Fire-sale sections trigger dramatic slump in seaside values

The number of sections selling at huge discount to original asking price is affecting coastal house prices. Photo / Bay Report

The number of coastal sections selling at firesale prices is undermining beachside property values, and in some areas it may be years before prices start to move again.

A Weekend Herald analysis of prices in the North Island's holiday-home market shows substantial drops.

Unlike some areas, such as Auckland, Wellington and Canterbury, where a shortage of houses for sale has helped push prices to records, coastal property prices are still slipping.

From the Far North through Kaipara, Rodney, Coromandel and Bay of Plenty to Ohope and Raglan, too many coastal sections and houses for sale and too few buyers are forcing values down.

Median price figures prepared by property information company QV and published today shows big drops in all the popular beach areas as sales have plummeted. Some areas have lost 20 to 24 per cent in value since the market highs of 2006 and 2007.

The tell-tale statistic is the small number of sales. The year to September last year was well into the downturn, but the dip since then has been dramatic.

Sales numbers did not increase in any of the areas surveyed, and in many were down more than 30 per cent.

Waihi Beach was down 61 per cent, Pauanui 57 per cent, Ohope 51 per cent, Whangamata 38 per cent, and Mangawhai Heads 35 per cent.

The figures may give only part of the story. It is clear many holiday-home owners are refusing to drop prices enough to attract the small number of buyers. But many sellers will eventually have no choice but to accept offers well short of expectations.

The problem is greatest for those who bought at the height of the market in 2006 and 2007 and now want to sell. They are facing losses of tens of thousands of dollars.

Coastal property expert Rodney Dickens, a former ASB Bank head of research, says: "People who bought at the peak can justify their decisions all they like, but they are not going to get a return on their money for years."

A combination of factors puts the holiday-home market in a different category to normal residential property in cities such as Auckland.

Beachside demand is always driven by New Zealand's traditional yearning for the bach, but it relies on disposable income, and the slow crawl out of recession is hurting.

Expensive playgrounds such as Pauanui, Matarangi and Whitianga have been hit hard and the Far North has been savaged.

Adding to the effect of the slide is the hundreds of coastal sections developed in the boom years, creating a vast over-supply, especially in Northland.

When the market started to slow two or three years ago, some of the developers struck problems, resulting in a series of mortgagee or "pressure" sales.

In Paihia in the Bay of Islands, a subdivision of 30 sections came on the market at between $250,000 and $450,000 when prices were solid.

Half a dozen sold fairly quickly close to asking price, but the remainder have since sold at mortgagee auction for an average of $90,000.

Bayleys Northland salesman Chester Rendell said: "It's a real tragedy for many people. Some just batten down the hatches and decide to ride out the next five years, but others are in big trouble."

The number of sections selling at huge discount to original asking price is affecting coastal house prices.

As one valuer put it: "I can buy one of these sections for less than $100,000 when they were previously listed at well over $200,000, and I can then spend $200,000 getting a house built.

"Why would anyone be interested in the place down the road which may not be as nice and yet is for sale at $425,000?"

SLIP SLIDING AWAY

How far median selling prices of coastal homes have fallen since the peak of the market in 2007

* Pauanui - DOWN 24 per cent
* Cable Bay, Coopers Beach, Mangonui - DOWN 21 per cent
* Matarangi - DOWN 20 per cent
* Clark's Beach - DOWN 13 per cent
* Pukehina - DOWN 13 per cent
* Ohope - DOWN 13 per cent
* Mangawhai Heads - DOWN 11 per cent
* Whangamata - DOWN 11 per cent

Source: QV.