Archive | Valuation

Absolute beachfront values rising by compound 15%/year above inflation

Published: 13 August 2005

The value of prime absolute beachfront land in 3 areas near Auckland has grown at a compound annual rate of 19.3-20.5% since 1982, Bayleys Research says in its annual account of beachfront property.

Bayleys began calculating the returns on beachfront in 1982, focusing on 3 areas:

Orewa & Omaha, north of Auckland
Oneroa & Onetangi on Waiheke Island, and
Whangamata, Pauanui, Tairua, Hahei, Matarangi, Whitianga, Cooks, & Whangapoua on the Coromandel Peninsula’s east coast.

Deducting 4.55% for a compound annual inflation rate over the period from 1982-2003, Bayleys said absolute beachfront values had grown by real compound rates of 15.81% at Orewa & Omaha, 15.59% on Waiheke and 14.81% on the Coromandel.

The researchers found there’s a growing trend for beachfront property to be used as a home rather than just a holiday destination, and said the increase in value and scarcity of standalone beachfront land was forcing buyers to consider alternatives such as property back from the beachfront and waterfront apartments instead a bach.

Bayleys said value gains were far from even: “The Coromandel provides an excellent example of this trend with Whangamata, which has a reputation as a good surfing beach and benefits from the presence of a large variety of shops, cafes & restaurants, commanding values up to 2½ times greater than Whitianga, where parts of the beach are adversely affected by erosion. Whitianga has, however, still seen prime land values increase by about 33% over the last 2 years.

“The unique appeal of living on the beach as a lifestyle choice, the scarcity of available sections and competition from local & overseas buyers have resulted in values continuing to surge ahead while the metropolitan residential market begins to cool.

“Value increases have been bolstered by the move in the use of beachfront property from holiday baches to beachfront homes. While traditionally the bach has been held for use during the holiday periods, more people are now choosing to live permanently on the coast or alternatively to purchase apartments in the city for use during the working week before heading back to the beach at weekends. This trend has seen buyers purchasing beachfront baches or older homes in order to secure the land that they sit on.

“The presence of an old bach on the site, while being of little value itself, can increase the land value considerably as it means that a new property can be developed on the existing building line as opposed to being pushed back to a line permitted by current planning regulations.”

To illustrate the outstanding levels of capital appreciation for prime absolute beachfront property, Bayleys compared with residential land in coastal areas more generally and with the general rise in land values.

“In Rodney, for example, throughout the 1991-2005, period, residential property as a whole has performed well. The value of residential sections in the region has increased by an average of 10.4%/year compounded. During the same period the value of residential sections in the coastal suburbs of Omaha & Orewa have shown compound growth averaging 15.2%. Prime beachfront land, however, has eclipsed both these figures, returning an average of 16.9%.”

Bayleys Research said land just a few metres walk from the beach can have a significantly lower value – 25% in some cases. “It is also not necessary in many cases to move far from the beachfront in order to benefit from marked reductions in values. In Omaha, for example, Taumata Rd, where beachfront values have reached $1.6 million, has also seen sections just 2 back from the beach selling for $350,000.

“On the Coromandel Peninsula, the Harbour subdivision in Matarangi also demonstrates the differences in values with lots one back from those on the beachfront being listed at values 50% less than beachfront sections.”

Website: Bayleys


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