This month our Mortgage Advisers take a good look at the property sector in the beautiful city of Tauranga.
It would be fair to say that property prices have increased significantly. QV Property Trends shows a jump of 45.8% in the past 3 years with average values now sneaking over the $700,000 mark.
Compare this with Auckland that has increased only 25.5% in the same time and you see how strong the market is in the Tauranga area.
As you would expect, our Tauranga-based Mortgage Brokers are seeing sales settle well above Council Value – to the point that they are almost irrelevant. In the 3 months to May 2018, the 583 sales in Tauranga had a median price of $608,000 which was 41% above the Council Valuation.
It seems at first sight that Tauranga, or certainly the central suburbs, are a little out of the reach of first home buyers.
This is not necessarily true city-wide. Take, for example, the southern and western suburbs of Parkvale, Gate Pa and Judea. They were the 3 lowest priced suburbs with the median sale price in the past 3 months $356,000, $424,000 and $435,000 respectively. The good news is that these median prices still sneak under the HomeStart Grant price caps which means first home buyers should be looking to these areas to make full use of their KiwiSaver and HomeStart Grants.
But what about the investor crowd? Obviously investors hoping for capital gains can settle back for some smashed avocados (sourced locally, of course!). However, with great capital gains comes low rental returns (we're looking at you Auckland!). QV's rental analysis shows Tauranga Central providing an average of 4.2% with the worst performing area - Mount Maunganui - an average rental yield of 3.5%. It's very hard to get both capital gains and high rental yields; tenants tend to get grumpy with 30% increases in rent so this low yield should come as no surprise to seasoned property investors.
New property construction is undeniably alive and well in Tauranga. In January 2016, building consents totalled $54.83m... in January 2018, building consents totalled $71.7m - a 30% increase. Our Mortgage Advisers are certainly finding this with Land and Build finance forming a major part of our turnover in the Tauranga area.
Tauranga residential property is continuing to party even after Auckland has stumbled outside and fallen asleep on the deck. With higher prices and stricter finance, it is best to talk to our Advisers early. Some suburbs are still within reach of first home buyers and building developments mean there is plenty of opportunity to look at construction lending in Tauranga.
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