Home Affordability

[SueDonim]

Great post Jolie. Very informative. Thanks

[James 1077]

Jolie

Alternatively you could say that there is a market for real estate here and the price you get / pay is the price that the market dictates. No matter who your estate agent is they aren't going to get you any more than one person wants to pay. When I see houses on the market for ages and people complaining that they can't sell I get confused - the reason you can't sell is that you want more for the house than anyone in the market is willing to pay.

House prices are inflated because, for one reason or another, people are willing to pay inflated prices. As soon as that changes house prices will revert to more realistic levels.

I understand that some people want the buyer's / seller's agent system but it very definitely isn't for me. I want to talk to the agent selling a house to get an idea of what that agent is like; my philosophy has always been not to buy a house off someone who takes on an agent that I don't like - which is why there is one agent in our local area that I would never buy a house from (and in fact I would think twice about buying from the agency that employs him).

I know full well that the agent is there to get the best sale price and conditions for the seller as that is their job; they have no contract with me. But that is exactly the same as buying anything else - I don't generally get someone else to negotiate a price for me when I buy a washing machine so why should I do the same with a house?

And if I was selling a house I would refuse to pay any commission to a "buyer's agent" as I had no contract with them. And as a buyer I wouldn't want to pay anyone to do it for me (I have enough problem paying lawyers to do some simple legal transfers but do it because it is less hassle than the alternative).

And why should home valuations be standardised? The price anything is worth is what someone is willing to pay; so that is the price regardless of any other factors.

I found the whole process exceptionally simple and easy to do and got a good house at the end of it for less than the price that I think that it was worth but at the top of what I was able to pay.

And have you looked at realestate.co.nz for an MLS?

[SueDonim]

One problem with realestate.co.nz is that so many houses are listed as auction or negotiation that you can't get a good idea of the market.

Is there a place to find actual selling prices or the tax value (is that council value "CV")? And are the tax values fairly realistic?

[James 1077]

QV reports are probably a good place to start.

http://www.qv.co.nz/

But councils should list the tax value which can also provide a guide (although you need to know when it was revalued to see how old it is).

An email to the agent will let you know the guide price or you could do what I do and not bother if they can't be bothered to give you their expectations easily!

[Kiwi Mac]

Part of the reason that real valuations are rarely done is that banks here do not require them to support your mortgage application, as they certainly would in the UK and in many other countries.

Quite why that is I am not sure. It seems at best cavalier and at worst downright irresponsible. Perhaps they might introduce it following this last burst bubble - who knows.

QV is really just a computer program, tbh - no one actually looks at the property being valued and inspects it.

[bluesky]

To me, this is the scariest part about moving to NZ. Housing is in a bubble. It can stay in a bubble for a while. California proved that. But ultimately, all bubbles pop.

If people cannot afford a mortgage payment on an average house, they can stretch for a while. But that leaves them no flexibility should bad times come. Once that happens, housing prices at best will stagnate. Most likely they will fall. Thew question is whether it is a slow decline or a plunge.

I'm glad there is a large stock of rental housing there (at least compared to where I live). I'd prefer to wait a while before I buy.

The way I think of it is you should buy a house when it suits you to buy a house. i.e. when you want to find somewhere and settle down and make it your own. As long as you aren't planning on leaving the market (e.g. by leaving NZ) why does it matter what house prices do? If they decrease, you won't get so much if you sell your house, but if you're buying another house, it will be cheaper too, so no net gain or loss. My view is that too many people get bogged down by thinking of their house as an investment, when it isn't. It's somewhere to live and make your home.

[IanW99]

...
QV is really just a computer program, tbh - no one actually looks at the property being valued and inspects it.

This isn't strictly true, we've had someone visit from QV to inspect our property in the past.

Ian

[IanW99]

Is there a place to find actual selling prices or the tax value (is that council value "CV")? And are the tax values fairly realistic?

Another website that you can use for some house sales is http://www.infolink.harcourts.net/googlemapnz.htm - I think that this is the renamed 'helpsellmypropery' website. Whilst it is a harcourts website AFAIK they used to also provide recent sales from other sources?

Also, if you ask the real estate agent e.g. at an open home, they will get you a print out of all the sales in the area.

Ian

[Ngeru]

The Crockers reports give a lot of info on current market and trends. There is still a lot of pressure in the housing market, due to supply and demand and the fact that very few new houses have been built in the past two years. All things considered, if we think the worst of the recession is over, I don't see that it is a buyers market and the market seems overall to be quite buoyant. I certainly don't see the prices will be moving downwards from here, unless some kinds of sanctions are imposed on rental properties in the upcoming budget, which I'm pretty sure the Government have already dismissed.

http://www.crockers.co.nz/services/research/latest.html

[Super_BQ]

But in reality it's not. Because many of those sellers, lured by the prospect of becoming quickie millionaires (due to no Capital Gains Tax on property sales), have overstretched themselves massively, and now owe more on their properties than they can get by selling them.

They've overstretched themselves simply because they bought during the wrong time. Look at those that bought their homes 2 - 3 years ago during the peak of the housing prices and mortgages were around 10% p.a. Nowadays in an economy with rising unemployment, it's no surprise people will be stressed out. (even more when the home is rotting)

I'm specifically speaking to those that don't own a home but have disciplined themselves by saving. It's a no brainer to get into a house now.

House prices are inflated because, for one reason or another, people are willing to pay inflated prices. As soon as that changes house prices will revert to more realistic levels.

House prices will always be high in NZ because there is no mechanism for those to invest elsewhere. The NZX is a poor example of providing decent returns for local investors as people in NZ have been burnt too many times. Unlike other dev. countries, NZ has tax laws that discourage foreign investments (that is a NZ resident is limited to how much they can buy in shares such as Coco Cola, McD, Visa, and many more business we see operating IN NZ on a daily basis.

Don't forget, the cost of materials to build a house comes at a insanely high profit margin. All the advertising we see at Bunnings and Mitre 10 Mega means nothing when the sparkies already buy at 40 or 50% less than these retailer's best price. This is no Home Depot or Lowe's or Costco that operate on a cost + 5 or 10% margin.