Off the Top of My Head

By Paul Murray

After almost two years as a land agent here in Karamea at the top of the West Coast of the South Island of New Zealand, I have learnt a lot about property, our region and the intricacies of contract law, LIM reports, titles, easements and a raft of other complicated legal implications involved in the transfer of a property from seller to buyer.

I’ve approached the real estate business as a professional service rather than a sales job and attempt to help my clients through a property-purchase process to make it as smooth, transparent and stress-free as possible. As a property purchase is, for many people, one of their most significant investment decisions, it’s essential to get it right, and I enjoy helping people through the process.

I’m pleased to report I have found buyers for over 40 properties since I started with Property Brokers and have thoroughly enjoyed the challenge and learning experience and the satisfaction of helping my clients sell their properties and welcoming new people into our region.

Karamea has a robust demand for rental properties as well, and I’m finding quite a bit of interest in the market from investors looking to get their money out of the banks and into property where the perception is that their returns will be higher and their cash safer.

The Buller region has the best rental returns in the country as property here can be purchased much cheaper relative to other areas. According to QV.co.nz, the average price of a three-bedroom home in the Buller region is currently $205,794, and average rent in the region is $280 p.w., which provides a rental yield of around 7.5%. This is an attractive return on investment, particularly when the long-term capital gain potential is also considered, but be prepared to invest for more than five years for a rental property to avoid paying capital gains tax when the property is sold.

New Government Valuations (GVs) will be publicly available around the middle of January next year, so it will be interesting to see which way they go. I suspect (speculatively) that GVs in our region will increase as properties have been selling well for prices significantly higher than the current GVs. This indicates strong demand in the market and buyers are prepared to pay over and above GV to secure property in this emerging and attractive region.

Rateable valuations, government valuations and capital valuations are fundamentally the same thing. The valuations are an attempt by the government to standardise the valuation process across the country to give buyers, owners and sellers confidence in the capital value of land and buildings. These valuations are calculated by local authorities and also used to assign rates for the property. That said, GVs in the Karamea region were generally higher in 2008 than they are now, and I’m yet to hear of anyone who has had their rates decrease!

Prospective buyers use GVs as a gauge of a property’s value, and people often ask why the GV is lower than the asking price. Government valuers assess property value based on general factors for the region that don’t include such considerations as improvements to the property, the condition of land and buildings, chattels, renovations, views, aspect, location etc.

Property owners in Karamea have been quite frustrated by the lower GVs assigned to their properties in recent valuations, which have been linked to the economic malaise being experiences in Westport and other Buller districts resulting from the closure of Stockton and Reefton mines, Holcim Cement moving to Timaru, which impacted on Buller Electricity and Westport Harbour as Holcim was their largest client.

In addition, the dairy industry also simultaneously went udders up, and another of the region’s main economic drivers suffered a downturn. The loss of jobs in the Buller that resulted from these events led to a sharp drop in Westport property values and the GVs in the Karamea region also declined by association.

As our local economy is mostly independent of Westport, I consider the downturn is of little relevance properties in our region given its excellent location, quality and appeal. I explain this to prospective buyers to assure them that asking prices for local properties are justified.

As GVs are only calculated every three years, they can be very inaccurate as the market can change quite quickly, and the GVs can be left behind as the market progresses. People often say, “A property is only worth what the market will pay for it,” and this is very true. Buyers and what they are prepared to pay for a property determine actual property values. My role is to find that magic figure between buyers and sellers that is acceptable to both parties, and I’m pleased to be able to say that the prices achieved for my vendors have been well above GV in most cases.

Average House Price October 2019 v October 2016 (Source qv.co.nz)

August/September/October, 2019 sales figures for the Buller District: (Source: qv.co.nz)

If you are interested in an assessment of the current market value of your property, please give me a call, and I will do a free appraisal for you based on recent sales of comparable properties and other market developments.

It will be interesting to see what the new GVs for our region will be when they are released. I suspect they will begin to tick up again on the back of robust property sales in the region, but I hope our rates don’t follow suit!

Thank you to everyone in the Karamea community for their support and encouragement. I’m really enjoying my new role, and if I can be of assistance to any readers, who are thinking of buying or selling property in the Karamea region, if you have any questions or need some information relating to property, please contact me anytime.