Tide's out on capital gain

One Tree Pt. Photo / APN

Many coastal areas were not included in our QV tables because sales volumes were so low, explains Bruce Morris.

Deciding which coastal regions have dipped more than others is a fraught business because sales volumes have been so low.

Areas which seem to be holding up may be doing so only artifi cially as property owners tough it out, hoping the market highs of 2006 and 2007 will soon return. But that is a forlorn hope and it is likely to be many years - perhaps decades - before values regain that level in real terms. If at all.

In time, many will decide to sell and then find a market reality far removed from the surging values of the boom years. For people who inherited baches or bought property more than seven or eight years ago, that will be disappointing but hardly financially crushing. They will simply not make as much as they might have if they had sold in 2006.

But people who bought at the peak - perhaps off plans at inflated prices - will suffer if the idea was to ride the wave to capital gain.

In the chart below, the data comes from QV's E-Valuer tool, which assesses average value based on local sales and other measures. It is a more accurate guide than median sales data, which can fluctuate wildly.

E-Valuer needs enough local sales before it can make precise estimates, and many coastal areas are not included in the tables because volumes were so low.

The data offers a comparative guide only, and there's a danger of reading too much into the results. Whangamata, for example, emerges as a relative bright spot, with prices flat over the 33 months. But a chat to local real estate agents - hardly the sort of people to doubt what seems like good news - suggests a much greater decline.

The Far North is not represented in the tables because sales volumes have trickled to almost nothing, but QV's triennial rating valuations for the Far North District Council, set in September, tell a dismal story: capital values on the coast are down by 16 to 20 per cent, and land values by 22 to 29 per cent.

The E-Valuer readings here are available only since January, 2008, and the drift began a year before then.

The seaside is not alone in having problems, of course, and sales in most urban and rural areas have dried up over the past two or three years. But the coastal areas, especially those dominated by holiday homes, have been hardest hit.

Gary Jones, a Barfoot & Thompson representative in Doubtless Bay, says the summer of 2004/2005 gave the Far North its peak, with 115 sales and signs of panic buying as people feared they would miss out in what they saw as an ever-climbing market. But then it all came to a grinding
halt. A year later, summer sales were down to 50 and in 2006/2007 they had dropped to 30. Last summer there were barely 20 sales in the whole region.

Elsewhere in Northland, values in Ruakaka and One Tree Pt have been badly hurt in the same classic combination that has damaged the Far North: too much supply - as new tracts of land were opened up - meeting miserly demand.

The same goes for places such as Mangawhai Heads and the nearby village.

Further south, Snells Beach, Tairua, Mt Maunganui, Pukehina and Raglan have tumbled more than other places. Pauanui didn't have enough sales to register an E-Valuer reading for 2008, but it also seems to be
struggling, with values down 6.5 per cent so far this year alone.

Within all the seaside gloom, there will be bright patches where individual properties find buyers at somewhere near 2006 peaks, but they will be rare examples evoking "I must have that place" emotion from
cashed-up suitors. Places within striking distance of Auckland, such as Omaha and other Mahurangi pockets, might offer prime properties in that category, and Waiheke Island has had some big sales within a struggling
local market.

But everywhere else within sniffing distance of the seaside, where the bach equals discretionary dollars, it's very hard going - as it has been for the last three or four years and as it will be well into the future.

DRIFTING ON THE SANDS OF TIME
*Source: qv.co.nz

E-Valuer Estimate of value at 31/10/10, E-Valuer estimate of value at 31/1/08, Change in value over the 33 months

One Tree Pt $460,500 $531,667 -13.4%
Ruakaka $311,333 $382,778 -18.7
Mangawhai Heads $479,556 $519,444 -7.7%
Snells Beach $410,278 $482,222 -14.9%
Orewa $542,667 $567,778 -4.4%
Red Beach $509,389 $548,889 -7.2%
Clarks Beach $465,667 $489,444 -4.9%
Whitianga $378,056 $393,333 -3.9%
Tairua $431,667 $524,444 -17.7%
Whangamata $445,556 $446,667 -0.2%
Waihi Beach $530,944 $558,333 -4.9%
Mt Maunganui $444,944 $496,667 -10.4%
Papamoa $396,889 $421,111 -5.8%
Pukehina $435,722 $512,222 -14.9%
Ohope $523,056 $542,778 -3.6%
Raglan $375,000 $432,222 -13.2%

* From the New Zealand Herald's quarterly 'Property Report' - a guide to house prices and great places to live.