NZ 1st homebuyers are ScReWeD...

[POSSUM THE CAT]

Minimoke Just a question why is a lot of Carters timber advertised as Australian. In the 1990s I was buying Australian retaining timber from Carter Holt for approximately 60% of comparable NZ retaining timber. But of course Australia does not grow trees and none of companies mentioned have Australian operations and G J Gardener and Hallmark homes are just little twobit operators that have no buying power. And some of the premium NZ brands mentioned are consider very low class by Australian Standards

[minimoke]

Minimoke Just a question why is a lot of Carters timber advertised as Australian.

I have no answer to that. Perhaps we export our logs, the Ozzies add value send them back as rough sawn and dressed and we pay a premium. CHH have loads of timber mills locally so I woudl have thought they would chop a pine down in NZ for sale in NZ

[upside_umop]

House prices wont come down so much?

Some things that might bring down new home costs:

*Excess labour
*Declining commodity prices
*Loosening of red tape including RMA

Then again...first home buyers arent always looking for a 'new' house, are they?!

Another thing that will bring first home buyers house prices down:

*Section prices.

I can't believe how expensive sections are...peoples price expectations are way beyond reasonable.

*Properties (sections only) fetching over $200 k in mediocre areas in Christchurch. Not even large sections. Is this reasonable?

When land prices tank further, first homes will also become cheaper. Theres plenty of scope for that.

Although interest rates are falling (OCR) watch for banks rates to halt as around 60% of overseas funding is renewed in the next 6 months! Ouch! Around half of the banks financing in NZ (excluding kiwibank, sbs) are from overseas sources. Given international funding has dried up, and higher deposits have been installed watch for even further downside. Unemployment will rise, confidence will be lost further and watch the slide

My friend is in real estate...hes finding it reasonably tough at the moment. He sold a property but failed on finance. Listen to this - the bank valuer went to property and failed it because it had a powerline going over top and said that it wasnt worth what it had sold for! Incredible....this is what banks are doing now, tightening right up. Gives us first buyers lurking plenty of time.

Heres an interesting article....read the last line.

"Tougher lending has silver lining for home-buyers"

http://www.stuff.co.nz/4777688a13.html

[minimoke]

I can't believe how expensive sections are...peoples price expectations are way beyond reasonable.

Well, you don’t just get a piece of land and stick a house on it. Firstly you have to buy the land and the land seller has an expectation that there is reasonable value in it. The value generally has to be higher than its previous use like market gardening or light stocking. The council has its hand up early for subdivision consent fees and here you will have to tame the RMA. Then you have to put in roads, footpaths, sewerage , street lighting, water, phone, sometimes reticulated gas. Council charges for this might be add up as it does for storm water. Also leave a bit aside for community reserves or other community services which can’t be on-sold. Add in some earth works - a subdivision down the road from me was build on an old land fill and they spent a couple of years working the land – still not nearly long enough for me to want to buy into it. But even then earthworks will be need to get the subdivision looking reasonable and of course surveyor and engineer fees. If you are being a bit flash like Pegasus town you need to build a lake and associated pumping costs, wave generator and sand importation. They are also planting 15,000 trees. Add in legal fees for getting titles sorted and then don’t forget a marketing budget and then real estate agent fees. Somewhere in there will be financing costs. Add a margin for risk and for profit which is then balanced against supply/demand to work out a final sale price.

That’s all for just buying a section in a new subdivision.

If you want to buy a section in an established suburb you have to pay for all this value but also a premium for knowing what you are buying into. For example if you buy a section in Fendalton you are buying into a reputation of “Blue ribbon, Leafy suburb” with “nice” neighbours. If you are buying into Aidenfield it has a current reputation which I suspect will evolve into Christchurch’s version of Coronation Street. You know the houses value of your neighbours in an established subdivision but look at how the covenants change over time for new subdivisions which aren’t selling sections.

[minimoke]

My friend is in real estate...hes finding it reasonably tough at the moment. He sold a property but failed on finance. Listen to this - the bank valuer went to property and failed it because it had a powerline going over top and said that it wasnt worth what it had sold for!

No surprise there. Even if I was a first home buyer there is no way I would buy under those high voltage lines at any price. They might be OK to live under (but that’s questionable) but at some point you’ll have all sorts of challenges with the resale – as experienced by the current owners. A useful lesson for your friend as well- he might find that there are easier properties to sell that he can put his time into.

[fungus pudding]

House prices wont come down so much?



My friend is in real estate...hes finding it reasonably tough at the moment. He sold a property but failed on finance. Listen to this - the bank valuer went to property and failed it because it had a powerline going over top and said that it wasnt worth what it had sold for! Incredible....this is what banks are doing now, tightening right up. Gives us first buyers lurking plenty of time.

A valuer doesn't pass or fail a property. He values it. If the purchaser has contracted subject to finance only, it doesn't really matter what the valuer says. As long as the valuation is sufficient to allow the borrower to complete the purchase, then he must do so. e.g if a purchaser with 150k of his own enters a contract to purchase for 400k, and the valuer assesses the property at 300k, the buyer must complete the purchase at 400k because normally he can still borrow the 250k shortfall. (Although in practise, many weasel out on a low valuation, and the costs of enforcing the contract often mean he gets away with it.) It's a daqngerous game, because even if the bank declines the loan, the vendor can leave money owing as a second mortgage which the buyer can't reject provided the vendor's terms are no more harsh than the purchasers intended intended lender. So it's necessary to have a finance clause properly drafted, and if you are relying on anything else other than simply 'can I raise the money' then your special clauses should stipulate exactly what those requirements are.

[Financially dependant]

Will the value of property drop as much as the States??

http://www.interest.co.nz/ratesblog/...k-by-feb-2011/

looks like it!

[minimoke]

Will the value of property drop as much as the States??

http://www.interest.co.nz/ratesblog/...k-by-feb-2011/

looks like it!

Bernard is a real doomsayer “House prices will drop by 30%” is his mantra. Earlier this year he was saying this is what we could expect to loose this year. He is beginning to remind me of Charles Drace / Drake(can’t remember his last name) who was a supposed property expert who banged on for years about house price dropping – during a time when prices just continued to escalate.

What Bernard is doing is creating a perception that prices will drop and this will become his reality – because somewhere he will find evidence to support his view. Unfortunately that evidence hasn’t come to light and that’s why he is having to do a presentation which compares apples (NZ prices) with a bag of vegetables (US over supply, non recourse loans and housing affordability ) – all packaged up with nice graphs that are forward projected over different timeframes. He’s really trying to conjure something up. And he’s shifted his view to the end of 2009.

So to Bernard’s key points. Do we have a housing over supply. In some sectors like apartments and destination lifestyles perhaps. Other wise no. We might actually end up with an undersupply if all the expats come home. Do we have dodgy subprime loans – no, but Westpac was getting close with its 110% loans. And banks are tightening up their loan ratios, insisting on valuations and we’ll soon see income ratios looked at. Do we have housing unaffordability – yes, but lets look at the impact of significantly dropping interest rates.

[upside_umop]

Well, you don’t just get a piece of land and stick a house on it. Firstly you have to buy the land and the land seller has an expectation that there is reasonable value in it. The value generally has to be higher than its previous use like market gardening or light stocking. The council has its hand up early for subdivision consent fees and here you will have to tame the RMA. Then you have to put in roads, footpaths, sewerage , street lighting, water, phone, sometimes reticulated gas. Council charges for this might be add up as it does for storm water. Also leave a bit aside for community reserves or other community services which can’t be on-sold. Add in some earth works - a subdivision down the road from me was build on an old land fill and they spent a couple of years working the land – still not nearly long enough for me to want to buy into it. But even then earthworks will be need to get the subdivision looking reasonable and of course surveyor and engineer fees. If you are being a bit flash like Pegasus town you need to build a lake and associated pumping costs, wave generator and sand importation. They are also planting 15,000 trees. Add in legal fees for getting titles sorted and then don’t forget a marketing budget and then real estate agent fees. Somewhere in there will be financing costs. Add a margin for risk and for profit which is then balanced against supply/demand to work out a final sale price.

That’s all for just buying a section in a new subdivision.

If you want to buy a section in an established suburb you have to pay for all this value but also a premium for knowing what you are buying into. For example if you buy a section in Fendalton you are buying into a reputation of “Blue ribbon, Leafy suburb” with “nice” neighbours. If you are buying into Aidenfield it has a current reputation which I suspect will evolve into Christchurch’s version of Coronation Street. You know the houses value of your neighbours in an established subdivision but look at how the covenants change over time for new subdivisions which aren’t selling sections.

You certainly make it sound like a lot.

Sections sold in Cromwell in 1995-1997 for between $10,000 - $15,000.

So whats changed? Land supply obviously has dried up a little, regulation, and the most important is like you say...expectations.

People expect to get $200k for a section when in reality 10 years ago, they were selling for less than 1/10th that price.

Thsi is ridiculous and it won't 'continue..' There will be cheaper sections and then underlying cheaper houses

[upside_umop]

A valuer doesn't pass or fail a property. He values it. If the purchaser has contracted subject to finance only, it doesn't really matter what the valuer says. As long as the valuation is sufficient to allow the borrower to complete the purchase, then he must do so. e.g if a purchaser with 150k of his own enters a contract to purchase for 400k, and the valuer assesses the property at 300k, the buyer must complete the purchase at 400k because normally he can still borrow the 250k shortfall. (Although in practise, many weasel out on a low valuation, and the costs of enforcing the contract often mean he gets away with it.) It's a daqngerous game, because even if the bank declines the loan, the vendor can leave money owing as a second mortgage which the buyer can't reject provided the vendor's terms are no more harsh than the purchasers intended intended lender. So it's necessary to have a finance clause properly drafted, and if you are relying on anything else other than simply 'can I raise the money' then your special clauses should stipulate exactly what those requirements are.

Now your getting nit picky. All i said was the bank failed them on finance because their valuer disagreed with the purchasing price. Im not even bothering to read after your first sentence because you obviously misinterpreted what I had said.