If you are lucky enough to be a homeowner in New Zealand for more than a couple of years your buying experience was probably relatively similar to that when we first purchased over thirty years ago.
The steps include:
- Finding a house you want to buy within your price range (the asking prices were advertised).
- Make an offer, negotiating though a real estate agent.
- Initial offer was always lower than you think you can afford to pay.
- You would expect a counter offer from the vendor, slightly less than asking price but not accepting your original offer.
- Negotiation between all parties continued until a price was agreed, in some cases the agent also contributed by cutting their commission to seal the deal.
- Get a LIM report (Land Information Memorandum) from the local council to obtain a summary of relevant property information including potential issues relating to erosion, flooding, hazardous substances, storm water and sewerage, cost of rates and evidence of building consents.
- Ask a builder to look over the property; you usually knew a builder who would check things for a dozen of beer.
- Arrange a mortgage and start packing.
Then and now, purchasing property is stressful and if you don’t have the money you have to expose yourself to the scrutiny of the lenders and jump through hoops to get a mortgage, knowing that over time, you’ll be paying thousands more in interest.
Dependent on the market conditions your investment can go up and down, so risk is real, the only saving grace is that when you buy and sell in the same market the risk is negligible. For those that are new to the market you are at the mercy of the cycle, which over recent years has had significantly more ups than downs.
My Hubby and I bought our first home in the eighties when the interest rates were high and still climbing; the most we personally paid was 19%. We were both working and had saved 30% deposit but even so we could only afford to purchase in one of the cheapest suburbs in our town. We were delighted to have a roof over our head and got stuck in and added to the property’s value using good old ‘sweat equity’.
In those days’ banks were cautious and it was hard to get any money, buying anything required either cash or layby (pay for the product whilst the store held it in stock until you had paid for it in full) so we were used to going without and saving.
After a few years of paying off the mortgage and increasing the equity in the property we looked to move up the property ladder, each time we moved, the mortgage increased but we also improved the location of the property and the potential for resale in the future. Some purchases were in a slow market where as buyers there was more stock to choose from and others times it was stressful to find a house that would meet our needs before settlement but only one house turned out to be a disappointment in our journey.
After many years of mortgage payments and hard work we finally managed to sell a lifestyle property to purchase a home without a mortgage.
Yeah we felt good, now all we have to do is save for our retirement, but guess what we don’t have enough time left so maybe we should look to purchase an investment property. Money is cheap, the floating variable rate is just over 4% with fixed rates as low as 2.5% and probably can be negotiated lower.
Haha the jokes on us as the market has moved on considerably and skyrocketing out of the reach for many, especially the new home owners.
So how difficult can it be?
Know your market; I created a spreadsheet of all the available houses listed in our region, detailing size, location, bedrooms, bathrooms, garage, RV (rateable value), age; basically everything but the price.
Price is now the big unknown! In this market it turns out that the market is so hot that no one, including the real estate agents can tell you a price. The only guide can be sought by applying a price range within the websites that list the properties. However the first time I entered my preferred price range only properties requiring considerable upgrades were displayed; increasing the price range by 100k didn’t produce much more.
Time to spend the day open homing to get a more realistic view of those within my budget. OMG when did these very basic houses get to be so expensive, yes I have read about the crazy market but these basic properties were selling for more that what we had paid for our not basic, substantial home with swimming pool just a couple of years ago!
Not only were they overpriced but the agents were saying at the first open home, we will be accepting offers in X days at X pm. These offers are not the negotiating type contracts of old, the new process I describe as an aggressive ‘sharks feeding frenzy’ with multi offers, where no price is off limits and the strongest bid wins.
The new rules are:
- Put your best price in (no low balling initial offers or real estate agents dropping fees to get a sale as negotiation).
- Have your finance sorted and pre-approved.
- If you want a builders report then you will need to pay around $500+.
- No LIM reports as not enough time to wait for these.
- Banks and lawyers need copies of draft Sale & Purchase or Tender documentation urgently so the title search and any issues can be obtained prior to presenting the offer.
- ‘Conditions’ are a bad word these days, however if you do need to include these, make sure the time period in the offer is less than three days because three days is too long! The agents will question you, are you sure this can’t be a condition that can be met in one day rather than three?
So much pressure, however it is essential to do your due diligence quickly because in this market the vendor is presented with multiple offers and they are looking for as close to unconditional offers as possible, and if you can’t provide this, there will be others that will.
The frenzy is real and so many people are participating in the madness, however most remain unsuccessful despite having paid thousands and those that are successful are paying well over what they would have if they didn’t have to put their best offer in. It is a horrible feeling when you know a property is worth X, however you have to put in at least another X just to second guess what everyone else is thinking and then a wee bit more X to try and make it yours.
For hubby and I, we are jumping out of the water and leaving the frenzy behind and it feels great, so what if we don’t have a rental to prop up our retirement, we will still be happy.
Unfortunately, here in New Zealand, spending is not just reserved for the housing market, it seems we are spending like never before on new cars, kitchens and bathrooms, you name it those that have money are spending up large, those that have the opportunity to borrow are spending up and those that can’t afford are also spending when the rest of the world are struggling just to stay alive and survive through the COVID crisis and facing more lock downs and new COVID strains.
It makes you think doesn’t it.
Be kind and take care.