WHAT NOW ?

Price Rises Accelerating

price rises. Corelogic’s January price release show Whangarei continuing on its growth curve at 13.9%. That’s a full 1% higher than last month’s record 12.9% figure. Both Tauranga and Hamilton have hit over 20% growth in January so the likelihood Whangarei will follow is very strong.  The average price is now $386,876 which is currently an increase of over $1000 per month .  The prediction of us hitting 17.5-22.5% growth this year is looking good.

25 good reasons why you should buy your next Rental in Whangarei.

  1. Good Rental Returns . The average property price is $380,000 ( Corelogic Dec) while the average rent paid is $355 per week *( Harcourts Dec) . That’s a 4.85% return based on the average. By buying well you should see a 5-6% return. With borrowing heading below 5% properties can be fully funded and be neutral in terms of cost.
  2. Population Growth. The city is growing fast. Whangarei city has around 55,000 people, but if you add in the population within 30 minutes of the city centre you have a population that is over 80,000. It has historically been growing at 1% per year but those that would know say that this has accelerated over the last two years. In one three month period last year   a large health organisation added 1000 new people to its clientele.
  3. New Housing not keeping up with Growth. . New housing is not keeping up with population growth so there is a looming shortage of housing on the horizon. Approximately 350 houses are being built a year but we need 700-800 to keep up with population growth.
  4. Young Families. The population has a higher proportion of young people than many centres. The young, especially young families are the ones more likely to rent. This is supported by The Harcourt’s Just rentals Team who have a large waiting list of qualified tenants looking for properties. Good schools are a drawcard for these people.
  5. Forestry. Currently forestry work is developing fast as Northlands “Wall of Wood’ is currently being harvested. Many employers complain about not being able to find suitable workers to meet demand. This industry is expected to grow up to 2020 and then level off.
  6. Rents Increasing. Rental prices are on the way up. The shortage of good rental properties has driven prices up and will continue to do so this year and probably for the next two to three years as well.
  7. Capital Gains. The Whangarei market has lagged far behind the Auckland market. Prices only started to increase towards the beginning of 2015. There should be a long catch up period of around two years meaning Whangarei properties can expect considerable capital growth .
  8. Accidental landlords exiting Market. The good real estate market has allowed the “accidental landlords “to exit. Accidental Landlords are those who tried to sell but couldn’t, so rented their properties out instead. This is contributing to the growing shortage of rentals.
  9. Beneficiary Benefits. Most beneficiary statistics lump Northland into one category. A casual glance will suggest large numbers of unemployed. But the reality is Whangarei has just above the average number of unemployment, the high numbers are further north where there are fewer jobs and more cannabis. There is plenty of employment for people who want to work and the unemployment figures show a large percentage of unemployable people rather than any shortage of work.   There are many types of benefit and by circumstance they tend to be long term tenants. Many of these people are model tenants in behaviour and the way they look after the property. By having direct debits from Social Welfare you get a reliable, if not excellent payer. By using stringent vetting procedures this provides an unlikely, but reliable pool of good tenants.
  10. Ports of Whangarei. Whangarei Port is in place and expanding as required. Many say it’s a log port but as the CEO points out most container ships have their own loading and unloading equipment so the concept of purpose made container ports is obsolete. It is a deep water port and can take ships larger than Auckland can take and you don’t have the problem Auckland has where the port is in the CBD, yet the dispatch centre is in Wiri , meaning that every container has to be loaded from the port, driven through the busy CBD to its dispatch centre in Wiri. Ports of Whangarei is on a growth curve.
  11. Base Hospital. Northlands Base hospital is located in Whangarei. It is a great employer of transient people who are high earners and want to rent for a number of years. They want better quality housing and we have people currently paying up to $550 PW. These people are allowed to live 20 minutes from the Hospital, so most areas in Whangarei ,including a lot of the Rural areas, qualify
  12. Marsden Point Refinery. People often overlook the huge benefit this “ Muldoon Era Think Big project” has had on the economy. The refinery is a massive employer and pays some of the highest wages in the area. The refinery loves the low oil prices and is having some of its best years ever. It’s been a part of Whangarei for so long people forget the financial boost it gives to the district. It’s a bit like what the Tiwai Aluminium smelter does to the Invergargill region without the requirement to provide it cheap power.
  13. Marsden Point and Ruakaka Expansion. We have seen a building boom in this area as a new town is being born. The growth in this area has many parallels to Papamoa beach and we know how that went .
  14. Retail Growth. Cities have a size when they attract the big name retailers. At a population of around 80,000 we have passed that size. Most of the big name retailers are either in Whangarei or coming. These are mostly 7 days a week employers so have larger numbers of staff. (Bunnings , Mitre10 Mega, The Warehouse, K-Mart, Briscoe’s, Countdown, Pak & Save, and New World, Rebels Sport, and most of the fast food outlets , to name just a   few. )
  15. Property Price Growth. We have only just begun our growth spurt so have a long way to go before our prices reach their natural market value. So far we have had $25,000 of an expected $150,000 increase in the average price. Much of this increase will happen in 2016.
  16. Investment Outlay. The three provincial centres that are benefiting from the outflow from Auckland are Hamilton, Tauranga and Whangarei in that order. Whangarei has the cheapest houses of the three, so is the easiest centre to buy into with the best rate of return.
  17. Cheap Rates. Due to some prudent Council management our rates are some of the lowest in the country which means less in outgoings. ( average rates around $1,500)
  18. Proximity to Auckland. We are   just over 2 hours from Auckland, with the distance getting shorter every day due to highway construction and improvements. We already have people who live here and commute to Auckland on Monday and back again on Friday.
  19. Baby Boomers. As the baby boomers reach retirement age many are looking for an affordable coastal centre to retire to. Whangarei is increasingly being discovered by these people. While they are not renters themselves they are buying up many of the properties that have previously been rented.
  20. Migration. Whangarei seems to be attracting a group of people who don’t want to live in a city the size of Auckland. We have been getting our share of migrants from Australia, South Africa, Korea, and India. Most of these people will be renting for a time.
  21. Movable Businesses. Many jobs are internet or export based. There is no need to be located in a major centre and many small internet based businesses have relocated for economic and lifestyle reasons. These businesses tend to employ 1-5 people and we have seen a lot relocate from as far away as Christchurch. No earthquakes up here.
  22. Investment Buyers. Auckland investment buyers are buying up here in increasing numbers to find affordable housing and to get reasonable returns. 5-6 % returns on good quality homes in good areas are achievable. This is putting pressure on supply pushing up the price of existing rental properties.
  23. Larger Companies. Some Auckland based businesses are relocating to Whangarei. Cheaper labour, cheaper land and buildings , and a great port.
  24. Lifestyle. Whangarei is well known for its proximity to some of the best beaches, fishing and diving in the country. What is not so well known are the large number of stunning scenic walks from the gentle 10 minute Kauri forest canopy walk in AH Reid Park to the gut busting, but scenically stunning, 6 plus hour Smugglers Bay to Ocean Beach walk.
  25. Facts and Figures. Harcourt’s Just Rentals keep statistics of their monthly activity. The last report from January is interesting reading. It shows a vacancy rate of just 0.48%. This is very low and would be a lot lower still if not for a couple of very run down properties in low socio-economic areas that are very hard to let. Of more interest is the growing number of rental enquiries with the office receiving 581 new enquiries in the month.

Let me buy your next Rental Property. If you want to buy a rental property let me do the hard yards for you. I can look at the new listings that come in, before they hit the market , select the good rental ones, and put a contract together that allows you to inspect the property  before being committed to it. I can help with the price and explain its strengths and weaknesses.  After 30 plus years I am pretty good at finding the right ones.  Get in touch, outline your basic requirements and let me do the rest.  We have the property management team to take care of it from there.

The Big Short. We both watched the movie “ The Big Short ‘ . This is an intriguing documentary type movie demonstrating how the Global Financial Crisis was created by almost criminal activity in the banking sector. Its compelling viewing for anyone interested in Real estate, and based around how mortgages were manipulated, packaged and then sold as triple a investments. The mortgages were “low starts” where the borrower pays an artificially low rate for a year or two before hitting the actual market  and usually unaffordable level . All stuff that can’t happen in NZ but from the message in the movie is very likely to be repeated in the USA.