Feature article

Cashed up buyers in good positions to buy finished new homes

Now is the time to be buying recently completed developments.

If you search Trade Me Property for new homes that have recently been completed, (ticking new homes only, keyword completed) you’ll find they’re selling at very competitive prices at the moment, and at quite a discount from the prices reached in 2021.

CoreLogic Chief Property Economist, Kelvin Davidson says a lot of newly-built townhouses are coming on the market in Auckland, and the CoreLogic index has recorded a 5% fall so far for Auckland’s average property values, he estimates. “Buyers will either be getting properties at a cheaper price or be able to afford a better home,” he says.

One Auckland agent says his developer client sold some high quality new homes last year for $1.6 million or $1.7 million. A new tranche of the completed houses coming on the market, the same quality properties as those sold last year, will be priced closer to $1.3 million, a discount of some 20%.

“All the fat’s gone for developers,” he says.

Barfoot & Thompson agent, Sam Bowen is marketing some newly completed, four bedroom, 2.5 bathroom homes in Saint Johns, developed by Bay Developments, which is well-known in the area. The newly finished homes in Strong Street, are in the Stonefields School and Selwyn College zones and offer excellent value for money, likely to sell at the $1.3 million plus mark.

Last year, $1.35 million would have bought you a three bedroom home in a suburb a bit further out, now you’re getting a four bedroom home in a very good area, says Sam.

Developers are definitely more negotiable than owner occupiers in the current market, say real estate professionals. They have multiple developments going on at any one time and they need cash to progress these projects waiting in the wings.

Another agent selling in Saint Johns, Ray White’s Ryan Wolfe, says the market has changed considerably since last year and his developer client is highly motivated to sell.

The agent is selling three newly built, landscaped homes at 2-4/4 John Shaw Drive in Saint Johns, and he’s priced them at $1.195 million after some testing of the market. Homes of a similar style and size in the same suburb were selling for $1.4 million last year, Ryan adds.

What are developers thinking in the current changing market? “When developers are selling, their attitude is all to do with financial viability and feasibility. If you’re dealing with an owner occupier, there’s an emotional attachment and they don’t necessarily need to sell,” explains the Ray White agent.

A lot of developers are taking the loss and wanting things sold now, they’re not worried about making as much,” adds the Ray White agent.

As an agent regularly marketing developments, Ryan sees stronger interest from buyers on homes that are completed.

“It takes a specific buyer to be able to buy off plan, whereas with tangible brick and mortar you’re able to see the proportions and get a feel of the home,“ he says.

Good deals on newly completed homes are on offer all over Auckland. Barfoot & Thompson’s Jesse Singh, selling three finished new homes in Mt Albert’s Tyburnia Ave. One has already sold in the mid to high $1.5 million price range which is a very good price given the homes would have sold for over $1.7 million last year, he says.

When a new home is completed, people can see that the features of the house are good quality, check out the appliances, the heated floors and so on, he comments.

What are developers driven by in the current market?

Buyers looking at newly completed homes will vary from first home buyers, to investors to downsizers. Ed McKnight, resident economist at Opes Partners helps investors and first home buyers and the company has relationships with many developers.

“Our understanding is that developers’ margins are being squeezed and the amount of profit they’re making is lower than last year,” he says.

Developers are far more realistic and aren’t expecting to get 2021 prices. We’re seeing developers meeting the market, adds Ed.

Developers are definitely more willing to negotiate and drop the price and will be more responsive than other types of vendors like “mum and dad vendors” who are under no time pressure, he explains.

“They’ve got a company to run, staff to pay, they’re in the business of building properties, and they have to sell before the bank will give them the money for the next project,” he adds.

They don’t have the time or the financial resources to wait for the market to recover.

If a completed new home appeals, do your research on the area you like and identify all the best developers operating in the suburb, suggests the economist.

Developers are definitely more willing to negotiate and drop the price and will be more responsive than other types of vendors

It’s still a tough market to borrow in, but your chances are better buying new

The good news is that buying a newly-completed home rather than an existing one will make your borrowing experience easier, according to Loan Market advisers.

According to Loan Market’s Mikey Smith, banks are favouring borrowers buying new builds over existing homes. ANZ, for instance, will give buyers a two year discount on their interest rate if they buy new and they don’t need to come up with a 20% deposit, they can get the loan with a 10% deposit, he says.

Banks are almost incentivising buying new homes with their products, he explains. ANZ gives a 2.76% per annum discount off the floating rate for a loan on a new home. If it were an existing home, you’d be paying around 6% on a mortgage, so that’s a saving of around $15,000 a year if you have an $800,000 mortgage, the adviser estimates.

With other banks, you might get a standard rate on a mortgage but they’ll give you cash back that’s double the normal size, say $15,000, he adds.

The Loan Market adviser says he’s seeing signs of the buyers’ market in the completed new home field. He’s recently advised a client buying a home at a fixed price development and she successfully negotiated a discount off the asking price. The Auckland townhouse had a start price of $879,000 and she paid around $849,000 in the end.

“The beautiful thing about any market is if some developers start giving discounts off the asking price then others will follow. It’s a nice thing to happen, why shouldn’t buyers be more in control?” says Mikey.

East Auckland Loan Market adviser, Paulette Trotter, who works with a lot of first home buyers, says the advantage of buying a new home is that banks get an exemption from the Reserve Bank on their lending criteria. So they aren’t constricted by LVRs, requiring homebuyers to have a deposit of 20% or more, they can lend more freely.

And, in many cases when borrowing for a brand new home, not only do you have a better chance of it being granted, there’s a good possiblity banks like ASB and ANZ, may give you a higher amount approved too, says Paulette.

Talk to your mortgage adviser about what other advantages there are to buying new and do your research on First Home Grants.

The First Home Buyers’ Club director, Lesley Harris says she’s seeing groups buying new homes, combining their income for shared ownership. For a $1.3 million new home, the group would need an income of around $200,000, she says. That kind of solution should always be approached with caution, she adds.

One buyer who’s going to be buying new next

People from all walks of life are looking at newly finished homes in the current buyer-friendly market. Top-selling Harcourts Cooper agent, Kris Cunningham, who’s successfully sold some high-end new houses in Browns Bay, says he’s about to put his own home on the market and he’ll be looking for something new in central Takapuna. 

It’s 100% a good time to be going after new developments, he says. “I’ll be looking for a new build and I’ll be throwing offers at all of them,” he adds. 

In his experience, sometimes a developer will sell a new home cheaply within a new stage of homes just to get the ball rolling. They may have another tranche of new homes waiting in the wings, he explains.

It’s 100% a good time to be going after new developments. I’ll be looking for a new build and I’ll be throwing offers at all of them.

If the right home doesn’t come up, Kris says he’ll buy where the opportunity is and rent in the location he wants to be. He likes the idea of a new home that’s low maintenance with no lawn. It's the lifestyle he wants, says the Harcourts agent. He stresses he wouldn't buy anything without a Master Build 10 year guarantee, for resale purposes. “Buyers want them”, he says.

Buying off plan is another option, he adds. It’s significantly cheaper because the development’s not completed. He notes, as a general rule, by the time you settle, it’s worth more one it’s time to settle and the house is ready. If you can get a deal off plan and you’re prepared for the element of risk, that’s still a good way to go, says Kris.

Tips if buying a newly completed home

A final piece of advice: if you do fall in love with a newly completed home, still have a building inspection to make sure the developer has done everything correctly and finished the build properly.

Inspect House NZ director, Lauren Fox says with so many tradespeople involved in a home’s construction some finishings and works can be incomplete or incorrectly fitted. Common defects can include incorrectly installed flashings, nails and screws overdriven, joinery junctions not sealed correctly to cladding, for instance.

if you do fall in love with a newly completed home, still have a building inspection to make sure the developer has done everything correctly and finished the build properly.

Even a minor defect can lead to major damage and can compromise the property’s weather-tightness, she says, so a building inspection is advised.

Do your due diligence at the start and have a lawyer engaged at the beginning, adds Loan Market’s Mikey Smith. Have a good rundown of what’s expected and get an inspection done, pre-settlement, he says.

“Don’t be shy and let them know anything that you’re unhappy about,” he advises.