Regional Review : Tauranga

Downtown Mount Maunganui, long regarded as one of the country's top holiday resorts, has once again become the shining light of the Tauranga residential property market.
Fuelled by a resurgence of interest from cashed-up Aucklanders and expatriates, properties of all shapes and sizes near the beach are now regularly selling for around $1 million.
Downtown Mount has always been the most expensive part of Tauranga city but its housing market took a hit during the global financial crisis (GFC) and in the aftermath took a little while to warm up.
However, house prices on average have climbed to 10 per cent over the last 18 months. The neighbouring coastal strip of Papamoa has had a similar rise but prices elsewhere in Tauranga have increased no more than 4 per cent.

Long time real estate agent, John O'Donnell, has seen many highs and lows when selling in the Mount and Papamoa markets but he's excited by this latest upsurge.
``I've never seen so many private mansions being built at the Mount,'' he says. ``People have had holiday homes for 20 years and they are being demolished and replaced by new million-dollar houses. Sections of 500 sq m are being filled by these modern homes.''
Older, established houses just back from the beach in streets such as Oceanview Rd and Muricata Ave are selling for between $800,000 and $1 million.
A small 60-year-old, two bedroom, brick house in Pitau Rd within walking distance of the downtown shopping centre recently sold for $600,000.
``The rest of Tauranga prices are reasonably stable but downtown Mount has gone crazy  - it's like a mini-Auckland,'' O’Donnell says.
 

Near the water
He says many people who are near to or have reached retirement are leaving Auckland and heading for the Bay. They want to be near the water and enjoy a traffic-free lifestyle. The coastal strip, rather than the established suburbs of Matua and Otumoetai across the harbour, is where the action is.
``If they can't get into the top end of the Mount, then these people coming out of Auckland move further down the coast to Papamoa,'' Mr O'Donnell says. ``Let's face it, most New Zealanders don't have $200,000-$300,000 in the bank when they retire. They can sell their home in Auckland for $700,000 and buy a new home (through a land and house package) in Papamoa for $450,000. They can put away $250,000.
``These people like to buy new houses. They don't want to do lots of repairs and maintenance, and presentation is important when selling your home,'' he says.
Overall, the activity in the Tauranga market is steady – though there are the pockets of buoyancy. The market hasn't taken off like Auckland, which is surprising considering Tauranga has traditionally followed the trend set by the big northern city.
There was a degree of speculation, both in house building and investment, when Tauranga grew rapidly in the 1990s and early 2000s, but the GFC took the puff out of the growth. And many local residents were hit more than they expected by the collapse of the finance companies.
Property values, overall, have remained stubbornly sluggish and behind the national average. The average value of a property in Tauranga city in March, 2014, according to QV.co.nz, was $443,723 compared with $428,273 in March 2013 – a rise of 3.6 per cent. In the largely rural Western Bay of Plenty, the average value in March, 2014, was $409,493 compared with $404,747 – a rise of 1.2 per cent.
The number of sales is solid rather than exciting. There was a spike in March last year when 123 houses changed hands in Mount Maunganui and Papamoa, and 163 in the rest of the city. But the sales again settled into a steady business. In March this year, 101 houses sold in Mount/Papamoa compared with 110 the previous month, and 127 for the rest of the city compared with 119 the previous month.
 

Levelled off
``Sales had been going quite well up to Christmas but they have levelled off this year,'' real estate agent Neville Falconer says. ``People knew the interest rates were going to rise and the banks are careful who they lend to, but nothing really happened that would shock buyers.
``Listings were quite short at the start of the year and I think the market favours sellers more than it does buyers. There's a good supply of land and house packages starting from $450,000 especially at Papamoa and The Lakes in Pyes Pa, but existing homes have not really kicked on, price-wise,'' Falconer says.
The property investor will find that the Tauranga housing market has several faces. The investor will need to complete plenty of research and be very careful where he or she buys - or be left with a property showing negative gearing.
Investors in Tauranga have traditionally gone for capital gain rather than rental returns. They acknowledge that Tauranga is a fast growing city and readily accept a yield of 5/6 per cent from their property investment.  Compare this with a rental return of 10 per cent in Dunedin.
The places to look in Tauranga are the new sections, or even the house and land packages, at The Lakes and Papamoa; the newer suburb of Bethlehem; the tightly-held areas of Matua, Otumoetai (particularly around Brookfield and Bellevue), Pillans Point and The Avenues; and of course Mount Maunganui.
Valuer Shayne Donovan-Grammer says the recession has shown that people have to invest in quality properties in a reasonable area. The property shouldn't have a negative feature such as being next to the highway, up a shared driveway with 10 others, or under a pylon.
He says some people have given up hope buying a home, through increased prices and mortgage restrictions, and have become long term tenants. They may pay a little extra in rent but their expectations have increased.