• 

  Download Full Report - 264.0kb

ANNUAL 07 WATERFRONT REPORT

WATERFRONT PROPERTY UNDIMINISHED

Whether it is for occasional holiday use, as a permanent residence or purely as an investment, absolute waterfront property continues to be amongst the most sought after, and tightly held, in the country. This desire for waterfront property is a combination of factors which has continued to drive values upward according to the latest Bayleys Research survey.

 

 

The differentiation between absolute waterfront property and the wider coastal market is becoming greater as the general residential market cools. While well located absolute beachfront property within coastal subdivisions continues to sell well it is increasingly clear that vendors are having to price their product realistically as purchasers are unwilling to pay a price premium for property set back from the water.

Bayleys Research has tracked the movement in the value of stand alone absolute waterfront sections on a number of sample beaches since 1982. The beaches are located in the Coromandel Peninsula, Waiheke Island and the Rodney district. The figures are drawn from actual sales, and market reports from agents and valuers working within the areas.

In some cases where there have been few or no sales of absolute waterfront sites, the value of land is estimated from the sale of improved land. In many cases it is agreed that the value of an old batch is negligible as the purchaser plans to redevelop the site immediately upon purchase. Therefore, the underlying land value is what drives the final purchase price.

As the graph illustrates, further significant capital appreciation has occurred over the last year continuing the trend apparent since the mid 1990’s. Reports from agents and valuers confirm that in a majority of popular beachfront locations property on the water is tightly held, often by family trusts, ensuring that the amount of property brought to market is insufficient to meet the demand of purchasers, thereby maintaining pressure on prices. Agents report prospective purchasers are willing to pay premium prices should waterfront property within specified areas come to market.

 

 

The long term performance of waterfront property is shown in the table below. Between 1982 and 2007 the annual average compound real returns for absolute waterfront property has been between 14.17% and 15.58%.

 

 

While the economy and residential markets seem set to cool further over the next year, the prospects for waterfront property remain positive. The rural sector is enjoying a combination of factors such as record commodity prices, a weakening New Zealand dollar and a forecast record dairy payout which will see farm gate incomes increase significantly. By way of example the latest forecast payout from Fonterra would increase the average income of participating farmers by over $200,000 compared with last season. This is likely to see a surge in interest in waterfront property, particularly in areas close to the main farming centres such as the Coromandel.

As the above figures show absolute waterfront property is a niche sector of the property market with its unique characteristics making it less susceptible to issues which have caused the general residential market to cool recently. This is not the case, however, for the general coastal market. In many areas, market reports would suggest, an oversupply of large scale subdivisions has resulted in vendors having to price their product appropriately or risk sections remaining on the market fore an extended period of time.