KEY POINTS:
As the property market slump deepens, mortgagee sales are not the only source of bargain buying. For investors willing to look out of Auckland and Wellington, provincial cities are already offering properties for sale considerably below what they were fetching at the peak of the boom.
QV's House Price Index indicates that property values are now less than the same time last year in many areas even though average sales prices have increased. Its latest statistics confirm all of the main provincial centres are showing annual growth rates less than those reported last month.
Property values in Whangarei, Rotorua, Wanganui and Invercargill are all still above last year, but continue to slip. Gisborne, New Plymouth, Palmerston North, Nelson and Queenstown Lakes are now showing declining year-on-year property values.
The biggest regional median price decline is Manawatu and Wanganui, down 13.81 per cent from $248,000 to $213,750. Taranaki also plummeted from $285,000 to $255,000 and Hawke's Bay from $265,000 to $261,000.
Kent Leicester, director of website propertybillboard.co.nz, says the majority of the best deals on the website in the past few months have been in the regional cities and towns.
"Major centres like Auckland are definitely seeing some areas coming back a bit too, but I think some of these provincial areas had some pretty significant growth in a very short space of time, and will correct in the same way," says Leicester. However he thinks by the end of next year things will have "settled down," and there may be a supply shortage of housing in some regions then.
Leicester invests in property principally in Napier and Hastings in Hawke's Bay. "There are absolute bargains down there, that's why I buy there."
Local statistics show Hawke's Bay sales volumes have dropped 38 per cent in the last quarter. Real Estate Institute data shows nationally sales are down 42 per cent. It now takes nearly two months to sell the average property, with days to sell up from 49 days in May to 53 in June, says REINZ president Murray Cleland. The low number of buyers means they have substantial negotiating power with vendors who need to sell, Leicester says.
He secured a property earlier this month in Taradale, with a current registered valuation of $360,000. The owners "desperately needed to sell," and were willing to consider offers around the $300,000 mark. Leicester got it for $295,000 - 18 per cent below the registered valuation. It returns $520 a week rent, giving a 9.2 per cent yield.
Leicester just viewed a two-bedroom property in Hastings on an 1100sq m section. Its price had been dropped to $195,000 as it has been sitting on the market a while.
"You can't go wrong with something like that to hold on to and develop long term. There are some bargains around for sure." He and fellow investor friends have lately also secured a three-bedroom home on a 700sq m section in Flaxmere for $130,000, renting for $250 a week - a 10 per cent yield, and a two-bedroom rental type property with garage in a good area of Hastings for $154,000 at a mortgagee sale. After a $4000 tidy-up, it's now valued at $200,000 and renting for $260 a week.
Shannon Tawhiti also focuses his property-investing activities in Napier and Hastings, and says vendors are increasingly motivated. "It's quite easy to find properties 20 per cent or more under registered valuation."
With these price discounts, he says there are a lot more properties on which he can get yields over 14 per cent, while 18 months ago it was "very hard" to get a 10 per cent yield. Tawhiti has also bought "quite a few" rental properties this year for under $100,000. And on top-end properties such as in Havelock, he says the margins have dropped even more, because values rose so rapidly over the past three years that owners have "a lot of room to be able to move and still come out with some equity".
Another town offering "massive" bargains, says Leicester, is Wanganui, which he says has an oversupply of properties on the market currently.
Other bargains that investors havepicked up from the Property Billboard website lately include:
Katikati:
A brand new four-bedroom, two- bathroom home in Katikati with a May 2008 valuation of $405,000 secured for $350,000.
Rotorua:
Two-bedroom unit with May 2008 valuation of $170,000 sold for $150,000.
Two-bedroom investment property on 800sq m subdividable section with current valuation of $280,000, sold for $200,000.
Four-bedroom family home valued at $505,000 went for $410,000 - almost 20 per cent below valuation.
Gisborne:
Three-bedroom home on 1300sq m secured for $105,000, renting for $200 a week, a 10 per cent yield.
Paraparaumu:
Seven flats on separate titles valued at $900,000 sold for $718,000.
