Picky buyers sit tight

Returning Kiwis may need strong persuasion to spend their yen and pounds on real estate. GILL SOUTH reports.

If you are planning to sell your house in the pre-Christmas season, you should know about a hard-to-please group of buyers out there. Be warned, they will wait patiently - up to 12 months - for vendors to get really desperate before making an offer, and they are looking for bargains.

This recalcitrant bunch can be separated into three groups:

People returning from overseas with their foreign currency;

Baby boomers looking for investment properties for their retirement, who do not expect to buy until the next property cycle;

Independent thinkers who want to avoid the enormous mortgages which they think have restricted their friends' lives.

Would-be buyers who arrived within the last year with British pounds, US dollars or another foreign currency are not happy. When they got here the dollar was higher than they expected so they didn't convert their money, expecting the dollar to fall.

But, instead of going down, the NZ dollar is rising, hitting a historic high this week of US71.51 cents, and there is no end in sight.

The Bank of New Zealand's chief economist, Tony Alexander, warns that people waiting for the dollar to go below its average will have to wait until 2006 or 2007. Although it should reach its long-term norm at some stage next year, he adds.

Meanwhile, people like lawyer Ed Potter, who returned to New Zealand from London in 2003, are shocked by "over-inflated housing prices" and do not believe they will last.

Keen to move to Grey Lynn or Freeman's Bay, Mr Potter says he is prepared to wait months to find the right deal. He is doing his research and looking at houses where the vendor has to sell quickly, or at estate sales.

If he does buy, it will be a tired 1980s townhouse; he refuses to "buy the perfect Ponsonby villa" and, with a flat in London, does not want to overexpose himself.

"I saw a small apartment the other day in Freeman's Bay and it went for $710,000. It was a ridiculous price," he says.

Matt Buckley, an executive who is back from several years in Tokyo, is looking for a lifestyle property just out of town.

He recently put a very low offer on a house that had been on the market for some time.

"I have to be much more aggressive when I make a bid. I have got to save enough on the deal to pay for the hit that I take on changing my yen into dollars. That amount has to be taken off the purchase price," says Mr Buckley, who is happy to rent for as long as it takes.

The competitive rental market is proving an attractive alternative to potential home buyers. It is a more attractive route for Aucklanders who could easily afford to buy, but who refuse to burden themselves with a hefty mortgage.

Paul Ferrer, 40, a marketing executive for a multi-national company, is renting in Parnell and is resisting pressure from his friends to join the mortgaged brigade.

"I think we live in a unique city, but I also think it's priced itself out of the market," he says. "I know people who put down $200,000 to $300,000 on a $1.1 million house and are borrowing $800,000 to $900,000 at a huge cost.

"They are paying about $90,000 just in interest. How many people can truly afford to be in that league?"

Mr Ferrer is not saying he would never buy, but "it would have to be affordable and not need any work. I have heard too many stories from people whose bathrooms were meant to cost $20,000 but ended up costing $50,000."

So, homesellers, you are warned. Many buyers out there are quite happy to walk away from a deal they think is over-priced, which means your agent is going to need all the skills they possess to sell this season. Good luck.

- THE HERALD ON SUNDAY