NZ 1st homebuyers are ScReWeD...

[minimoke]

"I just bought a new house that if i worked for nothing i couldnt build it cheaper. I know what the building costs are"

Hi Duncan,

Question from someone looking to buy a house in the not too distant future.....what is the current rule of thumb as to the cost of building a house?... so that I have a rough idea if I am looking at something it is below replacement costs.

thanks in advance

If you were in Christchurch you’d be looking at around $1,500 a square meter for an average speced house.

[duncan macgregor]

If you were in Christchurch you’d be looking at around $1,500 a square meter for an average speced house.

How long is a piece of string. Its like comparing two cars, one a rolls royce, the other a ford. It depends on so many variables, as to its worth. You cant say $1500 a square mtr is a good or a bad price. It might be a complete bargain, or it might be overpriced, depending on what the make up is.
It takes experiance to understand what each feature costs to build. If for instance its a colour steel roof that would cost lets say $10000 to replace, then the new roof is valued at $10000 but if its 16 years old you can value the roof at $5000. Thats how you go through a property and value each item against its new replacement cost. Macdunk

[lakedaemonian]

I think in this market, I'd be offering far below replacement cost for the home(the section is dependant on other factors).

While I do agree that building/compliance costs are exploding, that does not mean they will sell for a comparable or greater value.

I can build a widget for $1.00, but if the market/potential customers are only willing to pay $0.70c for it....either I have to have the risk profile AND CAPITAL to wait until the market accepts my higher price, or I have to be willing to accept the lower price now or when my capital runs out.

I think in the building game, where "other peoples money" is being used to finance spec construction, spec builders can only hang on so long before the carrying costs bury them.

In a REALLY tough investment environment, even airlines can become quite juicy targets for acquisition.

Back in the 1970's several US airlines with huge plane fleets were valued at less than the replacement cost of a mere handful of aircraft...pennies on the dollar in terms of long-term asset value due largely to a gigantic cash crunch and a short-term pounding........not that I would ever invest in airlines

In the short-term I think replacement cost is best used as an example of how you can find long-term value, but only buy purchasing at a substantial discount to replacement cost.

We just bought a beach house where I believe we paid a fair price for a substantial and private beachfront section......with a very well built and mainatained home thrown in "for free".

If we had only purchased the section AND had to have a home built to a similiar spec TODAY....we'd be out at LEAST an additional $300k.

Having a home built today is insanity.....when deals on existing homes priced far below replacement cost are just beginning to look intrigueing.......I think once the "catch a falling knife syndrome" has ended in the next 12-24 months those that have been patient will have found amazing value for dollar.......but that "value" may not present itself in cold cash for a decade.

The builders I know working in both residential and commercial have seen their work backlogs disappear......

Just my 0.02c

[CAM]

Thanks for the info people. Gives me plenty to think about. Might have to do some research into house building costs to give me a clearer idea of the components you get for the $. I am in no real rush now....have just found out child number 2 is on the way....so we will be going back to one income in 7 months time! So plenty of time to do some research and try and get the deposit as big as possible.
Also need to do some research on the various local markets we will look to buy in. Either here in the Waikato or over in the BOP. Will also go back and read this whole thread at some stage.

cheers
Cam

[duncan macgregor]

Good luck with it all CAM we have all been there one way or another, exciting times ahead.
From a builders perspective, to someone in a different occupation, i will give you a list of doos and donts to take into account, when the time comes.
1,never buy a house that has no code of compliance.
2,always have a builder check it out.
3, leaky homes were all built between 1974 up to 2006 mostly all were spanish style plaster over a timber frame. Dont even think about one of those in that era.
4,Do a REINZ course from home at nights to learn how the legals operate. Its not costly and its a 99.9 pass rate.
5, Work out the life span of each product to see when you are likely to replace it.
6, Remember when buying that you will most likely sell when your kids are at the leaving home age.
7 Your first home should be bought with your kids in mind. Your second home is with all the things you couldnt afford in your first home.
8, When the market turns, which it always does, your saving for a deposit wont keep up. be very watchfull the market will come back later with much higher rate than the inflation rate. It is a long term investment.
I always take the risk out of nasty surprizes by locking in an interest rate that is affordable in the short to medium term, otherwise you gamble with something you might not be able to afford. Who knows what tomorrows market will do, buy at your leasure with your price, sell exactly the same way regardless of what the so called experts might say. Macdunk

[Crypto Crude]

Good luck with it all CAM we have all been there one way or another, exciting times ahead.
From a builders perspective, to someone in a different occupation, i will give you a list of doos and donts to take into account, when the time comes.
1,never buy a house that has no code of compliance.
2,always have a builder check it out.
3, leaky homes were all built between 1974 up to 2006 mostly all were spanish style plaster over a timber frame. Dont even think about one of those in that era.
4,Do a REINZ course from home at nights to learn how the legals operate. Its not costly and its a 99.9 pass rate.
5, Work out the life span of each product to see when you are likely to replace it.
6, Remember when buying that you will most likely sell when your kids are at the leaving home age.
7 Your first home should be bought with your kids in mind. Your second home is with all the things you couldnt afford in your first home.
8, When the market turns, which it always does, your saving for a deposit wont keep up. be very watchfull the market will come back later with much higher rate than the inflation rate. It is a long term investment.
I always take the risk out of nasty surprizes by locking in an interest rate that is affordable in the short to medium term, otherwise you gamble with something you might not be able to afford. Who knows what tomorrows market will do, buy at your leasure with your price, sell exactly the same way regardless of what the so called experts might say. Macdunk

Good advice number 1 through 7... poor form on number 8...
Look mad dunk... when your renewal comes up, go floating and you can pay me the difference between the fixed rate and the floating rate (which is 100% likely to keep falling)...
If its a reversal, I will sign a contract with you and pay double the difference...?
A few pages back I left the web page details for me to be contacted on, or the 0800 number for you to call me on.... hahaha....
Dont pay the banks... pay me instead....
...
Man I wish I coul short houses... damn, Id short sell one right now if I could....
your mate... shrewd...

.^sc

[minimoke]

Might have to do some research into house building costs to give me a clearer idea of the components you get for the $.

Heres a starting point for you – check out all the features used to sell a new home. http://www.stonewood.co.nz/pages/new-home-features.aspx. There’s a huge pick list in there which makes it hard to come up with a valuation as Macdunk has suggested.

Builders know about building stuff but do they know the costs associated with, say programmable timers. Many builders will send your plans to a Quantity Surveyor (often within firms like Placemakers and Carters and they will come up with a PC sum – like $15,000 for a kitchen. They will also send the plans to their subbies – a drainlayer will come up with a price for the drains - say $15,000 for stuff which is below ground which you don’t get to see. So you may end up with $350,000 to build a 230sqm home. The moment you start fiddling with the plans you can guarantee the PC Sum to go up. Small builders won’t necessarily get as sharp a price as a large building firm – but they may not be far off. The building supply firms are having to carry greater credit risk now .

So as a local rule of thumb you can build for $1,000 a SQM for a low spec house, $1500 for a well speced house and if you have $2,000 plus a sqm you will end up with something pretty special.

[foodee]

Cam
You might find this of use:-

http://www.dbh.govt.nz/bofficials-es...building-costs

cheers

[Dr_Who]

Man I wish I coul short houses... damn, Id short sell one right now if I could....
your mate... shrewd...

.^sc

You can. Just short CDI, ING, KIP etc.

Looks like cost of construction is coming down big time. Maybe time to built myself a house. Na, only joking. Building a house is just a total headache, done it before and will never do it again, unless I have gone completely bonkers.

10,000 out of a job as housing slumps

Almost 10,000 construction workers have lost their jobs in the past year as the downturn in the housing market bites.

http://www.stuff.co.nz/4647505a13.html

[duncan macgregor]

The thing to remember when you say 10000 workers lost their jobs is that they either get out the trade or go overseas. A very large proportion of that number is lost to the industry never to return. when the market turns which it always does, this will inflate house prices at a much greater rate than ever before.
With all the lack of knowledge in the industry by the rule makers inflating new building costs added to this home ownership will be confined to the rich. I can see a major crisis looming with unaffordable rents and house prises resulting in a great exodus overseas by our young people who will be replaced by rich migrants. Macdunk