NEW ZEALAND (Commonwealth Union)_Buyers in Southland can purchase a home for less than the cost of a deposit in Auckland. According to a Trade Me representative, the cheapest house for sale on the web this week is on Milton St in Ohai. It was also the most affordable offering on Realestate.co.nz. The asking price for the property is $95,000. The house has been empty and is labelled as “demolish or rebuild” so whoever buys it will have to do some work.
The median sales price in the area during the last 12 months, according to Realestate.co.nz, was $137,500. According to Real Estate Institute data, the national median price in November was $810,000. This was a 12.4% decrease year on year. Ohai has traditionally been a cheaper neighbourhood, but experts warn that those expecting huge capital returns from property there may be disappointed. “I’d expect housing prices in Ohai and Nightcaps, as well as more broadly across Southland, to remain among the cheapest available,” said economist Brad Olsen.
“The economic fundamentals for more rural locations like Ohai and Nightcaps continue, with economic drivers in the local economy more constrained in these remote towns compared to the major provincial hubs. Recent trends have also showed a steady population shift away from metropolitan areas and toward provincial centres, with modest development in more rural locations.”
“Prices in these places might not decrease as dramatically as we’re seeing throughout the wider housing market, with home prices in Northland and Southland Regions being more stoic thus far. According to Real Estate Institute data, these two regions had the most recent annual declines in house prices. Both regions showed an annual decline in November 2022, despite the fact that national prices have been declining on an annual basis since July 2022.”
He predicted that property values would continue to decrease this year as interest rates rose.
“However, the spread of house price reductions and broader housing trends will be felt differently. So far, big urban centres (especially Wellington and Auckland) have declined faster and harder, followed by more regional and provincial centres.”
Corelogic Chief Economist Kelvin Davidson said that Ohai and similar locations would likely just follow the national average house price movement in the future.
“It’s difficult to picture them outperforming. They are, nevertheless, inexpensive. However, investors should be cautious about investing in markets with a small tenant pool. And owner-occupiers would often require local employment, with employment prospects not necessarily plentiful in such small rural areas.”
“As I mentioned, they might do ‘fine,’ but it’s difficult to envision the tiniest rural communities becoming great outperformers in the long run.”
According to property investor Graeme Fowler, it is arguably a better buy to live in rather than an investment.
“If you want to live there and are already retired, prefer a quiet lifestyle, or have the potential to produce a high income, then buying a house in that location can make a lot of sense,” he said.
“In general, it would not make sense for an investment property. The rent is likely to be relatively low as well, but there are still costs for rates, insurance, and upkeep. Once these are deducted from the rental income, the net income is quite minimal. The gross yield may appear great at first glance, but the net yield (rental income after expenses) is likely to be quite low, and may even be lower than if you had purchased a much higher priced property with a lower gross yield.”
Other low-cost properties on Realestte.co.nz included a home on Spackman Ave in Springston, which was priced at inquiries over $99,000. It just has one bedroom and one bathroom, however it is situated on a 202sq m area of Crown lease land. In December, the average asking price in the Selwyn district was $890,366.
A $115,000 flat in Auckland’s St Johns was listed, however it is on leasehold land, which means the owner must pay ground rent, which normally increases over time.
For $42,000, the lowest apartment listed was a one-bedroom on Anzac Ave in central Auckland. That, too, is a leased property. According to Davidson, leasehold buildings are not always terrible assets.
“However, they wouldn’t be for everybody, and people would need to be extra diligent in their research and being completely informed of the terms and circumstances – especially what would happen after the present lease term arrangement ends.”
“Like other things, it comes down to a person’s specific investment criteria and risk tolerance.”
