Holiday section prices set to drop
By EMMA PAGE - Sunday Star Times | Sunday, 4 November 2007
A glut of sections in holiday hotspots could see property prices in some areas drop by 30%, a property researcher predicts.
Former ASB bank researcher and managing director of Strategic Risk Analysis, Rodney Dickens, says the investor frenzy which racheted up demand and prices in places such as Coromandel and Queenstown, has ground to a halt as the property market cools, leaving an oversupply of sections.
Dickens, who predicted the downturn in the Auckland apartment market during his time with the ASB, says demand from would-be holiday home owners is much lower than the number of sections for sale in some coastal and resort destinations.
But while investors are no longer making the quick profits of the subdivison boom years of 2003 and 2004, buyers looking for a holiday home could benefit if stressed investors are forced to sell sections at cheaper prices. Price falls in some places could parallel the 30% loss in value that Auckland apartment investors have experienced, he says. "To me, the risk that there will be significant price falls in some of these areas, just based on the fundamental analysis of demand and supply, is high."
His company's research covers areas including the Far North, Whangarei's northern beaches, Coromandel, Mangawhai Heads, Tauranga city and Hanmer Springs, Kaikoura, the West Coast, Wanaka and Queenstown.
While all areas are different, Dickens says generally locations with the biggest supply are at the greatest risk, including the Far North where 2000 sections have been added or are planned for the coastal market.
Before the investor boom began in 2003, only 77 sections sold each year in the Mangonui and greater Kaitaia area. On these figures, Dickens estimates the current supply is enough to satisfy sustainable demand for 21 years.
Predicting exactly what the oversupply will mean for prices is difficult, he says, but they could drop over the next few years if investors are unable to sustain capital losses. Research by real estate agency Bayleys found that buyers were increasingly unwilling to pay premium prices for coastal properties not on the waterfront. Absolute beach front property continues to sell well.
Massey University property expert Professor Bob Hargreaves says while the market has cooled, he doesn't expect major price falls.
"Unless we get a lot of bad economic news, I wouldn't expect there will be significant downturns, but certainly a slowing."
By EMMA PAGE - Sunday Star Times | Sunday, 4 November 2007
A glut of sections in holiday hotspots could see property prices in some areas drop by 30%, a property researcher predicts.
Former ASB bank researcher and managing director of Strategic Risk Analysis, Rodney Dickens, says the investor frenzy which racheted up demand and prices in places such as Coromandel and Queenstown, has ground to a halt as the property market cools, leaving an oversupply of sections.
Dickens, who predicted the downturn in the Auckland apartment market during his time with the ASB, says demand from would-be holiday home owners is much lower than the number of sections for sale in some coastal and resort destinations.
But while investors are no longer making the quick profits of the subdivison boom years of 2003 and 2004, buyers looking for a holiday home could benefit if stressed investors are forced to sell sections at cheaper prices. Price falls in some places could parallel the 30% loss in value that Auckland apartment investors have experienced, he says. "To me, the risk that there will be significant price falls in some of these areas, just based on the fundamental analysis of demand and supply, is high."
His company's research covers areas including the Far North, Whangarei's northern beaches, Coromandel, Mangawhai Heads, Tauranga city and Hanmer Springs, Kaikoura, the West Coast, Wanaka and Queenstown.
While all areas are different, Dickens says generally locations with the biggest supply are at the greatest risk, including the Far North where 2000 sections have been added or are planned for the coastal market.
Before the investor boom began in 2003, only 77 sections sold each year in the Mangonui and greater Kaitaia area. On these figures, Dickens estimates the current supply is enough to satisfy sustainable demand for 21 years.
Predicting exactly what the oversupply will mean for prices is difficult, he says, but they could drop over the next few years if investors are unable to sustain capital losses. Research by real estate agency Bayleys found that buyers were increasingly unwilling to pay premium prices for coastal properties not on the waterfront. Absolute beach front property continues to sell well.
Massey University property expert Professor Bob Hargreaves says while the market has cooled, he doesn't expect major price falls.
"Unless we get a lot of bad economic news, I wouldn't expect there will be significant downturns, but certainly a slowing."
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