The next investment growth hotspots?

Amy Hamilton Chadwick
The next investment growth hotspots?

Did you know that there are still suburbs in New Zealand where house prices are lower than they were in late 2007?

CoreLogic has recently released a list of the 50 suburbs with the lowest house value growths since the GFC. A handful of areas are still worth less than in November 2007, while some of the others have low growth but have taken off in the past two years.

Can this list be used to identify areas that are good prospects for capital growth? We’ve looked at three areas that feature prominently to consider the pros and cons of investing in each one.

 

West Coast

With five suburbs in the top six, the Grey District has seen the lowest growth since the previous peak, with Westport also on the list. Runanga in the Grey District is the most dramatic example: values are down 14.7% on November 2007, and also down 2.2% on November 2016.

Reasons to invest: Gross rental yields of 7.1% on a low median house price of $199,000 mean Grey District is a good performer for property investors. It’s likely prices will rise, if only because right now you can buy a house on the West Coast for less than it would cost to build.

Reasons to be cautious: Mine closures have left the region with a struggling economy and stagnant or even decreasing population. With some areas still below peak prices, it could be an indicator of permanently lower demand.

 

Far North

Six suburbs in the lowest-growth 20 suburbs, with Paihia as the lowest-growth example: down 8.9% on November 2007. However, it’s picked up by 12.4% since November 2016.

Reasons to invest: It’s possible that the Far North remains undervalued; the population is growing steadily and the economy is likely to be boosted by projects like the infrastructure upgrade and a highway upgrade. This suggests future capital growth, particularly if tourism continues to thrive. A rental shortage also means tenant demand is high, while the recent price uptick is another positive sign.

Reasons to be cautious: Yields are mixed, with the best gross yield of 8% in Kaikohe, against low median values of $162,000. Kaikohe has had some reputation issues; will new investment help change that? The Bay of Islands has a mere 3.4% yield, with median prices at $578,000 – not a great return for a substantial spend.

 

Central North Island

Scattered throughout the 50 lowest-growth list, suburbs like Turangi, Motuoapa, Kuratau, Omori, National Park and Ohakune have all seen low value growth since the GFC.

Reasons to invest: Ruapehu looks impressive at 6.9% gross yield on median prices of $173,000; plus visitors hit record levels this year. In the suburbs around Lake Taupo, you can still buy a house for under $200,000 – and values have shot up since late 2016, which bodes well.

Reasons to be cautious: These areas are strongly dependent on tourism and good tenants may be hard to find for long-term renting. And don’t forget that Mt Ruapehu erupted in 2007 and set the local economy back severely – it could happen again at any time.

 

Selected median property values from CoreLogic data

 

Suburb

Local Authority

% change since
Nov. 2007

% change since
Nov. 2016

50

Motuoapa

Taupo District

11.8%

18.9%

37

National Park

Ruapehu District

8.0%

29.6%

36

Ohakune

Ruapehu District

7.9%

17.6%

27

Kuratau

Taupo District

3.3%

15.1%

26

Raetihi

Ruapehu District

3.3%

23.8%

21

Omori

Taupo District

-0.1%

15.2%

20

Westport

Buller District

-0.2%

-0.4%

17

Turangi

Taupo District

-1.0%

23.9%

14

Kaikohe

Far North District

-4.2%

13.4%

13

Kaeo

Far North District

-4.3%

14.0%

12

Coopers Beach

Far North District

-4.4%

10.4%

11

Opua

Far North District

-5.4%

8.9%

10

Omapere

Far North District

-5.8%

9.4%

8

Blaketown

Grey District

-6.0%

4.6%

6

Karoro

Grey District

-6.5%

4.6%

5

Greymouth

Grey District

-6.7%

2.5%

4

Moana

Grey District

-7.6%

1.9%

3

Paihia

Far North District

-8.9%

12.4%

2

Cobden

Grey District

-10.1%

-0.8%

1

Runanga

Grey District

-14.7%

-2.2%

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