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Hi Adrian! I used to live in Auckland but have been in Melbourne for 12 years. While there I managed to build up a portfolio of 6 dwellings on 4 titles between 2002 and 2004, mostly in West Auckland. At one point I had a gross yield of 9.6% on a dual income property in Henderson that was positively geared, despite interest rates going over 10% back then. I have since divested my entire Auckland portfolio, for a number of reasons, with the last one going earlier this year for what I thought was an eye watering price.
Auckland on some measures is currently considered the most expensive real estate in the world, comparative to incomes. I think I read recently the ratio of median to income is over 10 now!! The NZ government and financial regulators have imposed all sorts of restrictions on the market but it has gone up by some 70% in the last 3-4 years. Affordability is a major issue and it is a hot topic all over the place. The Auckland council has just signed off on a unitary plan that sets out development rules for the next few decades.
There is no reason for the market to suddenly crash, it is being held up by unusually low interest rates with signs of further reductions from the RBNZ to support inflation. The thoughts are that when the interest rate cycle turns up there will be a correction, but that keeps getting pushed out. Meanwhile house prices continue to march onwards and get stretched from traditional valuations. I read a great article the other day on how much interest rates were affecting the market vs all the current talk of overseas investment, undersupply of new builds etc… sound familiar?
Here is the article..
http://www.goodreturns.co.nz/article/976504729/the-affordability-of-unaffordable-homes.htmlCheers,
SimonYou can use an architectural designer to customise plans for your project. Depending on your target market, you can fit the budget to the architect. Some big fancy firms will charge a lot vs a small one man/woman shop, but there are pros and cons. The smaller ones can only work on so many projects at a time and you may not be at the top of their priority list and may have to wait some frustrating time for any changes/amendments to the design.
Just pulled out of a display home deal myself. Looked a good deal on the face of it but finance can be a real problem. Most lenders consider them non standard because of the leaseback and so your available sources of finance are immediately limited. This was a lesson to me though I fail to follow the logic.
The lenders valuer ended up saying the property was worth a lot less than the asking price, mainly because there was little comparable sales in the area, being a new development. For the amount required to invest I felt the return was not good enough in the end. I have no doubt the property will perform well over the medium term but the short term risk was too high. If the bank had been right then I would have lost $70k instantly and relying on faith of the future development to recoup that over the coming years.
Generally the cost of the lease is added back onto the purchase price, so watch out for that.
As long as you are not paying above market rate then I would say go for it as the secure and quality tenant for the initial period makes it a worry free investment. But be sure to really research the deal carefully and get a fully independent valuation based on the plans!
From someone who has just been through a whole lot of learning about the world of display homes I hope that helps.
