Real estate is a dream come true for some people but for others it's a nightmare. Jo-Marie Brown looks at where the Western Bay's real estate market is heading - and why
Novice real estate agent Steve Scrace was warned about how tough the property industry could be. But within three weeks of qualifying as an agent in Tauranga, he sold his first house and hasn't looked back since.
"I was a bit lucky really," the 53-year-old now jokes about the September sale. But no matter which way you look at it, the Western Bay's property market is one of the hottest in the country.
Mr Scrace - who owned a book store in Tauranga before embarking on his new career two months ago - knew from his own experience that there was money to be made.
"I bought four houses this time last year as investments and they've certainly gone up in value in the last 12 months" he said.
His amicable dealings with real estate agents during those purchases, along with his desire to remain self-employed, finally convinced the father of two to give the industry a go himself.
But for many first-home buyers or residents new to the area, Tauranga's real estate market is more of a nightmare than a dream opportunity.
Since January 2000, median house prices in both the city and Mount Maunganui have increased 56 per cent.
A standard three-bedroom, brick and tile house in a good area is now virtually impossible to come by for less than $250,000.
Million dollar property sales - which were unheard of five years ago - now occur every week.
At an auction last weekend, for example, five bidders pushed the price of a 1950s two-bedroom bach bordering Mount Maunganui Golf Course to $1.185 million.
The family who owned the modest yellow house were stunned. The toilet, bathroom and laundry were all squeezed together in one room and they had been hoping to get around $900,000 for it.
Mr Scrace has already made three sales in his short real estate career and agents across the region, he said, were desperate for more listings.
"I walked down one street door knocking the other day and was told I was the fourth salesperson to have called by that week."
But among all the excitment, some first-home buyers are now giving up on the Western Bay altogether and moving away to more affordable areas of the country.
One Pillans Point couple, who did not wish to be named, have a combined income of $70,000 a year but cannot find an old villa on a decent size section in the region for less than $250,000.
"The bottom line is that we cannot find the house we want for the money that we're prepared to pay.
"It's left us with no other option but to move on," the woman said.
So what sort of market should Western Bay house-hunters and vendors be prepared to face over the next 12 months?
In short, a stable one.
Real estate agents, mortgage brokers and valuers agree that prices are unlikely to rise any further in the short term - but they will not drop either.
Gil Beadle, marketing manager for both Eves and Bayleys real estate groups, says Tauranga and the Mount remain growth areas. The economy is good, unemployment is down and people are still flocking to live here.
"But buyers now are looking for a house that's absolutely right for them, rather than saying 'gee whizz, I must get into the market right now' and preparing to compromise. They've got a wider choice," Mr Beadle says.
"Vendors need to be realistic and recognise that there's not the scarcity premium that was given to some properties in 2003. But if buyers are sitting waiting for the bottom to drop out of the real estate market, they shouldn't expect it to happen here."
Neville Falconer, past-president of the Waikato/Bay of Plenty Real Estate Institute and principal of Tauranga's LJ Hooker, says the origins of the region's recent property boom can be traced back to 2000/01.
Sales began picking up over that time as more land became available at places such as Pyes Pa, Papamoa, Oropi, Bethlehem and Welcome Bay.
The following year, prices started to rise rapidly and by last year, the market had reached fever pitch.
While the number of houses and sections being sold has now eased off slightly, Mr Falconer says prices will remain steady because of the Western Bay's population growth and strong economy.
The real estate veteran has seen this growth cycle occur three times during his 18-year career in Tauranga.
"Each time with increasing frequency. But one would have to be pretty bold to say how long it will be until that growth curve starts again," he says.
As far as Mike Pero mortgage broker Michelle Towersey is concerned, the sooner a person can take the plunge into the local property market, the better off they'll be.
"You've got to start somewhere," the Tauranga businesswoman explains.
"The same issues have always been there - like being able to save enough for a deposit - but the goalposts are now moving every year.
"The fact that it's becoming more and more expensive is making it harder at that entry level. But once you're on the cycle and in the Tauranga market, you can take advantage of that capital gain and you're away."
Ms Towersey said the average-sized mortgage in this region was now $180,000 - up from $155,000 at the same time last year.
First-home buyers obviously face a much tougher battle, as they do not have the benefit of selling an existing property to make up the extra cash needed to secure a house. Banks are now bending over backwards to lend people money but with the Western Bay's high prices, a reasonably high income is required to pay any mortgage back, Ms Towersey said.
For example, to buy a $250,000 house in Tauranga, the minimum deposit required is 5 per cent (or $12,500).
To pay back the mortgage over the maximum 30-year term at current interest rates, weekly repayments of $362.56 would be needed.
In order to do that - and still have enough money to live on - a two-parent, two-child family would need to earn at least $50,000 a year, Ms Towersey calculates.
"I guess a lot of people think that they could rent a house for a lot less than $362 a week but if you're renting you don't have that same emotional stability that home ownership brings.
"It's part of our Kiwi culture and capital gains are there to be made." Bay Valuation director Bruce Fisher said to buy an average 10 to 15-year-old house in a good location around Tauranga, people could now expect to pay an average of $280,000 to $340,000.
Locations close to the city centre, near the waterfront or that offer a combination of rural and residential lifestyle blocks, were currently the most popular.
Mr Fisher recommended that buyers sit back and take professional advice before rushing in and making an offer on a property so they would not wind up paying too much.
But whatever the future holds, Neville Falconer and others involved in the real estate game agree that the Western Bay will always enjoy a place in the sun.
"I think there's very positive underlying factors in Tauranga," Mr Falconer says.
"If there's to be an area of New Zealand where one would have to put their stake in the ground and say 'I'll hang my hat here and hope that works well', Tauranga has got to be the place."
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