Builders find a home in holiday park
Prices of accommodation properties near Christchurch are climbing as investors and building companies seek accommodation for construction workers.
The latest property to be snapped up by a building company looking to house its workers is the Riccarton Holiday Park, a camp ground and cabin complex at Sockburn in Christchurch.
Peter Harris, of Bayleys Real Estate, who handled the sale (which is still subject to due dilligence), said the property had been purchased by a company involved in the rebuilding of Christchurch and it was looking to house about 200 of its workers on the site.
Harris said he could not reveal the identity of the buyer or the sale price because the deal had not yet settled, however, speculation doing the rounds on Christchurch grapevine is that the property has sold for more than $6 million.
If that is correct it would be about five times the property's council valuation of $1.3m.
Harris, who specialises in accommodation and hospitality properties, said demand for them in Canterbury was stronger than he had ever experienced and was outstripping supply. That was driving up prices.
There were two main groups of potential buyers, construction companies looking to house their workers during the Christchurch rebuild and investors looking for reliable cashflows.
Potential buyers were interested in motels, boarding houses, backpacker lodges, hostels, camping grounds and rest homes which could be converted to other accommodation uses and these could be located as far afield as Ashburton to the south of Christchurch, Darfield to the west and Amberley to the north.
However, buyers were only interested in purchasing properties they could buy as freehold going concerns, they were not keen on leasehold properties, Harris said.
Although the majority of motels were owned by absentee investors and leased to their operators, there were still plenty of properties that were owner-operated and these would be of interest to buyers.
Investor interest was coming both from within New Zealand and from overseas investors.
They were prepared to pay prices which achieved yields of about 7 per cent.
Companies looking to buy properties to house workers generally expected to own them for about five or six years and then put them back on the market as their work in Christchurch started to wind down.
"They are prepared to pay fair market value and perhaps a bit more than that because of the scarcity of suitable properties, but they won't pay ridiculous prices," Harris said.
This was creating an opportunity for people who owned such properties, to sell them at a premium price.
This could be particularly attractive to owners of older properties that might be a bit dated or in need of refurbishment.
Harris said he was attempting to contact the owners of every freehold motel, boarding house and other suitable accommodation property in Canterbury to see if they would be interested in selling.
"Many are aware that this might be their best opportunity to capitalise on the value of their asset," Harris said.
That demand could continue to increase because most of the work force expected to arrive in Christchurch to work on its reconstruction, was yet to arrive.
According to ASB's Cantometer, a report which measures economy activity in Canterbury, the region's economy is steadily gaining momentum.
The latest Cantometer, released last week, showed that growing economic activity in the region was starting to spread beyond the building industry.
"Activity is now firmly above pre-quake levels," the report said.
Retail spending in Canterbury had increased at a faster pace in the third quarter of last year than it had in the rest of the country.
In addition, there was a sharp improvement in consumer confidence, although that reflected the nationwide trend. "In addition to stronger consumer spending, we have also seen small improvements in other areas of the Canterbury economy," the report said.
"A lift in permanent and long-term net migration, now positive, and pick up in car registrations are also encouraging indicators of increased activity.
"The Construction Index lifted even higher over the last month, boosted by a further increase in non-residential consents.
"Housing demand continues to recover, with a pickup in house sales. However, low levels of new listings continue to hold back the Canterbury housing market recovery. The tight market continues to place upward pressure on Canterbury house prices.
"We expect Canterbury reconstruction activity to underpin the nationwide lift in residential construction over the coming year," the report said. It also said EQC had settled 108,653 claims for $4.1 billion as at January 14 while an estimated $12b in claims remained outstanding.
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