This time last year, you could buy a house in Elgin, Gisborne, for $276,450. Now, that house is worth $389,750 – a whopping 41% rise in value in a single year. Gisborne was the biggest winner in 2020 for capital growth, but it was far from alone in its impressive gains.

The central North Island was a growth powerhouse during 2020. Its affordable properties have drawn in homebuyers and investors alike, particularly those feeling priced out of larger centres.

Gisborne Leads The Way

Investor Ellie Tadema first purchased in Gisborne in 2016, and bought 18 houses in 18 months. She says the market has been “nuts – nobody could have expected it”. For instance, Tadema purchased a Mangapapa property for $178,000 in February 2016, and sold it in early 2020 for $400,000; “If it was for sale today it would go for $550,000.”

She believes that busy investors have had a hand in driving up prices, as well as relocating Aucklanders, lured in by the low cost of living and lack of traffic. Ten of Gisborne’s suburbs were in the top 20 for growth last year, “And I think we’ve only got 10 suburbs,” laughs Joe Snee, Hawke’s Bay regional manager for Property Brokers.

‘Where in the world can you buy the most affordable real estate right next to the water? Whanganui has been undervalued for a long, long time’ RITESH VERMA

“Gisborne has always been a beautiful place to live and demand is hugely outweighing supply.” Gisborne is boxed in by horticultural land, Snee says, which is contributing to the limited supply. Add to that a high proportion of sales by auction, and as a result, “people are paying tomorrow’s prices, today. If it carries on the way it is, there will be nothing left to sell.”

Tadema has benefited from the rising values, selling her final Gisborne property in October after seeing her portfolio almost triple in price in four years. The yields aren’t quite where she’d like them to be. Instead, she’s now investing in a few different ventures, including buying property in Whanganui.

Whanganui Follows Suit

“Castlecliff is a perfect investor spot,” says Tadema, who started buying in Whanganui in 2019. “It was almost undiscovered, and you could buy at a great price. Now rents are going up, values are going up, and Whanganui’s doing a Gisborne.”

Seven of Whanganui’s suburbs feature in the top 30, with Castlecliff topping the list at 30.4% growth. The suburb has long been undervalued, says Ritesh Verma, Property Brokers’

Whanganui branch manager. “Where in the world can you buy the most affordable real estate right next to the water? Whanganui has been undervalued for a long, long time.”

Once people arrive in Whanganui, they often fall in love, he says, and an influx of former Wellingtonians has helped drive up property values. “People are cashing up in the city, selling for a million and buying the equivalent house for half the price.

They can bank the difference and then they only need to work enough to pay the grocery bills and they can really enjoy life. Covid gave people the realisation that you don’t have to live in a big city, with a massive mortgage you can’t service.”
Just like in Gisborne, there are far

more buyers than properties available, and unless something unexpected changes the demand-supply equation, Verma says he can’t see why prices would drop, particularly with the burgeoning population.

Outlier Sales Move The Needle In Shannon And Raetihi

Two of the top-performing suburbs, Shannon in Horowhenua and Raetihi in Ruapehu, are both very small markets, explains Paul Roache, regional director of Manawatū and Wairarapa for Property Brokers. Low numbers of sales mean even a single high-end property can skew the results.

In general, Ruapehu has had respectable but not spectacular growth, with affordable Raetihi popular mainly with home-buying agricultural workers. Horowhenua has seen more overall growth, with Foxton also featuring in the top 20, and Tokomaru and Levin breaking into the top 50 (out of a total of 975 suburbs nationwide).

“People who are looking to buy in Palmerston North with $400,000 don’t find much, so they go out to Shannon to get the right price,” says Roache. His pick of the suburbs is character-filled Foxton.

“People are moving out of Wellington and moving to Foxton and Levin for the quieter lifestyle. If you’re retiring, they’ve got everything you need, and I think there’s growth in both of those areas still to go.”

Once again, Roache says that undersupply means it’s hard to see how prices would fall: “With interest rates so low I think the growth will continue. It’s just so hard for first time buyers to get in.”

Prices Appeal In Fordlands

Rounding out the top 10 highest-growth suburbs in 2020 is Fordlands in Rotorua.

‘People who are looking to buy in Palmerston North with $400,000 don’t find much, so they go out to Shannon to get the right price’ PAUL ROACHE

The Rotorua District has had some solid growth, with Selwyn Heights up 21.3% (38th) and Western Heights up 20.1% (46th). Fordlands, however, really stood out, at just a nudge under 30% growth. That growth simply reflects the appealing prices, says Pauline Evans, director at Rotorua Rentals.

“Fordlands is a low-cost entry point to the market with good solidly-built ex state housing. Properties tend to have big sections and investors coming from Auckland can buy under $300,000, so they tend to think it’s a goldmine,” she says, adding that investors may be too optimistic in terms of the quality of tenants they’ll attract. The area’s reputation has held back prices. “That’s why the growth is there – because it’s well undervalued compared to similar properties in neighbouring suburbs.”

For Dollar Gains, Auckland Takes The Cake

Although Auckland suburbs don’t feature too highly in terms of percentage growth, for dollar increases the City of Sails claimed 19 of the top 20 spots on the list. The ripple effect from popular areas has hit satellite and lesser-known suburbs. Shamrock Park, in East Auckland, is nestled amongst other popular suburbs and close to the water, parks and shopping centre. Homes there are closing in on $2 million each,
up 12.7% and $214,150 in 2020. The only other suburb to crack the $200,000 mark was Westmere, between Herne Bay and Point Chevalier, where homes now typically cost $2.13 million – up 11% and $211,200 for the year.

Gisborne’s Lytton West broke up Auckland’s dominance of the dollar-gain list, in ninth place – up an impressive $178,550 and 27.8%, making it perhaps New Zealand’s best-performing suburb overall.

Queenstown Takes A Battering With Borders Closed

While almost all suburbs in New Zealand grew in value, there was one region hardhit by the fallout from the pandemic. The Queenstown-Lakes District was firmly at the bottom of the growth table. Lake Hayes was last for both percentage and dollar growth, with values $121,000 and 7.3% lower this year than last year. Only 15 suburbs out of 975 throughout New Zealand saw negative growth, of which 11 were in Queenstown-Lakes and four were in Christchurch. Queenstown is likely to see some major bounce-backs once international tourism returns; in the interim this could be the time to pick up a bargain.

More Growth To Come

With interest rates remaining low and buyer demand strongly outstripping supply, it looks as though the hot suburbs will continue to grow in 2021. Tadema says the trick is in spotting future growth suburbs – personally, she’s looking to Northland. But wherever you are, the most in-demand suburbs tend to push buyers out to neighbouring suburbs, while major infrastructure projects drive jobs and demand. Do your research and get ahead of the curve to make the most of your investment dollars in 2021. ■