Top 10 Boom Spots
Amy Hamilton Chadwick uncovers the spots with greatest growth potential in 2016 and looks back at last year’s predictions to see if we were right.
1 July 2016
Three major trends have emerged this year across regional housing markets: a shortage of listings; more investor activity; and a bumper crop of first home buyers with Kiwisaver and HomeStart deposits burning holes in their pockets.
Added up, it means fewer availabe properties, more cashed-up buyers – and prices are being squeezed higher. First home buyers are competing with investors for affordable properties and investors are also competing with each other to secure better returns.
Values have been stagnant in many, if not most, regional markets since the global financial crisis. This year looks to be a turning point, helped along by Aucklanders looking for new places to put their investment dollars – and new places to live.
Comparing Growth Levels
To find out which spots are starting to accelerate in growth, we measured the 12-month growth (March 1, 2015 – February 29, 2016) and compared it with the three-month (March, April, May 2016) growth, annualised.
By annualising the three month growth, we discover which places are seeing an acceleration in immediate growth levels as compared to their 12-month growth levels.
The hottest spots are ranked in order of greatest difference between the two figures. We also included in the table below the percentage growth since the last peak in 2007.
This will help you make your own deductions as to whether there is further growth potential in each area. (All areas are analysed at suburb level using the CoreLogic median E-Valuer measure).
There have been some particularly outstanding suburbs for growth in the three months to May 2016; we talked to local agents in the areas that made our top ten to find out why these suburbs are punching above their weight and if there is potential for further growth.
1 Cannons Creek, Porirua City
Prices in Cannons Creek, and in fact across Porirua, remained essentially unchanged between 2007 and 2015. In the past year and particularly this year, they have shot up like a rocket. And with values still not far above the previous peak, this looks a rocket that could have plenty of fuel left in the tank.
“This is an area that’s had an established, reasonably bad reputation for gangs, drugs and state houses,” Graeme Barr, principal at Leaders Tawa to Pukerua Bay, explains. “The state houses have gradually been sold off, and the whole of Porirua is becoming more acceptable for Wellingtonians – the profile of buyers has changed.”
As Wellington City becomes more expensive, first-time buyers and investors are pushed further out. With Transmission Gully underway, Cannons Creek feels closer than ever to the city. With two- and three-bedroom homes still available for between $200,000 and $500,000, “name your price and we can find your area,” Barr says.
2 Hataitai, Wellington City
Expensive, sought after and hard to break into: Hataitai is a fantastic place to live and attracts mainly families, though a few investors have picked up blocks of units here to make the most of the quality tenants and 100% occupancy rates, according to Nicki Cruickshank, top sales consultant for Tommys Wellington City.
“There’s been a real shortage of listings and once people secure them they tend to stay for a long time, so if any come up they go for big money,” Cruickshank says. She recently listed a dated 160m2 family home hoping it would go as high as $830,000; she was astonished to see it sell for just under $1 million.
3 Castlecliff, Whanganui District
Both first home buyers and investors are finding value in Castlecliff, which has traditionally been one of the most affordable suburbs of Whanganui. Properties usually require some renovation. “But for those who are prepared to get stuck in and do them up, it’s a great first step on the ladder,” Ian Barns, manager at Bayleys Wanganui, says.
Investors from Auckland have recently been drawn to Whanganui, including Castlecliff, in search of better yields. Many of the original large houses in the suburb have been converted into flats and the returns on these are excellent,
Barns says. With a median value of just $121,850 and still sitting more than 20% below peak, Castlecliff looks like fantastic buying.
4 Elderslea, Upper Hutt City
The tide has turned in Upper Hutt, says Marc Walker, sales consultant at Marc Walker Real Estate. The general lift in the Wellington market has pushed buyers out in waves towards the Hutt Valley and Porirua, and suburbs like Elderslea have seen a surge in popularity.
With its proximity to town, easy transports, good schools and affordable prices, around 80% of homes in Elderslea are going to first home buyers with Kiwisaver money burning a hole in their pockets. The other 20% of sales are to investors, who are struggling to match the more emotion-driven offers of keen first home buyers.
Walker recently listed a smart property with a council valuation of $330,000 and got six offers from as far afield as an expat in Dubai. The house finally sold for $427,000; “buyers do not want to lose the race – developers and home buyers – they just keep throwing offers until it sticks.”
5 Appleby, Invercargill City
Growing fast but well below peak, it looks as though gains are still to be had in Invercargill. Yields of 8% to 10% are attracting investors from all over New Zealand, but particularly Auckland, Christchurch and Queenstown. Invercargill in general is underrated, Wayne Ellis, manager Harcourts Invercargill, says. It offers good cashflow at affordable prices that reflect the lower capital gains.
“Investors are finding they can get two or three properties compared to one in those larger metropolitan areas,” Ellis says. “It’s entry level in Appleby, at that $100,000 to $200,000 mark, with a shortage of stock putting a bit more pressure on prices.”
6 Kaitaia, Far North District
Northland’s property market became overheated in around 2005, leading to a correction that saw prices drop by more than 50% in the GFC, Michael Healy, principal of Professionals Far North Coastal, says. Since then the prices had flatlined, until 12 months ago, when the lower end of the market began to improve – though the whole region remains well below peak prices.Kaitaia is one of the more affordable suburbs and sections there (which had long been in oversupply) are beginning to be soaked up by quality developers.
There are four distinct groups of buyers: those who plan to move there and are aiming to beat price rises by buying four or five years before shifting; homebuyers; those buying holiday homes; and investors. Healy sees positive signs for the local economy as productive professionals relocate and work remotely, bringing money into local industries and flowing into the whole region. “I can definitely feel a bit of momentum.”
7 Aramoho, Whanganui District
Aramoho is around a 10-minute drive to the centre of Whanganui, which might sound like a CBD location to Aucklanders, but has tended to be a stumbling block for locals, Barns sa. Now, though, younger buyers are prepared to drive a little further to get good value for money, and Aramoho has a charming provincial feel with lovely streets and solid homes. Investors are also active here, as they are across Whanganui.
“There’s been positive growth all over town,” Barns says. “People from Auckland, Dunedin, Wellington and all over are looking around and seeing it’s a nice tidy-looking town. We’re starting to see the investors, too, and they get fairly good returns. It’s great.”
The market has jumped Quite dramatically since Christmas, what was Selling for $220,000 is Now $260,000 or $280,000. Properties are going way Over the asking price – John Wilson
8 Waihi, Hauraki District
A popular retirement spot, Waihi is seeing an influx of Auckland money being spent on both rentals and relocations. Once again, a significant number of people are buying for the future, purchasing a home to live in when they retire and renting it out in the meantime. Investors are also buying rentals, particularly those priced out of the Auckland market. Here, too, a lack of listings is putting upward pressure on prices.“The market has jumped quite dramatically since Christmas,” John Wilson, sales consultant for Harcourts Waihi, says. “What was selling for $220,000 is now $260,000 or $280,000. Properties are going way over the asking price.”
9 Matua, Tauranga City
Matua was once Tauranga’s premier suburb, but its values suffered as other suburbs, especially Bethlehem, developed over recent decades. With Bethlehem now full, buyers are turning their focus back to Matua, Stephen Pepper, general manager at Realty Link Marketing, operating as LJ Hooker Tauranga, says.
Investors are busy in Tauranga and they’re divided into two camps: traditional long-term buy-and-hold investors and those who are buying with a plan to move to Tauranga in future. Everyone who’s buying there has an eye on capital gains, Pepper says. “There’s strong competition among investors and it can’t be said it’s all the Auckland market – we’re getting an equal supply of buyers from other regions.”
10 Tawa, Wellington City
The success of Tawa this year can be summed up in two words, says Cruickshank: city squeeze.Suddenly it’s harder to find a three-bedroom, one-bathroom home in Wellington for under $600,000, so Tawa is attracting a new crop of first home buyers and investors.
“People have the choice of going out to Aotea and getting a new house with little land, or getting an older house with more land in Tawa,” Cruickshank says. She’s feeling a new sense of optimism in the Wellington market and has had her best summer ever. “There’s no land left in the city – it’s expensive to build on the side of a hill.
The demand is high and there’s not much chance of a change in supply.”