KEY POINTS:
Hundreds of New Zealanders are offloading their holiday homes and seaside baches - and some are going to desperate measures to sell up.
Estate agents report bargains galore for coastal property investors, with some homes and baches selling below government valuations.
Economic commentators debate the benefit of owning
a second home in a holiday hotspot.
Some say it makes no economic sense and is "nuts" in the current climate, while others say there are investment opportunities.
In the Far North, Professionals Mangonui agent Michael Healy concedes sales are down, but says vendor interest is high.
Healy says people who bought four or five years ago, when prices were lower, were making a good return on their property when selling.
But less lucky were the vendors who bought 18 months ago.
"There are some instances where people are having to sell for less than they bought it for. I am definitely an optimist but I don't think we've hit the bottom of the market."
Carol Mosen's Doubtless Bay investment property has been on and off the market for two years.
Mosen, who says she is sick of the mortgage, wants $415,000 - almost 12 per cent below its $470,000 valuation.
Mosen, a mortgage broker, has seen fellow holiday homeowners succumb to the mortgagee sale, and says coastal property "is not the flavour of the month".
But for those who can afford it, the lifestyle is attractive.
In the Coromandel, Pauanui real estate agent Lottie Ashwell has noticed sellers dropping prices.
One property has dropped from $525,000 to $479,000, despite a valuation of $545,000.
Another was listed for $799,000, but the owners are now accepting offers from $700,000 upward.
Ashwell blames the downturn on poor winter weather.
In February, TradeMe had 899 holiday homes for sale; last month there were 571.
Brendon Skipper, TradeMe head of property, says the site recorded a 3 per cent drop in prices for holiday homes between February and August.
Waiheke Real Estate agent Kevin Martin says the winter was the quietest he has had in 24 years of selling on the island.
There were only three sales in July, he says.
On the Kapiti Coast, north of Wellington, agent Eddie Winkle says while more people were selling their baches, property sold in the past 18 months had "generally not gone up in price".
"It's a second house for most and the equity isn't as much as it was."
Further north, Raglan agent Julie Hanna says the town is gearing up for buyers with the worst of winter over.
Hanna says Raglan felt the pinch from the farming drought that took money from the local economy.
"All over prices have dipped and Raglan's no different."
Bernard Hickey, of interest.co.nz, says buying a holiday home makes no financial sense and that coastal properties are either not selling, or selling below previous prices.
Hickey says that even if a buyer is mortgage-free in their home, buying a holiday bach could cost $865 in weekly interest repayments.
He bases his total on a homeowner borrowing $400,000 against an $800,000 property to purchase a $500,000 bach. At 9 per cent interest, the bill in interest could reach $45,000, or $865 a week.
Renting coastal property can be difficult as baches are often only in demand around summer.
Hickey says coastal market prices were obscene. "Coastal property prices have lost touch with reality."
Investor and author Olly Newland says the seaside bach is an expensive palace. "I don't think, as an investment, they stand up at all. It doesn't make economic sense."
However, accountant and investor Mike Withers says a bach in the right spot can be a profitable investment.
For Aucklanders, Withers suggests a coastal property in an area no more than 250km away, preferably south. Withers says this is about the distance people want to drive, and put property in an area with access to beaches, the Rotorua lakes and ski fields.
The property would be attractive to weekend renters whose money could help pay the mortgage.
Investor Andrew King says people shouldn't turn their back on the seaside bach, with many owners potentially in financial stress and considering selling up.
"There's potentially some good buying options."
SLASHED BY $50,000
Paul Dempsey, who has been trying to sell his Pauanui investment property for six months, has now slashed the asking price by $50,000.
The retired Auckland real estate agent built the three-bedroom, two-bathroom home in Oceanair Drive himself.
He now wants to sell to free up money to build another house for his daughter. But the slow property market and bad winter have hindered his efforts.
"The beach property has probably been more affected than town properties."
He has cut the price from $699,000 to $649,000.
Once it sells, he probably won't buy at the beach again.
"There's probably not going to be any capital growth in property now for a while so it's just a matter of freeing up some capital."
Dempsey says he has noticed more For Sale signs spring up in Pauanui. It was a "sign of the times" with people being unable to afford to own a second home.
He was confident the warm weather would help sell his house by Christmas.
