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First-Home Buyers: To Buy or to Build?

Posted on Jul 4, 2017

Screen Shot 2017-07-04 at 7.17.36 PM© MarkMoz12

By Lydia Truesdale

For many New Zealanders, home ownership is the ultimate dream. About half of all adults in New Zealand own their own property – specifically 49.8 percent of people aged 15 years and over owned or partly owned the home they lived in, according to Statistics New Zealand’s 2013 Census.

This demand, exasperated by immense international interest, means there’s not a huge amount of freely available properties, let alone at prices that welcome the average income.

But fear not, future homeowners, because with people’s frustration comes ingenious inventiveness on what constitutes a home.

The variety of houses available and popping up is expanding, particularly at entry level, from traditional, architectural designs to more innovative, space-saving and bang for your buck solutions like tiny houses, container houses, barn-style houses and houses on wheels.

 

So, where to start?

House hunting is a daunting process and the rules of the game often change to reflect the market. First things first – is getting your home loan or pre-approved finance confirmed.

Once your finance has been approved, the very next things to consider are your three Ps: purchasing power, preferred lifestyle, and preferred choice of location.

  • What’s your spending limit?
  • Do you mind commuting or do you want to be in close proximity to the community and its amenities?
  • Are there public transport routes handy to the property?
  • What are the neighbourhood crime rates?
  • How receptive is the section to sun?
  • What are the views like?
  • How close are your neighbours?
  • Where is the nearest school? Etcetera

Once you have an idea of the above, it’s time to consider some of the differences between building and buying: what are some of the factors behind each process and what might be best for you and your budget.

 

Buying

 

Pros:

  • The hard work has been done for you and you can essentially move straight in after settlement without having to wait for your dwelling to be built
  • What you see is generally what you get.

 

Cons:

  • You might have to compromise some desirable factors for others
  • Buying existing property is generally the more expensive option of the two.

 

1. Choosing a property

  • LIM report
  • EQC report/repairs
  • Rates
  • Insurance
  • Property tax
  • Location/zoning.

 

2. Choosing personnel

  • Real estate agent
  • Lawyer.

 

3. Settlement

  • Conditions
  • Sale and purchase agreement.

Keep in mind:

A property tax applies if selling within two years (or a Residential Land Withholding Tax for offshore persons).

You can ask the agent anything you want to know about the property and they can’t withhold any information they are aware of. However, you shouldn’t rely only on their information and you should do your own research.

Depending on the property, other things to consider getting checked out are weather tightness issues, possible ‘P’ contamination and the condition of plumbing and wiring.

You might be eligible for KiwiSaver’s First Home Buyers Grant, which could increase your purchasing power considerably.

The following organisations offer free advice, information and/or resources about property and the buyer’s process:

 

Building

 

Pros:

  • Flexibility with budget and customisation
  • Convenience and cost-effectiveness of home and land packages.

 

Cons:

  • Building is a much longer process than buying existing
  • There is more opportunity for complications to arise throughout the process and delay you or put you over budget.

 

1. Choosing a section

  • Terrain, surveys and valuations
  • District plans, titles, covenants, building and resource consents
  • LIMs, PIMs and council files
  • Services (power, phone, water and sewerage)
  • Rates
  • Architects’ plans and/or builders’ quote
  • Conditions
  • Sale and purchase agreement.

 

2. Choosing personnel

  • Banker or mortgage broker?
  • Designers, architects and builders
  • Lawyers
  • Tradespeople and labourers.

 

3. Construction begins

  • Project management
  • Expected timeframe and budget
  • The better your preparation throughout the earlier stages of the process, the better equipped you will be to adapt to and nip challenges in the bud.

Real Estate Agents Authority: www.reaa.govt.nz
Property Toolbox: www.propertytoolbox.co.nz
Trade Me Insights: www.trademe.co.nz/ property/rural/auction-1254317614.htm

 

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