The Demand For Land
Very soon we could be seeing a lot of investors become developers, but before you rush in, it’s worth taking your time to get the numbers right, says Nathan Miglani, Mortgage Adviser with Loan Market Paramoun t.
January saw property values in Christchurch have their strongest rate of monthly growth in 17 years, with an increase of $100,000 on the median sale price in just 12 months and an increase of 53.51 per cent in the volume of sales – yes, it really has been that busy! And while we still have a bit of catching up to do in terms of property values compared to Wellington, Hamilton, Tauranga and Auckland, it’s safe to say that no one expected Christchurch to go up that quick. The fact that we still remain the most affordable of the six main centres means we’re unlikely to see demand wane any time soon.
And it’s not just the prices of existing dwellings that are being affected from a surge in demand (and a lack of listings) – sections are also experiencing unprecedented demand.
Driving this demand for land are homebuyers with a genuine intent to build their family home, but also from builders who are willing to pay top price for land, just so they have work for their staff. Last year we had so much choice when it came to buying sections, but now it’s a different story – the 150 sections that went on sale in Rolleston a few weeks ago were sold in just 16 minutes.
And demand is reflected in rapidly growing prices. Recently I helped a couple buy a 550-square-metre section in Pegasus. Just after COVID-19 lockdown, they were selling for $170k, and now they’re selling for $305k. After COVID-19 lockdown we were helping our clients buy sections in Halswell, which were priced at $269 – $289k. During the latest release, we are now talking around $420 – $460k for a 600-metre-square section. In Rolleston it used to be $185 – $200k, now you can expect to pay $305 – $310k for a 500-metre-square section.
The other demand that is driving a lot of wealth in Papanui, Linwood, Sydenham, Spreydon, Addington and Riccarton is for RMD land, or residential medium density land. This zone allows medium density housing to be built in those areas without needing to go through a costly resource consent process, and provides for both detached dwelling and multi-unit development up to three stories high – including terrace houses and low-rise apartment blocks. It’s no surprise that when you go to these suburbs you’ll see more and more townhouses, and in my view, I believe the trend has just started and we’ll be seeing a lot more.
Off the back of this, we will likely see a lot of investors become developers because investing, after all, is all about the numbers. If you’re buying a property that’s costing you $800k, it’s unlikely to rent for $800 a week, so we’ll see a lot of people buying property on RMD land with the intention to demolish and use the land for townhouses and small-rise apartment blocks.
We always recommend to our clients to not develop just because it sounds good in theory, but to ask themselves their reasons why. It’s important to get your numbers right and not to max yourself out on a number of mortgages; if you have extra cash, could you pay off your own home loan? Because you can’t go wrong with that.
Years of experience mean Nathan Miglani knows how to give you the best possible chance of success if you are thinking of buying or building a property. Whether it’s a first home, next home, rental or a development, Nathan and his team are passionate about helping you through the process and they’ll find the best deal for your unique circumstances.
