Why do small houses cost so much in Auckland?

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One of the hardest types of property to buy in Auckland is a 2 bedroom unit or house. You need deep pockets and a strong will because the prices they are attracting are unbelievable.

What is it that makes them so desirable – often more sought after than 3 bedroom houses?

The strong demand for small houses in Auckland is the result of a number of factors

  1. We have a growing number of one person households
  2. We have an aging population and an increasing number of couples looking for smaller, single level homes
  3. We have a large migrant population, many of whom are used to living in small homes
  4. First home buyers are trying to take everyone’s advice and look for smaller homes
  5. Many new investors are also looking for a smaller property to get started on their investment journey

In previous decades these factors would not have created a problem as there were huge numbers of smaller houses and units being built and the supply could meet the demand and everyone was happy.

Then in the 1980s and 90s the trend of building units slowed considerably and today the number of 2 bedroom dwellings (other than apartments or retirement villages) being built is low in most parts of Auckland. And those being built tend to be multi-level such as terraced houses rather than single level which current buyers see as more desirable especially if they are older or have children and pets.

This unbalanced demand versus supply has a created a situation which has almost removed the price differential between 2 and 3 bedroom homes in parts of Auckland. Some recent examples I have seen include an offer being accepted on a unit nearly $50,000 over the asking price, another selling for more than $100,000 over an acceptable pre-auction offer and a very ordinary unit having an offer on it the day it was listed.

It is unlikely that the demand for smaller single level homes is going to decrease in the near future but I doubt that anyone is planning to increase the supply so I don’t see any change in this unbalanced situation happening soon. Good news for owners of these properties but another negative for those who just don’t want to own a bigger house.

Robyn Forryan

Property Magic

0800 800455


Advising Auckland property buyers

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5 essential actions house buyers need to take


Whether it has been a few years since you last bought a property or you are buying for the first time most property buyers think the process is about looking at properties until you find the right one then buying it. Sadly it has never been that easy and in our current market you need to take some essential actions if you want to make the buying process successful.

  1. Start with the compromises first.

Before you make a list of what you hope to be able to buy you need to decide what you are willing to compromise on. If you do this at the beginning of the process you will open up new possibilities for houses to look at right from day one.

Your compromises are likely to be about the size, location, price, property condition, land area or features of the property. Everyone ends up making compromises so deciding where to make them before you start will give you a huge advantage once you are actively hunting.

  1. Do your finances again.

There are amazing online calculators such as at www.sorted.org.nz where you can play around with numbers to ensure you are able to manage your home loan regardless of what the future brings.

The kind of finance checking you need to do before you buy includes what your repayments will be at higher than current interest rates, how long it will take to pay it off and what the impact will be if the amount of your repayment changes.

  1. Attend some auctions now!

So many properties in Auckland are sold by auction so you need to get some knowledge before you are actually bidding.

Viewing auctions when you are not involved is a great, free way to find out how they work, what really goes on and what strategies bidders use. The house doesn’t matter, the price doesn’t matter but getting a handle on the psychology being used is vital. So spend some time in the next couple of weeks being a voyeur at auctions near you.

  1. Talk to the experts.

There are constant changes in the property market but some things remain the same and one of these is our need to “do it ourselves”. Unfortunately this can be a very expensive mistake if it includes reading titles, LIM reports, Sale and Purchase agreements, leases and making choices about home loans and tax structures.

It scares me that many buyers are willing to bid at auction or negotiate with sellers without getting advice first from their lawyer, bank or mortgage broker and possibly their accountant.

These experts can ensure you don’t make a mistake that you could regret for a long time. Investing in good advice before you buy is crucial.

  1. Face facts. Become a realist.

You are not going to find the perfect house. You won’t agree on everything. There will never be enough houses to choose from. Making the right decision is never easy. Having $50,000 more to spend won’t solve the problem because you will just want more for your money. These are just some of the facts that house buyers have to face.

Overcoming your natural optimism when you start looking for a home isn’t easy. I am not suggesting you should have a negative attitude but being as realistic as possible will help you enjoy the rollercoaster ride ahead of you.

Talk to friends and family who have bought in the last couple of years and really listen to their experiences then build it into your thinking before you start the search. Understanding the reality of the process before you begin will help to overcome a lot of problems that can otherwise make it much more difficult.

With these essential actions under your belt you will be ready to tackle the exciting process of buying a house so enjoy the next few weeks or months.

Robyn Forryan

Property Magic

0800 800455


Advising Auckland property buyers

Posted in House Buying, Market information and house buying tips | Tagged , , , , , , , , , , , | Leave a comment

Land, Money and Time – the 3 critical issues in Auckland


It has been a very noisy time for anyone following the Auckland property market with commentators, journalists, Government officials, Councillors and opinion piece writers voicing their ideas on how to fix the market once and for all.

What is absolutely clear is that the lack of supply of houses for sale (regardless of who is buying them) is getting worse. Data released from REINZ shows that sales numbers have fallen considerably because of the lack of supply of properties for sale.

The noise started with ideas to reduce the demand so the lack of supply wouldn’t be a problem. Most of it centred on the two most obvious ideas – limits on bank lending and establishing new taxes.

Neither of these ideas has worked well in the past and neither deals with the problems of a growing population and changing Auckland demographics. They are reactive ideas which could severely impact some Aucklanders while others will simply find ways to go around them.

One smart idea I read today could make a difference by suggesting alternative investments for cash rich babyboomers who are certainly involved in creating some of the current demand. Here’s a link to Bernard Hickey’s article for anyone who would like to learn more http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11642655

So if we can’t or perhaps shouldn’t hold back demand then what are the 3 critical issues that we must overcome to increase the supply of houses?

Let’s look at land first. We will know in 3 months if Auckland Council is going to allow more land to be made available on the outskirts of Auckland for housing. The Unitary Plan for Auckland must be notified by August 19th. The Independent Hearings Panel must deliver it’s recommended plan to Council by the last week in July then Councillors will vote to decide whether to accept it or not. Until this process is completed all the talk and threats about land is just noise and nothing else.

Supposing the land issue is dealt with the next critical problem is likely to be money. There will need to be a great deal of money invested to get the subdivisions developed and the new houses built. Currently our banks love lending money to property owners with sufficient equity to buy further property because they can rely on these small customers to pay the interest and the principal. Are they as keen to finance developers at competitive rates to ensure the housing being built is somewhat more affordable than current offerings? Probably not. And if the major banks are not going to lend the money for development who is?

The final critical issue we face is time. Unfortunately it takes a lot of it to develop land into residential sections with roads and services. Then it takes more time to actually build the houses. So if the first critical issues can be resolved in the next few months we are still going to have to wait for the available supply of houses for sale to match the current demand. And while that is probably the worst possible news for the buyers and investors trying to find the perfect Auckland property in the next few months at least if we recognise the issues we can put pressure on the relevant authorities to ensure that solutions are put in place to avoid this situation in the future.

And don’t forget that we have the right to exercise our vote for Auckland Council this year and the New Zealand Government next year.

Robyn Forryan

Property Magic

0800 800455


Advising Auckland property buyers


Posted in Auckland Property, House Buying, Property Investment | Tagged , , , , , , , , | Leave a comment

The Zen of house buying: How to stay in control


There has been quite a lot of information about the Auckland property market out there this past week and not much of it all that helpful for all you property buyers considering your future in the market. Hopefully this week’s topic will help you to find ways to get those negative feelings under control and put you back on track when it comes to evaluating your house buying position.

Firstly I think it is important to acknowledge that for many New Zealanders house buying in Auckland is no longer possible. Regardless of their television channel subscription habits they simply do not earn enough to be able to ever save the deposit for a home and their parents are not in a position to help out. Generalist budgeting advice is not only insulting to them but also pointless.

For these Kiwis who would love to own a home but who may never do so it is important to remember that there are other ways to invest for your future and for your retirement that don’t require saving a small fortune to put down a deposit on a house. The most important advice I can give you is don’t give up on the idea of saving and accumulating because it will still help you enjoy a wonderful lifestyle later.

You need to look for saving and investment advice that fits your personal situation and recognise that there are other ways of achieving your goals than buying a house in Auckland. This is difficult to accept I know when our culture is so geared to home ownership and you are being bombarded with information about what you are supposedly missing out on but there are other alternatives if you put the effort into learning about them.

And for those who can either afford to buy in Auckland or are looking to buy another house (perhaps as a rental) then please take the time to relax and think carefully about your decisions before you make them.

One of the biggest stress makers in today’s market is the pressure you are probably feeling to buy quickly before you miss out but being stressful when you make a buying decision is a sure fire way to overlook important considerations and increase your risk of making a big mistake. Yes the market in Auckland is still moving but it isn’t moving as quickly as it was and you do have time to do your research and get the expert advice you need. And of course the same is true of other popular markets outside of Auckland.

Sadly our media seems intent on adding pressure to buyers by portraying the market as a madly boiling pot which is about to explode but the reality is quite different. I don’t know if you watched the supposed reality TV show about families buying, renovating and selling houses for a profit which aired recently. It seemed that from buying a house 1 week they worked on it for 10 then sold it at auction just 1 week after they finished. Of course the reality was quite different. The houses were bought in September last year and the renovations were finished by Christmas. The houses then sat (maybe they were waiting for the market to pick up a bit?) until the marketing of the auctions started some time before the live shows were completed. And even then in 2/3rds of the auctions only a small profit was made. And the one large profit may have had quite a bit to do with the potential to subdivide the land.

So, I would encourage you to take a bit more time to ensure you have a long term plan, take a bit more time to check out everything you can about a house you might like to buy and definitely take a bit more time to get over the initial attraction you feel to a particular house and think about the potential that it has or hasn’t got just in case there is a change in the market at any time. I know it seems as if the Auckland market can only go up but believe me it has had downturns in the past and is sure to again in the future. That won’t be a problem if you are buying and staying put for the long term though so thinking long term is always a good idea.

Take control over your buying decisions and don’t let dramatic headlines and less than real television programmes influence the way you live your life. And please don’t make decisions based solely on what your best friend’s neighbour thinks or does or on single examples of someone making a fortune by doing something. Especially if that example is portrayed in the news as representing the majority of the experiences out there because believe me it won’t be.

The Auckland property market is expensive and difficult but every week people are buying great properties and making great decisions. Relax, breathe deeply and make sure you follow what you know are the right steps and hopefully you will be able to join them.

Robyn Forryan

Property Magic

0800 800455


Advising Auckland property buyers


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What is cladding and why should you care?

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Cladding is the name for the exterior material of a house. It is put up to protect the inside of the house and to make it look attractive. Rather like skin on your body.

The cladding is responsible for protecting the interior from weather elements such as wind and rain but doesn’t necessarily make it waterproof. That’s why you hear about and read about “weathertightness” not waterproofness.

According to the Department of Building and Housing “a building is weathertight when water is prevented from entering and accumulating behind the cladding in amounts that can cause undue dampness or damage…”

So the cladding helps prevent water getting in but if it lets some through it must be able to harmlessly escape or evaporate. There are a couple of ways to ensure this occurs – by using building paper correctly to act as a moisture barrier and to have a cavity or gap behind the cladding with drainage and ventilation. That way any moisture that penetrates the cladding can escape or evaporate.

Cladding that has no cavity behind it removes this protection and is likely to have problems at some stage with water being able to accumulate behind it creating a “leaky” property.

Houses can be clad in a variety of materials including

  • timber
  • fibre cement
  • metal
  • vinyl
  • brick
  • stone
  • concrete
  • plaster
  • composite materials

Most of these materials will last up to 50 years (some will be longer – think Kauri villas) and all will require some maintenance. The amount and frequency of this will depend on the material and the conditions the house endures in a typical year.

What is essential when considering whether to buy a property or not is knowing what the cladding material is, whether other home owners have experienced problems with this material previously, whether the house is built with a cavity between the cladding and framing and what repairs may need to be done in the near future.

To find these things out will usually require a building inspection as well as an examination of the building file held by the local council.

Buying the perfect house is not just about location, location, location – it is just one of the critical elements. Knowing the materials that a house is built from and how it is built is just as important and can have just as much impact on the value in the end.

Educate yourself on what claddings, cavities, flashings and ventilation are all about and save yourself from making a house buying disaster. And always consider getting a building inspection done before you proceed with a buying decision.

Robyn Forryan

Property Magic

0800 800455


Advising Auckland property buyers

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The hottest trends in housing today


As people attempt to deal with rising house prices around the world there are a number of innovations which are being seen more and more. All of them are right for some but none of them can be promoted as right for all. Have you considered any or all of these latest trends?

Prefabricated Houses

This covers a wide range of options but includes houses built from components that are built in a factory through to complete buildings. Their use is growing quickly in many countries.

Prefabrication is not new in New Zealand with most houses built with prenailed framing and roof trusses which are put together in a factory and delivered ready to be assembled quickly.

And we can’t forget companies such as Lockwood Homes which has been delivering prefabricated houses for a very long time.

The new generation of products are wall panels that are lined, insulated and have their exterior cladding and these are being used more widely throughout New Zealand.

So does prefabrication lead to more affordable housing? Yes it does and the reasons include less wastage of material, economies of scale in material costs, less time and less labour (an expensive part of the building process), accurate and measurable quality control and of course building is no longer as weather dependent which reduces the overall time frame for building.

Expect to see a gradual growth of prefabrication in house construction as more and more people look for ways to make housing more affordable.

Smaller Houses

Another trend that is growing overseas is the reduction in house sizes. These are seen as very environmentally friendly and the focus is on living simply but with everything you need.

Small houses in New Zealand are classified as between 37-90 square metres and they are usually designed with open plan living spaces and much less use of space-wasting hallways.

Overseas, homes are often smaller than this size with utilisation of existing small land plots being a key driver. There are also companies which specialise in providing flexible furniture solutions to make the most of every inch or centimetre of space available.

Another trend (particularly in the US) is that of “tiny houses” – basically a customised caravan on a trailer which is often designed to be self-contained and off grid. These homes are usually 10-15 square metres and would take quite a bit of getting used to I think.

If you are interested in checking out some smaller home ideas there is a show home in Papakura called the Smarter Small Home which you may find interesting.

Eco Houses

More and more buyers are hoping to find homes that are environmentally sound. This means efficient use of power and water (think solar panels and reusing rain water) as well as building with sustainable building materials.

Eco homes will need to be matched with smaller homes to make them more affordable to buy because a large eco home will be expensive but over the lifetime of the home (and your mortgage) the savings can be huge and this can make the difference in being able to pay those monthly payments.

Houses built in New Zealand use the Homestar rating system and new homes are usually built to a 3 star rating. Eco houses are built to a 6 star minimum and can go up to the 10 star maximum. They usually include solar panels, passive heating, high level insulation, LED lighting, rain water collection and a vegetable garden.

For those who want to reduce their footprint on the planet and provide a better future for their children and grandchildren this growing trend is likely to meet more than just their housing needs.

Being thoughtful about your housing choice could give you more opportunities to be able to own a home which doesn’t create a lifetime millstone around your neck or your lifestyle.

Robyn Forryan

Property Magic

0800 800455


Advising Auckland property buyers


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‘P’ contamination threatens home buyers and investors


A recent article about a case headed for the Tenancy Tribunal got me thinking again about methamphetamine and its impact on families who will never be involved in its manufacture or consumption but will live with its dangers.

These families are the innocent home buyers and tenants who will find they are living in a house that has been contaminated by ‘P’.

In the case I read about the property was tenanted when it was put on the market for sale. A smart potential buyer had it tested for the residue left by methamphetamine and discovered it was contaminated.

That was a huge saving for the buyer because the cost of decontaminating a house can be huge depending on the reason for the contamination and also the extent.

By having the house tested before buying they put themselves in a position of having all the facts and then knowing what the consequences would be if they went ahead with the sale.

It is possible and highly recommended to put a clause into a sale and purchase agreement that the sale is conditional upon a satisfactory result from a methamphetamine test. That means that the buyer only needs to pay for a test if they have agreement on the price to be paid for the property.

In the case of a property being sold by auction the testing would need to be part of the due diligence done by the buyer before bidding on the property so money would need to be spent before they knew the property was theirs.

There is another family who say they have been impacted by this particular testing – the tenants living in the house. They apparently had no idea they were living in a contaminated house and are now looking for remedies via the Tenancy Tribunal.

As yet there are no facts established in Court about this case but there will be many instances of tenants living unknowingly in contaminated houses with their health potentially being compromised. These will be families who have caused no harm themselves but who have rented properties where others have broken the law and left behind a dangerous house.

Currently there will be landlords who genuinely do not know that their property has been contaminated but there may also be others who do know but rent them out regardless.

What needs to be done in New Zealand to protect house buyers and tenants?

Firstly, I highly recommend that all house buyers get properties tested before proceeding with a purchase. Costs have reduced and compared to the price of a house it is miniscule. It should just be part of the checking done before committing to this huge purchase.

Secondly, I believe that all landlords should have their properties tested at the end of every tenancy so they can offer proof to their next tenants that the house is safe for the people who will be living in it. Publicising that you test between tenancies might also discourage those who use the drug from applying for your property.

And if the results show a problem? Well that’s when you need to get the police and the courts involved if necessary and to ensure that the property is properly decontaminated before further harm occurs.

Robyn Forryan

Property Magic

0800 800455


Advising Auckland property buyers


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