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Taranaki - The Place Where Energy Peaks

Taranaki - The Place Where Energy Peaks

From picture-perfect Mount Taranaki to the wild surf beaches and civilised cultural attractions, Taranaki boasts a natural energy and vibrancy, writes Sally Lindsay. Images courtesy TaranakiStory.

By: Sally Lindsay

2 September 2023

Spectacular Te Rewa Rewa Bridge spanning the Waiwhakaiho River.

Taranaki’s strength lies in its diversity, with a huge oil and gas presence, a robust engineering sector, a concentrated primary production industry and fast-growing tourism and public events.

Taranaki is home to 124,600 people, most of whom live in the coastal city of New Plymouth. The region is split into three districts, each with its own council: New Plymouth to the north with a population of 86,100; Stratford in central Taranaki with a population of 9,880; and South Taranaki, which includes the main centre of Hawera,with a population of 28,700.

Dominated by Mount Taranaki, the 2,518-metre peak is the central icon for the region, dominating views and delivering a wide range of visitor and lifestyle experiences.

The region also has a coastline of rugged cliffs and sandy black beaches, ideal for swimming, boating, diving, fishing and other water sports. Surfing is also popular, with dozens of renowned surf breaks around Surf Highway 45.

New Plymouth is also home to one of New Zealand’s best contemporary art museums, the Govett-Brewster Art Gallery. The central Pukekura Park is home to the annual Womad festival (World of Music Arts and Dance) and other international performance events; and then there’s the Len Lye Centre and Coastal Walkway.

ABOVE Taranaki’s Surf Highway 45 beaches are always popular.

Beyond these events, several garden festivals and major sporting events keep the locals entertained.

Hawera, Stratford, Inglewood, Waitara, Oakura, Opunake, Urenui and many of the other towns throughout Taranaki provide an inviting alternative to New Plymouth. In these smaller communities there are homes on spacious sections and lifestyle blocks with sea and/or mountain views.

The median house price in Taranaki in June was $570,000. This is up from $280,000 10 years earlier. This means the median Taranaki property increased in value by 7.37 per cent each year, or $29,000 on average.

Recently, however, some suburbs and towns across the region have seen falls in house prices, but not to the extent of the big cities across the country.

A morning run in Pukekura Park’s native bush.

The Market

The latest CoreLogic data shows houses in Manaia, South Taranaki have risen 5.1 per cent in the 12 months to July 1 this year, going from $338,950 to $356,250. Across the rest of South Taranaki prices in Eltham have dropped 1.1 per cent from $375,700 to $371,700, Waverly prices have declined 1.5 per cent from $384,650 to $378,850, and Normanby prices have decreased 3.1 per cent, from $436,400 to $422,750.

In New Plymouth the biggest drop of 2.8 per cent has been in Hurweorth, where prices have dropped from $1,054,100 to $1,024,900, followed by Glen Avon dropping 2.2 per cent from $790,250 to $772,950 and Okato declining 1.9 per cent from $612,850 to $601,400. Fitzroy prices dropped 1.3 per cent, Waiwhakaiho by 0.8 per cent, from $1,156,050 to $1,147,150, and New Plymouth 0.7 per cent.

Taranaki has fared better than most of the provinces as house prices have not dipped as far as other areas across the country, says Daniel McDonald, managing director and the fourth generation to work for McDonald Real Estate.

The main business sectors have continued to employ and while some people are worried about being able to afford their mortgage payments, there are a growing number of others who believe interest rates are at or near their peak, he says.

“They’re encouraged by that and if they can make their mortgage or investment work at these interest rates, then it’s only going to get easier.”

The general feeling is the drop in house prices is almost finished. “The stats are starting to show that. We have certainly seen declines in certain markets, but when you find a suburb that’s gone backwards, it’s not hard to find a suburb that’s actually continued to increase right through the crisis,” McDonald says.

“Right across the board, the feeling is that regardless of any drop, house prices seem to be higher than they were three years ago. Most Taranaki people with a long-term mindset seem to understand the market goes up and down, and the longer they stay in it, the better they will do.”

THIS PAGE CLOCKWISE FROM TOP LEFT Dawson Falls at Taranaki Maunga National Park, New Plymouth Coastal Walkway, Back Beach sand dune fun, Ember Restaurant.

Investors Holding

Investors are not running to the exit door either, says McDonald. “The majority are holding, but we’re having more and more conversations with landlords about potentially exiting the industry.”

Sales to investors have certainly dropped off – in 2020, 20 per cent of the agency’s sales were sold to investors. It is now down to 13 per cent and still declining.

“A lot are saying that they will wait and see what happens later in the year. A change of government may alter some of their minds about selling, but likewise I think interest rates will have just as big an effect, especially if they start coming down.”

McDonald says the feeling the agency gets from most of its landlords is that they are paying a mortgage on their investment, so interest rates are a major factor in whether to hang in or sell.

Unlike other areas of the country, McDonald says Taranaki is not suffering from a listings shortage. “We could always do with more, but there is a lot of appraisal activity.”

Last year, 29 per cent of the agency’s sales went to buyers outside the region, rising from 24 per cent in 2020 and 2021, fuelled by buyers leaving the bigger cities after the pandemic for a better lifestyle and able to keep their jobs and work from home. This year it has dropped to 20 per cent. He believes the decline is out of town buyers now finding it difficult to sell their homes, while Taranaki domiciled buyers don’t find it so arduous.

First home buyers have been the most active in the Taranaki market this year. Last year, 10 per cent of residential purchasers were first home buyers. This year, it is 13 per cent, most in recent months, particularly after LVR restrictions were loosened on June 1. McDonald says sales to first home buyers are back to 2020 levels.

Tax Burden

A few landlords on Propertyscouts' books have recently sold because of the extra tax burden as deductibility on mortgage interest payments is phased out and cost of living increases.

Propertyscouts Taranaki director Courtney Belgrave says tax deductibility is scaring landlords. “We have had a few landlords sell but a lot are waiting to see which way the election goes, and they will then decide what they’re going to do.

“But with interest rates going up, insurance going up, council rates rising, it is putting stress on landlords and they are having to increase their rents to be able to get back some of that cost,” she says.

Mt Taranaki watches the morning surfers at Oakura Beach.

“We have a few landlords saying they feel for the tenants and try to reduce the increase because the tenants are also being hit with increases in all the other living costs.

“A couple of years ago, we would rent a brand new three-bedroom, two-bathroom property for $550 a week. Now, the rent is $750. So in a couple of years it’s gone up $200,” Belgrave says.

A few investors are still buying properties, but they are also holding on and hoping there is a change of government to reverse the tax deductibility.

Demand for Taranaki rental properties has dropped in the past year. The number listed on Trade Me has risen to between 70-85 properties this year compared with 50-60 last year.

Belgrave says while the agency could do with more rentals, living costs are having a huge effect on the market.

“Renters are trying to stay longer in their existing property hoping they can avoid a high rent increase.”

She says it is definitely a lot easier than it was at this time last year to find a rental. “However, we still hear stories about people who have been looking for a year and can’t find anything suitable.”

OPPOSITE CLOCKWISE FROM TOP LEFT Bleached New Plymouth, Paritutu Rock at Oakura Beach, award-winning Juno Gin distillery, Kingsroy Gallery, Puke Ariki, Billow Bakery treats.

Cooling Off

Belgrave says there is usually a reason – they have an outstanding Tenancy Tribunal case, had 14-day notices, or haven’t kept up with rent payments. “If tenants present as clean and tidy and pay their rent on time, they don’t seem to have an issue finding a property now that the market has cooled off.”

There is still a scramble by tenants for properties at the median rent. For a two-bedroom property the average rent is $450 to $550 a week – a median of about $400, while for a three-bedroom the average rent is $550 to $650 a week, so the median is about $600 a week.

For those properties Belgrave says there can be up to 30 applicants.

Propertyscouts has a few high-end properties on its books, but they are mainly rented by companies for staff coming from out of town or overseas.

The most popular rental areas are in good school zones. “As school zoning has become tighter in New Plymouth, areas around Highlands Intermediate, Welbourn School and Frankleigh Park are popular.

“No matter what spin is put on landlording, it is a risk, and the government is not making it easy for them, adding a range of legislative changes.”

She says the Healthy Homes standards are great, but it has come at a huge cost to landlords, with tax deductibility, higher interest rates and insurance rising on top of the standards. If something doesn’t give landlords will sell and the rental market will collapse, leaving even more people homeless.

Investing in Taranaki

For more information about investing in Taranaki go to www.taranaki.nzpif.org.nz.

Corelogic Taranaki

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.

The rental market across Taranaki is dominated by houses. Of the 534 properties recently available on the market for rent, 459 have been houses (86 per cent), 42 have been flats (8 per cent), with 33 apartments (6 per cent).

Apartments are concentrated in two areas, with 18 in New Plymouth Central/Moturoa and 15 in outer New Plymouth. For flats, 18 have been in outer New Plymouth, 15 in New Plymouth Central/Moturoa, with another nine in Waitara/Inglewood.

The most significant market for houses on the rental market lately has been outer New Plymouth (201), followed by New Plymouth Central/Moturoa (78). There have been around 40 rental houses each in Hawera, Stratford, Rural South Taranaki, and Waitara/Inglewood. Rural New Plymouth has had a smaller number of 18 houses for rent, but it’s one of four sub-markets across Taranaki where there are no flats or apartments.

House Size, By Bedroom Count

Looking at the 459 houses recently for rent across Taranaki, none have had five bedrooms, and only six with one bedroom (all in Outer New Plymouth). As per most other parts of NZ, the concentration for houses tends to be in the three-bedroom bracket (273 properties or 59 per cent of houses), with 22 per cent having two bedrooms (99) and 18 per cent four (81).

The most four-bedroom houses recently for rent in Taranaki have been in Outer New Plymouth (36), with a smaller spread across each of the other sub-markets. The highest concentration rate has been in Rural New Plymouth, with 33 per cent of houses recently for rent there in the four-bedroom category. Switching to two bedrooms, again the most (51) have been in Outer New Plymouth, although its concentration rate (25 per cent) is slightly exceeded by New Plymouth Central/Moturoa (27 per cent).

And finally for three-bedroom houses, the most have recently been for rent in Outer New Plymouth (108), followed by New Plymouth Central/Moturoa (45). Each sub-market has a concentration rate for three-bedroom properties among all rental houses of around 60-70 per cent, although outer New Plymouth is a little lower at 54 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 range from as low as $402 in rural South Taranaki up to $620 in Outer New Plymouth. There’s also quite a wide range for the median values on these properties, from less than $400,000 in Rural South Taranaki up to nearly $720,000 in Outer New Plymouth.

Gross rental yields on three-bedroom houses can differ quite a bit, and are down at 4.5 per cent in outer New Plymouth (and 4.3 per cent in Rural New Plymouth), but 5.5 per cent or more in Rural South Taranaki, Hawera, and Stratford. Of course, even at a yield of 4.5 per cent (low for Taranaki), that’s still quite attractive compared to many other parts of the country. Rental growth has been strong lately, ranging from about 6 per cent annual increase for a three-bedroom house in Rural South Taranaki and Waitara/Inglewood, up to about 22 per cent in Rural New Plymouth.