Podcast: Could This Be the Saving Grace of NZ's Small Town Property Markets? | Ep. 212

Posted by Ed McKnight on 21/04/20
Could This Be the Saving Grace of N Zs Small Town Property Markets 001
Listen to the Show

Listen to the Show

Show Notes

What's Covered in the Show?

In this episode, we discuss whether Ultra Fast Broadband could be the savings grace for New Zealand's small-town property markets.

Our conclusion is that the benefits of UFB (and the internet in general) will most likely be targeted towards smaller cities as opposed to smaller towns. Listen to the episode to find out why.

We also mention the property investment webinar we are holding this Tuesday (14th April) @7pm. In this webinar, you are going to learn how the Covid-19 induced shutdown is going to impact the rental market

Transcript

Transcript of the Podcast

Ed McKnight: Hello and welcome along to the Property Academy podcast. I'm your host Ed McKnight, and I'm Andrew Nicol, and today on the show we're considering will the ultra-fast broadband rollout be the saving grace of small towns around the country and small-town property markets.

Now, this is a really interesting question. Of course, we talked a little bit about this at the start of the year or just coming out of 2019 but on our most recent webinar, somebody came on and asked, well, what consideration do you give for the ultra-fast broadband rollout? As this, to me is significant infrastructure because small towns can provide jobs from anywhere.

Now they've given the example of Westport, which is typically and historically lost a lot of jobs, but they're wondering, look, due to remote lifestyle changes and we can work from anywhere, will this be the saving grace of small towns and their property markets. Now, let's just briefly walk through the logic to link how ultra-fast broadband actually might have a connection to the property market. And the idea is, look, if anybody can work from anywhere, then people who would otherwise move to the big cities in order to find work can still work in their original small towns or people who already live in cities can move to smaller towns where property prices are cheaper, still remain and continue doing their work, but that will increase demand or at least steady demand in some of these small towns.

So, instead of having an outflow of people moving away from small towns to bigger cities, therefore decreasing demand in those small towns property markets, they will still have some demand there, which will prop up their property markets. Now, it is a really interesting question, and Andrew and I were talking to each other just before we hit record here, Andrew, what, what are your, some of your thoughts around this? Will the ultra-fast broadband rollout be the saving grace of small-town property markets?

Andrew Nicol: I think it'll make some changes Ed, but I don't think it will be the saving grace of areas like Westport. I can't imagine myself, even though I've been in isolation for two weeks now and may have been handling all my client meetings on Zoom and the like, I don't see myself moving to Westport and then conducting business from there because I can get a cheaper house. Having said that, there will be some people who will be able to go to smaller areas.

One area which has been really interesting to watch over the last five years is Timaru. So Timaru is not a place that I'd ever really gone to, unless I was passing through on the way to Queenstown for example, however, there is quite a lot more businesses I've noticed there in the last few years, and, a lot of like I know, single accounting firms and legal firms have opened up there now, and also, a very well-known photographer. She's moved there and they're basing their business out of there, a web developer, and so these kinds of businesses, you know, they can work remotely a lot easier, and that has changed probably the number that, or the types of business that are there.

Same would be said with Dunedin. So I was really interested, Ed and I were negotiating a software package and, the guy was based out of Dunedin and in doing a bit of due diligence there, I discovered the number of cheap businesses, that are actually based in Dunedin. And, that was really interesting to see that now of course there is a bit more opportunity there, because you've got those kinds of people that can work from anywhere buying in an area which is more affordable.

Having said that, I think that a certain amount of business is always going to be done face to face and, and you know, um, whilst for me personally, I find Auckland logistically a challenge, because of the traffic and the fact that it's so spread out, but there's so much business that goes on there that I make sure that I'm there every week to shake hands with certain people.

So there, there is a certain amount of business that will be done remotely, but a whole lot of the business will still be done face to face. And so it might have some effect, but maybe not a drastic effect for some years.

Ed McKnight: And I can understand how this topic as well as becoming more top of mind given that we are all working from home, but I think what working from home and this Covid19 induced lockdown has shown us is really, there are two types of jobs. There are ones you can do remotely, and there are jobs that you can't do remotely, and the ones you can do remotely are typically knowledge-based jobs.

So I can work quite comfortably from my bedroom because I'm an economist and I work with Excel spreadsheets every day, and that's all I need to do. I just need myself and my computer and a couple of Zoom calls and I'm away laughing. But people who work in hospitality and cinemas, theatres and events and anything that is kind of service based.

So hairdressers and places where you get your nails done and things like that all in person. And so there are a significant number of jobs that can never be done remotely because it's just not in the nature of work. So there are some that can worked remotely. There are some that can't. And the ones that are, that can be done remotely, are typically knowledge based. And look, the other thing I just want to talk about is that the reason that somebody chooses to live in a particular town or city or suburb, is not just about whether they can work and proximity to work. Of course, that does play a factor, but there's also the amenities.

So if I'm considering whether I live in Westport, or Christchurch or Auckland for instance. Then Christchurch and Auckland are much more competitive than say, say Westport, just to pick on it, since it was given in the example, because there are a lot more amenities within Christchurch and Auckland in terms of the lots of cinemas and restaurants and people, and as you get to a sort of level of population, some of those amenities and, and the sort of things that you would find and the services you would find in slightly larger cities become more apparent. So that's why I'm thinking, if I, if I'm thinking about, okay, which cities are actually going to be most impacted by the provision of internet, it's probably those smaller cities as opposed to fringe towns.

So it's likely the New Plymouth, Palmerston North, Dunedin, even Napier and Hastings, it's those sort of smaller cities that are going to get more benefit than the likes of you know, the very small towns like a Hawera, even Whanganui or some things like that. And just as you're talking about the tech sector in Dunedin Andrew, it makes me think of a good businesses that are based in other smaller cities.

So I think about Frog Parking, which is based in Palmerston North, which is a really tech focused parking company. And they provide technical parking solutions to things like the councils and Wilson parking and things like that. And it's a great little business. I just like it because it's such an, so odd thinking about parking, but based out of Palmerston North, and they provide a lot of software based jobs to people in Palmerston North because of that. I'm thinking about another company that I know that's based in New Plymouth that, uh, it's called Volunteer HQ, I think, or International Volunteer HQ.

And they help, uh, mainly Americans go and volunteer over in impoverished and developing countries, but based out of New Plymouth and they're happy and able to do that because of the internet, but they've still got an office based in New Plymouth and they still have employees that go into their head office in order to be able to do their jobs. So the internet is probably going to really benefit those kind of smaller cities.

And we're already seeing that with Dunedin and New Plymouth, and some of these other ones where good businesses are there. And, we actually have a virtual assistant as well who sometimes does a bit of work for us based out of Havelock North. Not that you'd call that a city, but you put Havelock North together with, with Napier and Hastings and it kind of makes up a solid population-base.

So that's probably where I'm seeing the internet will have more of an impact compared to helping out those very very, small town property markets where people perhaps grew up there and tend to move away anyway. And the other thing I just want to mention is it probably is already having some impact. I mentioned that in our wrap up of 2019 we looked at the last 20 years of the property market and I remember referencing an article, written in the New Zealand Herald and One Roof that was by Ashley Church, who's a property commentator, you know, and he was saying, look, one of the saving graces already have some of these smaller towns and smaller cities has been the internet and the ability that these businesses that were just kind of rattled off that are just top of mind, are able to sprout up in these smaller cities and they have a benefit because they can employ people.

And there's a lower cost of living in these cities, which, which gives them a bit of a strategical competitive advantage as well. So I'm, I'm thinking or picking that we'll probably see more of that as well. However, I don't think that that is going to stop or take away from the growth that we're going to see in the main centres. The main centres are still going to benefit from the fact that they have that larger population base, can provide more amenities and there is benefit from a greater number of people bumping into one and other starting businesses and creating wealth that way as well.

So it probably won't take anything away in large numbers from the main centres, but that will help to prop up those smaller cities. Anything else to add before we wrap up Andrew?

Fantastic. Well, let's wrap it up there. Again, thank you so much for listening to the Property Academy podcast. We really appreciate it. Now, don't forget to rate, review and subscribe to the show. It really does help us get the message out to more and more people and hey, if you're interested in how Covid19 in this Covid induced shutdown is going to impact the rental market, and median rents and with Airbnbs coming more onto the market, then why not check out the webinar we're holding this Tuesday the 14th of April at 7:00 PM

I'm going to drop a link to that in the show notes, but we're going to dig into some pretty comprehensive data. Looking at what is the impact, the quantifiable impact actually going to be on the rental market, so check out at Opespartners.co.nz, or in the show notes.

Thanks for listening to the Property Academy podcast. I'm your host Ed McKnight, and I'm Andrew Nicol, and we're going to be back again tomorrow with even more daily strategies, tactics, and insights to help you get the most out of the New Zealand property market.

Until next time.