Palmerston North Market Update December 2020

by Simon Tavendale on Dec 20, 2020
Article appears under: Palmerston North, About Property Investment, Local Markets

The Manawatu region continues its upward beat achieving strong median year-on-year growth for October. Palmerston North City, Horowhenua and Tararua being standout performers – both achieving Record Median Sale Prices.

The region has one of NZ’s lowest Days to Sell at only 22! Much less than the 10-year average for November of 35 days. It suffers from low stock levels (a common theme across the country). There were 6 weeks of inventory in November 2020, three weeks less than the same time last year (REINZ Monthly Property Report – Dec 2020). The current state of the market means purchasers have to really be on top of their game and active in the marketplace, or risk missing out on potential investment opportunities.

Record median prices have been seen in many of the regions’ territories:

• Palmerston North City - up 27.0% to $602,000 from $474,000 same time last year
• Manawatu – up 15.9% to $521,500 from $450,000
• Rangitikei – up 19.3% to $367,000 from $307,530
• Horowhenua - up 29.9% to $500,000 (Record) from $385,000
• Tararua – up 64.0% to $405,000 (Record) from $247,000
• Overall = Strong regional median sales growth at +25.8% versus November 2019

Although the region has had record high growth, affordability remains very attractive when compared to other parts of New Zealand; NZ Median $749k (Record), Auckland $1,030k (Record), Wellington City $980k (Record), Hamilton $692k (Record), Tauranga $835k (Record).

Despite the uncertainties with COVID-19, the positive regional economic outlook remains unchanged. Palmerston North City - the business hub of the Manawatu region - has been cushioned from the impacts of COVID-19 by a high government share of salaries and wages (38% share) and low dependency on international travel, most travel to the region comes from domestic tourism as well as business. The regions economy is well known for its stability and is buoyed by agriculture and education. The city's housing market has long had a reputation for being steady, but more recently has experienced stellar growth.

The city has a growing population and is looking forward to several large-scale construction and commercial investment projects. The region is about to receive significant fiscal stimulus from the government for the Manawatu Gorge replacement motorway (expected to be completed by 2024), Ohakea Airforce base upgrade, and KiwiRail freight hub. Total investment into the region is expected to be between $2B to $4B, bringing with it many new jobs which will increase demand for housing in a market already suffering from short supply. This demand has also caused rents to rise in-line with property values. Gross rental returns range from 4.2% to 5.3% in Palmerston North City (*Core Logic - Nov 2020).

On the investment front, low supply is making it harder to secure investment property and competition is strong, with most buyers finding themselves in multi-offer situations. You must act quickly and being on the ground is important.