Hayden Fahey - South Waikato Home to Cheap Real Estate

http://www.stuff.co.nz/waikato-times/business/9265422/South-Waikato-the-home-of-cheap-real-estate

South Waikato, low property values

South Waikato endures low property prices in the residential market. The lowest average housing property prices in the country for the month of September this year.

Property valuation service QV announced the average house prices for the southern portion of Waikato at $130,000. House values 4 percent lower than this time last year and more than 20 percent lower than peak values for 2007 in the area, including regional towns of Tokoroa, Tirau, Putaruru, and Arapuni. Hamilton, Waikato’s largest province managed an increase in house values, up 3.9% since September last year with an average house value of $352,723.South Waikato’s closest competitor for the lowest property prices nationally was Ruapehu where sale values averaged $141,322 (HARRIS, 2013).

Within the Waikato district, Waipa saw the most improvement over the 12 months, values rising 5.3%. House values nationwide rose 8.4% since September over the previous “but when adjusted for inflation were 4.9 per cent below it” stated property valuation company QV. The inflation-adjusted annual increase was 7.7 per cent(HARRIS, 2013).

Compared to the rest of the country where most provinces and all major city property values are increasing at a modest rate, excluding Auckland where property values soar and show no sign of slowing down.

In an effort to slow the rapid increase in house values that  have occurred nationally, the Reserve Bank has initiated caps to the loan-to-value ratio. These caps limit the low deposit loans but would take time to affect the market as many banks have many pre-approved loan application already in the works (Reserve Bank of New Zealand, 2013). A flurry of activity can be expected in the near future as people secure a property before their pre-approval expires. Especially in the lower end of the housing market where areas are more affordable. A housing boom in first home buyers can be anticipated while before the caps come into effect on the market.

Low priced areas have seen the most interest from buyers, mostly for first home buyers with homes that require little effort in maintain  or renovating.All regions of New Zealand have experienced growth in the residential real estate market prices. Properties are become more expensive as a whole driving the consumer to cheaper lower end of the market. While the rest of the country and major centers grow in average house prices, South Waikato remains cheap in comparison and is declining in value, this is indicative of possible buyer disinterest due to externalities, driving house values down. In future, this may be beneficial for the company as the low house prices attract buyers, but as sales continue to decline company profits from sales will not be as high in other areas nationally. As QV valuer Bruce Wiggins said lower ends of the housing market have experienced high growth, especially in South Auckland.
Welly Real Estate should move into the area of the residential property market. There is evidently cheaper real estate to be purchased here in large quantities. These properties could be rented out for a sustained income.  

HARRIS, K. T. (2013, 10 10). South Waikato the Home of Cheap Real Estate. Retrieved March 11, 2014, from stuff: http://www.stuff.co.nz/waikato-times/business/9265422/South-Waikato-the-home-of-cheap-real-estate

Reserve Bank of New Zealand. (2013). Loan-to-value ratio restrictions. Retrieved April 26, 2014, from Reserve Bank of New Zealand: http://www.rbnz.govt.nz/financial_stability/macro-prudential_policy/5393159.html