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Over the past decade, house prices in some coastal areas within an easy drive of major cities have been rising at a cracking pace. Prices in southern tourist hot-spots like Nelson, Queenstown and Central Otago are also rising steadily.
The unprecedented rate of growth in non-urban property markets has revived interest in these areas from investors. Lifestyle changes, improved transport infrastructure and demographic shifts all point to continued demand for coastal and country holiday properties, making them prime investment targets.
Although the Kiwi coastal bach is traditionally viewed as a lifestyle rather than financial decision – values have skyrocketed over the last decade making the dream home a dream investment for some.
Prices in trendy Waiheke Island and Rakino Island are up 190% over the decade.
Anyone who bought a bach in the outer Bay of Islands in the early 1990s is sitting on capital growth of at least 160%.
What is more, with New Zealand boasting a disproportionately high ratio of coastline to land mass, the beach house does not always have to solely represent a holiday home.
This is particularly true around Auckland, however, the price of coastal properties all over the country today suggests their popularity is endemic nationwide and not just among commuters.
The combination of geographic, socio-economic and climatic conditions dictates that the most popular areas for coastal living are around the upper North Island – a trend reflected in ever-increasing property values.
But the coastal success story is by no means unique to the nation’s business epicentre. Increased commercial development in Tauranga and dwindling land supplies in neighbouring Mt Maunganui continue to push up the value of properties in the Tauranga and Papamoa areas.
Properties with coastal views are particularly hot. Inland holiday areas such as Rotorua and Taupo – especially those with waterfront views – have also soared in both price and popularity.
Wellington’s satellites are also not immune to the trend. An hour north of the city, the Kapiti Coast has found particular favour among the retiree generation, while even closer to the capital, Pukerua Bay has witnessed an overall 10-year capital growth rate of close to 100%.
Indeed, the vast majority of the North Island’s coastal land has witnessed incredible capital growth, from Napier to New Plymouth – a fact not ignored by developers.
Even traditionally unfashionable regions until now ignored by all but longstanding local residents, are now beginning to lose any unpopularity that may have held them back.
Queenstown is the unquestioned star of the South Island, with prices for residential and holiday properties soaring. Analysis of the latest sales statistics by Robertson Valuations shows the average house price in the Wakatipu Basin for the September 2002 quarter reached $365,381 - up 19.6% on the year before. One reason for this is the 67% jump in population Queenstown has experienced since 1991. Another is the city’s summer/winter tourist market, which offer investors extended rental income.
Other holiday hot-spots in the South Island include Nelson, Blenheim, Akaroa and Wanaka.
The ageing of the baby boomers is one of the big factors behind the booming holiday property markets around Auckland, the Bay of Plenty, Wellington and to a lesser extent, Queenstown.
One defining trend is down-sizing. This occurs when baby boomers at or near retirement sell a large family home and scale down to a country or beach property, small townhouse or apartment.
The March Real Estate Institute of New Zealand (REINZ) figures for rural New Zealand support this theory, indicating that the lifestyle block market continues to be the star performer outside metropolitan areas. Their rural spokesman, Murray Cleland, recently told Kiwi Property Investor Magazine: “The increasing popularity of lifestyle blocks has been very positive for the rural economy, as it has contributed an influx of people and capital into local business.”
Operating a holiday home takes time, money and organisation – particularly if you live some distance away. You will probably need an agent. You will also have to organise cleaners after each tenant, gardening and repairs. (Rental agents can handle these for a fee).
Maintenance can be expensive, particularly in coastal and alpine areas. Frequent tenants add to wear and tear. You will have to provide good-quality furniture, linen (if supplied) and kitchen equipment to keep the house tenanted. Ski huts can be a great lifestyle investment and can offer good returns, but require intensive management during the winter months to maximise your income.
Holiday houses are also the perfect invitation for thieves, particularly if they are furnished all year round.
On the positive side, holiday homes are a wonderful lifestyle investment for you and your family. They can allow you to pursue other interests, become involved with different communities or groups or just relax and unwind.
While in the past, many Kiwis worked to buy the dream holiday home, the approach today is how to make the holiday home work for you.
Unlike traditional bricks and mortar investments, holiday homes rarely provide year-round rental income. (Exceptions include Queenstown, Wanaka and Taupo, which are all key summer and winter destinations.)
However, today’s evolving demographic trends, rising wealth and strong migrational flow create greater opportunities for year-round income. Good capital growth looks set to continue for some time, particularly for properties with secured coastal or waterfront views. This, coupled with satisfactory rental returns, suggest the case for investing in holiday properties has considerable merit.
And then there is the lifestyle, which despite the surge in capital growth, remains priceless.
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