Auckland property developers feel funding pinch

As Christmas approaches, BNZ’s Chief Economist Tony Alexander cautions that we’ll see a slowdown in the supply of Auckland houses due to lack of finance available to property developers. However, expect a brighter outlook come the New Year. 

Inflation around the world has been lower than expected by practically all of us since 2009 and that has seen interest rates stay at unusually low levels. These low rates have been one of the factors propelling house prices upward. Now things are changing.

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Is the Unitary Plan the great saviour of Auckland’s housing crisis?

BNZ’s Chief Economist Tony Alexander reflects on how the Unitary Plan will affect soaring Auckland house prices and future urban growth.

For the third time in three years the Reserve Bank has imposed new rules on the minimum deposit size investors must have when using a mortgage to buy property in Auckland. The first occasion was October 2013 when the 20% minimum was introduced for all borrowers. Then in October 2015 we had the 30% minimum for Auckland investors. Now we have a 40% minimum starting from October this year, although this has already being applied by banks for lending not arranged before the policy was announced a month ago. Continue reading…

Migration flows and Auckland’s housing shortage

I might have done this exercise here previously, but if I haven’t here is something you should find interesting, and if I have then this is an update. On average in Auckland there are three people per household. So in the absence of any specific information suggesting that Kiwis returning to NZ and migrants, along with Kiwis deciding not to leave NZ who might otherwise have done so, being different from this average, lets use it for calculating the extra number of houses needed to handle population change from migration flows. Continue reading…

Why property investors should keep an eye on transport developments

I finished last month’s housing blog by noting that if Auckland’s pace of house price rises was not sustainably slowing down then the Reserve Bank would probably take the 30% deposit requirement for investment purchases to 50% or 75%. This probably won’t be necessary because the pace of price inflation has slowed to 3.8% in the three months to October from 6.1% in the three months to July and 8% in the three months to August. Continue reading…

Retirement, increasing life expectancy, and the demand for investment property

It’s interesting to think about the impact of increasing life expectancy on demand for investment property. Basically, the longer people expect to live the greater their ability to recover from a financial shock and the longer the payoff from investing in an asset which produces both growth and capital gain. This aspect of increasing life expectancy is probably still in its infancy but will attract more discussion in coming years. Something which has been with us and having a strengthening impact for over a quarter of a century, however, is the message to get ready for retirement. Continue reading…

3 reasons Auckland’s housing market went into overdrive

Late last year we started to see a spike in activity in the Auckland housing market in terms of both turnover and prices. It looks like a key driving force behind this was a rush of new investors entering the market, probably encouraged by three key things. Continue reading…

When the hammer falls: My journey to homeownership

BNZ Community member @CatherineV bought her first home at auction and reflects on the process, the properties, and the panic before the final hammer fell.

My husband and I are both savers, so when we got married in 2014 we were both in a pretty good situation with our savings. Both of us have put aside a little bit from each of our paychecks since we started working just over a decade ago, which has paid for all sorts of stuff over the years. Once we decided to test the waters of the property market it meant we had our deposit ready to go.

Price ranges and properties

Getting started was all about the detail. We had to speak to the bank to get an idea of what we could afford and we got some really good advice from them and fromBNZ Community blog posts on how to decide how much to borrow.

After a short time looking in Auckland and not finding what we wanted in our price range we had to consider other options. This meant considering different styles of properties like apartments rather than houses and extending our search geographically. It seems to be a common pain point for young buyers. After a while you tend to get rather tired of people suggesting you look further out when you’re already doing so and it’s a pretty personal decision as to where you live.

Open homes and spreadsheets and building reports, oh my!

It got quite intense. I’m now super familiar with the Trade Me Property app and could probably scan for new properties in my sleep. Our weekends consisted of going to 6+ open homes on a Saturday then back to the ones we liked on a Sunday. We’d often take Mum and/or Dad to get a second opinion. The whole process is time consuming and emotionally draining. I’d like somewhere and my husband wouldn’t.

When we got back from open homes we’d do a summary of them all and grade the ones we both liked. We had a spreadsheet where we would mark components of the property out of 10 and give the place an overall score. We’d mark things like location, size, street noise, kitchen and other benefits. It was really useful to geta bit more of an objective view, and is a great tip from this blog on what to look out for at open homes.

Finding ‘The One’

When we found a place we both liked it was time to get a building report. This was where it got painful. We were looking at apartments so had to be really careful. Not once but twice I had my heart set on a place only to get a building report and discover it was leaky. Depending on your builder and whether you get a written or verbal report, you’re looking at $300-600 each time. It’s a cost but one that we had to absorb. It’s nothing compared to the potential cost of buying a leaky property that would require a major investment on top of our purchase price.

Before going to an auction we needed to go to the bank to get pre-approval. When you bid it’s unconditional so you need to have all your ducks in a row. This blog gives a rundown of what you need to think about beforehand.

The big day

Auction day was absolutely terrifying. I’ve never been so scared in my entire life. From the minute I woke up until the day after the auction I was in a state of panic. My husband actually suggested I don’t go into the auction room as I looked so petrified but I made it in the end.

One of the bits of advice we were given was to have a pinch price, a buy price and a top price. I’d suggest also having a ‘top top’ price for the day. Including these prices on the spreadsheet helps. We ended up winning, on our ‘top top’ price. After that you’re taken away to arrange to pay the 10% deposit and sign all the paperwork.

Then it’s all over. After the hammer falls on the biggest financial investment many of us will ever make, there can be a sense of panic.  I felt it but there was also celebration at feeling like we’d reached a milestone. Corks may have popped. Good luck to any of you on this journey at the moment.