The bach is back

Auckland house prices have risen 22 per cent in the 12 months to September compared with 4.1 per cent for the Coromandel. Photo / Alan Gib

Pity the poor bach owner who wanted to sell following the global financial crisis. Demand collapsed and prices took a massive hit.

Evidence is emerging, however, that some coastal markets are beginning to pick up. The traditionally more desirable coastal towns within two hours' drive from Auckland are faring the best, although price rises don't match the phenomenal increases in Auckland.

Economist Rodney Dickens of Strategic Risk Analysis says prices are increasing in some coastal areas but the movements shouldn't be seen as the beginning of a speculative boom as happened in 2003/4.

Bach ownership started to come back into vogue a couple of summers ago, says Dickens. But the oversupply that still hasn't been soaked up since the last boom is keeping prices subdued.

Dickens says a fresh generation of buyers is emerging. They are a new generation that has climbed the career ladder and is earning enough to consider the Kiwi dream of a bach.

Some Auckland-based buyers see the modest prices in coastal areas representing a bargain. QV's House Price Index has recorded a 22 per cent increase on Auckland prices in the 12 months to September 2015 compared with 4.1 per cent for the holiday Mecca of Coromandel.

The big but is whether there will be significant capital gain in coastal property to make investment worthwhile financially.

Coastal values in many parts of New Zealand have still not recovered to the levels seen at the previous peak of 2007, says Andrea Rush, communications manager at QV. Nonetheless QV is beginning to see the discretionary spend return in terms of people looking to buy coastal property now, says Rush. In Coromandel, Harcourts agent Ian Kemp is seeing more and more Aucklanders considering using their increased equity to buy holiday properties.

Heraldhomes asked First National Whangamata principal Gordon Turner for an example of a meat and potatoes bach that had changed hands at least twice since the 2003/4 boom. Turner cites the property at 222b Aickin Rd, worth $245,000 in 2003, sold in 2009 for $270,000 and again in May 2015 for $355,000. He estimates it's now worth about $415,000.

However, QV's E-Valuer figures, which are extrapolated from recent sales, don't suggest that such an upturn is widespread in Whangamata. The town had an estimated property price increase of 0.6 per cent to the year June 30, 2015, and 6.4 per cent for two years to the same date.

It's people looking to buy a coastal section and build who are likely to find bargain basement prices -- especially in areas such as the Karikari Peninsula, which was overdeveloped in the last boom. Dickens notes that there are still asking prices as low as $45,000, and some sections are changing hands for as little as $30,000, he says.

"These are the sections that were sold in the vicinity of $200,000 when they were first [developed]," says Dickens. Many were bought by investors looking for capital gain but were left "licking their wounds" after the GFC slashed their section values.

Likewise, Kinloch near Taupo is still awash with sections for sale at what might be bargain prices if demand picks up.