Absolute Waterfront Prices Surge
Whether it is for occasional holiday use, as a permanent residence or purely as an investment, waterfront property continues to be amongst the most sought after, and tightly held sectors of the market.
However, the differential between absolute waterfront property – being properties right on the water - and the wider coastal market is becoming greater as the general residential market cools, Bayleys Research says in its overview of the market in Bayleys just released 2007/08 Waterfront portfolio.
“While well located absolute beachfront property continues to sell well, it is increasingly clear that purchasers are unwilling to pay a premium for property set back from the water and vendors are having to price their product realistically,” says Bayleys Research senior analyst Ian Little.
Bayleys Research has tracked the movement in the value of stand-alone absolute waterfront sections on a number of beaches within easy commuting distance of Auckland since 1982. The beaches are located in the Coromandel Peninsula, Waiheke Island and the Rodney district. The figures are drawn from actual sales as well as 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 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.
Little says further significant capital appreciation in absolute waterfront values 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 capital growth performance of waterfront property has outstripped all other sectors of the market by a considerable margin. Between 1982 and 2007 the annual average compound real returns for absolute waterfront property close to Auckland has been between 14.17% and 15.58%.
Renewed confidence and prosperity on the rural sector, with the latest forecast payout from Fonterra likely to increase the average income of participating farmers by over $200,000 this season, is likely to further stimulate interest in waterfront property, particularly in areas close to the main farming centres such as the Coromandel, says Little.
He says recent reports from agents throughout the country dealing in some of the largest waterfront markets show mixed results.
“Some markets have flourished over the last 12 months, with growth in both market activity and property prices, while other markets have noted a slow down in the face of an uncertain economy. However, one trend remains the same, with premium prices continuing to be paid for absolute waterfront land while values fall sharply as you move away from the water.
“Absolute waterfront property is a niche sector of the property market with its unique characteristics making it less susceptible to factors 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 for an extended period of time.”
