Lift expected in property market

By James Fuller

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With interest rates at record lows and the housing market set to bounce back, real estate leaders say there has never been a better time to build or buy.

Those in the home building industry, such as GJ Gardner Sales Consultant Bruce Matthews, have reported an upsurge in activity and contract signings.

"I think the market will really take off in the next six months and I feel we're on the brink of another strong three-to-four year run. Auckland's taken off, it's gone berserk up there and we're usually three-to-four months behind so it's definitely coming.

"It's an exceptionally good time to build. Bank interest rates are the lowest in 17 years, the banks are lending again and building is cheaper than buying. For example there are sections available in the Lakes for $160,000, I could build a property for $250,000 and you would be walking in the door in six months for $410,000. You can't buy a comparable house in the Lakes for $410,000," Matthews said.

Ross Stanway, chief executive of Realty Services which operates Bayleys and Eves, said recent media coverage predicting stable, or even falling, interest rates were good news for the property market.

"Banks are competing aggressively for borrowers and there's certainly a lot more activity and positivity out there. Property prices have bottomed out and in some cases are starting to edge up again and we are seeing that in our region, which remains a very popular one."

Simon Martin, managing director of Harcourts Advantage Realty, said the current climate was an ideal one for conventional buyers to enter the market.

"The low interest rates are a huge factor, the best we have seen in many years and house prices have come back to a level where I would say there was never a better time to buy. We have just sold a property in Sutherland Street, Brookfield, for $178,000. Now yes that property needed some work but it's an indication of the levels you can enter the market, and there are plenty of homes in the $300,000 and $400,000 range.

"People have become desensitised to the European situation, they're a bit over it I think. Things have been pretty depressed since 2008 and I think people are just saying it's time to get on with life. The momentum is definitely building and the stock is up around the 2500 mark in the Papamoa, Mt Maunganui, Tauranga area so there's plenty of choice."

Build or buy?Mike Warren, managing director at Jennian Homes, said an immediate increase in value could be a motivating factor to build.

"If you buy a home, the day you walk into it it's worth what you paid for it. If you build your own, often the day you move in it's worth $10,000 or maybe $15,000 more than you paid for it."

Getting exactly what you want and a home made from the latest building materials was a selling point for Lorraine Oates, building consultant at Classic Builders.

"A lot of us are living in damp, cold, unhealthy homes and it causes a lot of stress. If you build a new home it has double glazing and the latest insulation materials. You're getting a brand new home made with modern materials."

Oates added that the slim margins building firms had been operating at to compete in a slow market could also be coming to an end.

"When things get busier, as they will, the supply and demand effect comes into the equation. Most of the building firms are working off very slim margins at the moment but as demand increases so will those margins."

Jennian Homes' Mike Warren added a note of caution: while it was a good time to build, investors should always be careful when choosing between building firms.

"You can build a 200 square metre home for $1000 per square metre or $1500 per square metre - it's all about what you put in it. That's where square metre rates can be very misleading. I would say to be very clear on what you want, do your research and do an apples for apples checklist, we encourage all of our clients to do that."

Realty Services' Ross Stanway said section prices had dropped back to the extent where they represented an attractive prospect for some but not necessarily better than existing homes.

"There is a good selection of sections available, the Lakes is a good example of that. But I would say the price adjustment we have seen over the last two or three years in the existing homes market means there are some very attractively priced properties compared to new builds. It is really down to the individual and whatever suits their needs."

Harcourts Managing Director Simon Martin said he felt there were advantages to buying over building.

"The immediacy. You don't have to wait. That's a big one. You can see what you're getting and move in immediately. Some people don't want to take that risk or want the potential hassle of building."

Finding properties in the areas you wanted was another.

"When you buy you get to buy in the established areas that are already developed. For example, if you wanted to be close to the Mount, it is never easy to find a section in that area or in central Mount to develop whereas you can buy established property there. A lot of the time when you are buying land it will be in a new development and you have to wait a few years for it to become established."

Those building have also been warned to be wary of cheap section prices that could have higher costs associated with them to develop, such as sloping land or difficult access.

Land and homepackagesLand and home packages were increasingly being offered by many builders as a way of "selling the dream" said Alison Morison of Fowler Homes.

"It's a starting point, people can see what they can get for their money and then alter those specifications to suit their own requirements."

Fowler Homes had a range of properties available in the Lakes, from a three-bedroom 158 square metre home for $436,100, to a two-level 181 square metre three-bedroom property, on an 850 metre section, for $526,500.

Generation Homes' Sales Consultant Debbie Kennedy said her firm had packages available in Milford Estate, Papamoa, starting at $359,000 for a 117 square metre two-bedroom, one bathroom home. At the other end of the scale there were 235 square metre four-bedroom homes in River Run, Bethlehem for $689,000.

In the Western Bay of Plenty, developer Mark Mayston had turned a former Katikati kiwifruit orchard into the 122-section, three-stage, Middlebrook development. Mayston said the decision to drop some section prices from $150,000 to $115,000 had resulted in seven sales in early 2012 and added that land packages, starting from $349,000 for a three-bedroom home or $355,000 for a four-bedroom, were still available.

Something differentLockwood Tauranga's Contracts Manager Soren Antonsen said timber homes were slightly more expensive than conventional ones but the 'tie-rod' construction employed made them safer.

"Essentially it's a box, with the steel rods interconnected through the frame making it incredibly strong and resistant to earthquakes and high winds. There wasn't a single Lockwood home that came down in the Christchurch earthquake.

"And we're actually getting people who have moved to Tauranga from Christchurch coming back to us because of that reason."

Antonsen said, depending on specifications, the cost per square metre of Lockwood homes ranged between $1650-$3000.

"It's more expensive but that's not margin - it's down to material and the fact that there's more to making these homes than conventional ones. There is a lot of timber used and you have to pay for that somehow. We are not trying to compete on price, because we can't, but it really depends on what you want from your house."

Earthcube's founder Chris Brauchli brought a background in super yacht, resort, restaurant and hotel design to his new firm. He said Earthcube's homes used the strength of recycled shipping containers to make environmentally sustainable, relocatable homes.

"We don't use GIB or MDF or materials like that and the result is like a super yacht in a box. When I came into the industry I was hoping to build really cheap houses but then you look at what you're doing and I wanted the build quality to be such that it lasted 100 years and not 10-15. So we looked at a normal house, identified the weak points and eliminated those elements.

"We're building in the $1600-$2000 per square metre range. Now whilst that's not the headline low prices the normal builders promote I would say that to get to the same quality of what we're doing it would cost you $3000 per square metre if you were building conventionally. So our homes are exceptional value for the quality you're getting."

The forecastRealty Services' Ross Stanway said that ultimately "it didn't have to be a contest between build or buy". He said whether people bought or built, it was all good for the housing market.

"The building market has been chronically slow in recent years and we need those new homes to come into the housing stock."

Harcourts Simon Martin said there were strong indications that would be happening soon.

"As sure as night follows day the building market follows the housing market six months later.

"We started to see an uplift in November so the building firms should begin to see that pretty soon if they're not seeing it already."

- BAY OF PLENTY TIMES

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