Wilbow branches out as house prices plateau

Melbourne-based Wilbow Corporation is looking at adding commercial and industrial arms to its New Zealand development base of residential subdivision, though it is hard to shift local managing director Ron Goodwin's eye off housing opportunities.

Goodwin has had a great deal to do with where many Aucklanders live, through his years as manager of Universal Homes, landbanking large tracts for subdivision during the 70s and 80s until the sale of Universal to Chase Corporation in the mid-80s.

At the end of that decade he joined Wilbow, a developer which has spread itself through two Australian states, Texas, Auckland, Tauranga and is now aiming to widen its geographic scope and development spheres in New Zealand.

Goodwin, managing director of the New Zealand operation, runs 12 per cent of the Wilbow budget. The group has $A600 million of work under construction, giving Goodwin $NZ80 million to work with in New Zealand.

From the low-cost housing era dominated in Auckland by Universal and Neil, Goodwin says it made sense for Wilbow to enter the tradeup market when it opened an Auckland office in 1989, doing more exclusive and smaller subdivisions. It completed 265 sections in The Palms at the back of Glenfield in 1995, winning the coveted Institute of Surveyors merit award for the intense effort put into landscaping and overall design.

Innovation has been an important factor in the group's thinking. At Woodland Valley in Browns Bay, the Wilbow development has a private street. The group is one of the main developers on the Sturges Rd ridge overlooking Henderson, where its Palm Heights subdivision has 300 lots developed in seven stages, with another two or three stages to go.

At Arkles Bay on the south side of the Whangaparaoa Peninsula it has the Pacific Palms subdivision, containing 57 fully developed section and with plans for another 100. But the proposed sale of two tracts there, which were intended for subsequent subdivision stages, is a signal of Wilbow's intention to widen its development scope.

Goodwin says in early landbanking, such as in Howick, the group lost profit opportunities by sticking to residential work and choosing to sell commercial sites.

On the northern outskirts of Tauranga it has two subdivisions, Ambleside and La Cumbre, and Goodwin is looking for residential opportunities in Christchurch as well as starting the development of more than 100 sections on the former strawberry patch between Schnapper Rock Rd and the North Shore Golf Club, adding to the residential surrounds of the commercial estate that has been created in the Albany Basin in the 90s.

The emphasis on landscaping as a feature of all these subdivisions has added substantially to the cost of each project. Goodwin says at The Palms, "it worked out at $3000 more a lot, but as a result we got an extra $10,000 to $15,000 a section."

Wilbow was an early user of cobbled patterns to slow traffic entering its subdivisions and also campaigned hard to introduce an individualistic street lamp, which has become a common subdivision feature in New Zealand.

The group's overall residential development director, Rob Boscarato, says Wilbow fought to use non-standard lamps for its Sherwood subdivision in Melbourne 10 years ago, eventually won the council battle, and the manufacturer now markets this product as the Sherwood lamp.

In industrial property, Wilbow is keen to feed the investor demand under about $9 million, a market general manager Larry Eade says has a shortage of supply.

Even so, it is a fragile investment segment because although there are keen investors the leasing market has proved a tough one over the past 18 months. Wilbow's record is one of being risk-averse, yet still turning in record profits.

Although the group is picking sites around the edge of the Albany Basin for housing, Goodwin says the industrial and commercial area in the middle is overheated and he is looking more to southern industrial zones in Auckland.

The change of focus makes sense, according to Goodwin's judgment of where housing is headed. House prices typically leap, then plateau, and after price hikes through 1995 to 1997 the Auckland market has reached its normal plateau, he says.

"I see a continuation of the plateau until we get a turnaround in long-term migration. We had a net outflow of 11,350 in the last year, but two years ago it was a net inflow of 30,000.

"The underlying housing demand varies between 4000 and 9000 new houses a year. When immigration hit 30,000, the underlying demand hit 9000 houses. Now, it's probably 4500 a year.

"We see a gentle rise in house prices, and that will continue as long as interest rates remain at unprecedented low levels. It seems that will be another year or so."