Recently a two-bedroom house Turner had on her books had 54 applicants and more than that number showed up at viewings. “This is normal as people desperately search for somewhere to live.”

Making light work of the application process and the appropriate checks keeps the business going smoothly. “This is not a five-minute job when there are 50-odd applications to deal with and everyone is given a fair chance,” Turner says.

New rentals are continually flowing into the business from property owners taking time out and travelling NZ in campervans or caravans, going overseas, and younger people trying mining in Australia to make more money.

Investors are still buying properties as rentals if they have the required 40 per cent deposit or a good chunk of capital in their own home or other properties they own. However, Turner says a few landlords she deals with (five in the past year) have sold up mainly because of high interest rates and difficulty in servicing mortgage repayments. “This would mean a huge hike in rents to cover the difference and that would not be fair on tenants.

“Investors, of course, want to minimise their outgoings and should be able to do this when tax deductibility is reinstated. When interest rates drop there should be an increase in more investors buying again.”

The city’s rental market fluctuates quite a bit. Turner says when owners/landlords notice rents increasing they feel they can achieve the same sort of rent. “Bearing in mind Healthy Homes standards, location and what is on offer at their property has an impact on rents. Comparisons at the time of renting out a home are important to keep in line with market rent, but not go overboard.”

Popular rental areas are Mount Maunganui, Pyes Pa, Greerton and the Avenues for one to two-bedroom homes and at the other end four to five-bedroom houses.

Rent on a two-bedroom house starts at a minimum of $500 a week and for a basic three-bedroom home $680 a week. Houses that are priced right can take less than 28 days to rent.

Investing in Tauranga

For more information about investing in Tauranga go to www.tauranga.nzpif.org.nz

Corelogic Tauranga

Kelvin Davidson, Chief Property Economist

The Data

Rental data is sourced from the Ministry of Business, Innovation and Employment based on rental bonds lodged. This data is supplied grouped into geographic areas based on statistical area units used by Statistics NZ for the census and as a result do not always match well with common usage suburb names.

The rental data for each area is matched to property price information from our database to determine property prices and therefore yield. The yield is calculated as the annualised rental income divided by the median property value calculated using our E-Valuer.

Market Composition

The rental market across Tauranga is dominated by houses, which is normal for most parts of the country. Of the 816 properties recently available on the market for rent, 717 have been houses (88 per cent), with 60 apartments (7 per cent) and 39 flats (5 per cent).

The dominant sub-market for apartments is Mount Maunganui – with 33 properties, or 20 per cent of all rentals recently available. Tauranga Central/Greerton (18) has also had a reasonable number of apartments available for rent, as well as flats (18).

Each part of Tauranga has had decent numbers of houses available for rent, ranging from 180 in Papamoa Beach, down to 108 in Pyes Pa/Hairini/Welcome Bay. In the latter market, houses have accounted for 100 per cent of all properties recently available for rent, with Bethlehem/Otumoetai also having quite a high concentration rate for houses (96 per cent).

House Size, By Bedroom Count

Looking specifically at the 717 houses recently for rent across Tauranga, none have had five bedrooms, and only 12 with one bedroom – six apiece in Bethlehem/Otumoetai and Tauranga Central/Greerton.

In the two-bedroom bracket (24 per cent of all Tauranga houses recently for rent), Tauranga Central/Greerton has been the largest market, with 63 properties. It’s also had the highest concentration rate (38 per cent), with Pyes Pa/Hairini/Welcome Bay at the other end of the spectrum. However, the latter is a key area for four-bedroom houses on the rental market.

For the key three-bedroom bracket – 59 per cent of houses recently for rent in Tauranga – Papamoa Beach has had the most stock (126), as well the highest concentration rate, of 70 per cent. However, three-bedroom properties have also accounted for more than 50 per cent of houses recently available for rent in most of the other areas of Tauranga too, apart from Tauranga Central/Greerton, at 49 per cent.

Rent And Yield

By matching average value to rent we can look at gross yield for three-bedroom houses in each area.

Median weekly rents for three-bedroom houses across Tauranga are in a fairly tight range of $660 (Tauranga Central/Greerton) up to $700 in Papamoa Beach. However, there’s a wider spread for the values of these properties, ranging from about $730,000 in Tauranga Central/Greerton up to $1.25 million in Mount Maunganui.

This means that gross rental yields also differ quite a bit across Tauranga, from a respectable 4.7 per cent in Tauranga Central/Greerton, down to a relatively low figure of less than 3 per cent in Mt Maunganui.

That said, even with large parts of Tauranga seeing rental yields on three-bedroom houses below 4 per cent, at least the growth in rents on those properties might be looking appealing to some investors. Growth of 5-7 per cent over the past year has been fairly common, with Papamoa Beach pushing 8 per cent, and Tauranga Central/Greerton getting into double digits.