We talk to Shane McConnell of GJ Gardner Homes, Tauranga, about investing in new builds and how to get involved.

PHOTOS JAHL MARSHALL

You may be eli­gi­ble to bor­row up to 90% for a new build, but only up to 80% for an exist­ing house that you will live in, or only 60% if you’re an investor. It’s allow­ing some peo­ple to get into the mar­ket, where they couldn’t before and it’s help­ing to address the short­age of homes.

Before start­ing, we assess the total cost of com­plet­ing the build, which includes bor­row­ing costs such as any rent you may need to pay dur­ing the build. This all gets cap­i­talised in the loan and is paid for as you incur build costs. That’s why it’s real­ly impor­tant to work with a rep­utable build­ing com­pa­ny that under­stands time frames and costs.

What’s happening in the market?

Q There have been explo­sions in the hous­ing mar­ket before; why’s this one so spe­cial?

Many econ­o­mists agree on fac­tors affect­ing the cur­rent boom. We have strong immi­gra­tion into New Zealand, cre­at­ing a short­age of hous­ing. Increas­ing num­bers of Auck­lan­ders are look­ing for afford­able land to buy and Tau­ran­ga is seen as a good solu­tion, par­tic­u­lar­ly with its attrac­tive lifestyle. This has exag­ger­at­ed the short­age of hous­ing in our region. Add to this low inter­est rates, favourable gov­ern­ment lend­ing cri­te­ria for new builds and strong growth in prop­er­ty val­ues and you have all the ingre­di­ents for the kind of boom we are expe­ri­enc­ing now.

Q I have bought a house, will it reduce dras­ti­cal­ly in val­ue at some stage?

Dur­ing the last reces­sion some areas, like Beth­le­hem, actu­al­ly increased in val­ue dur­ing the reces­sion. Oth­ers stayed pret­ty flat, some areas of The Mount dropped, but over­all there wasn’t a big dip. Like most invest­ments, the long-term ones tend to be less risky. It’s risky to take on a mort­gage you can only ser­vice at low lend­ing rates, as inter­est rates will inevitably rise again. If you are buy­ing hous­es to sell them quick­ly, this too is risky as you need to be sell­ing in a ris­ing mar­ket. Always fac­tor in tax impli­ca­tions and realise that at some point the mar­ket may dip.

Q Sure­ly it’s not sus­tain­able, this kind of growth. When do you think it will stop?

The Min­istry of Busi­ness, Inno­va­tion and Employ­ment recent­ly released a report pre­dict­ing the con­tin­u­ing rise in con­struc­tion in the Waika­to and Bay of Plen­ty, peak­ing in late 2017 then flat­ten­ing out over the next four years to sim­i­lar lev­els to those seen at the start of this year. Remem­ber, things often get shak­en up which are well out­side the con­trol of our econ­o­my and impos­si­ble to pre­dict, such as inter­est­ing choic­es for the next Amer­i­can pres­i­dent which could seri­ous­ly affect the world­wide econ­o­my.

Q Are the new rules with lend­ing going to affect me?

If you are buy­ing a home to live in, gen­er­al­ly the new rules shouldn’t affect you. The rules favour new builds, and we use Onion Home Loans and Insur­ance for our clients. They spe­cialise in bro­ker­ing con­struc­tion lend­ing to provide com­pet­i­tive fund­ing pack­ages for new builds. Many of our clients have used this ser­vice to access com­pet­i­tive lend­ing terms, and have been given the means to own a new home where it has been pre­vi­ous­ly been denied. As a busi­ness, we bank with BNZ, so they also offer great con­struc­tion lend­ing pack­ages to our clients.

Jono Shar­rock from BNZ and Shane McConnell talk about the Tau­ran­ga boom.

How do I get into the action?

Q Can I buy a sec­tion and sell off a plan?

Yes. Before the title is issued, you pay a deposit of up to 10%. Once issued, you’ll need to pay the rest up front. We have clients who buy a GJ house and land pack­age and put it up for sale before it’s out of coun­cil, repeat­ing the same process over and over again. Pure­ly anec­do­tal­ly, I’d say the­se clients have done very well! They use us from start to fin­ish for the design, full quote, draw­ings, selec­tions and sale of their pack­age.

Often, the biggest gains are made by actu­al­ly build­ing. Once the house is under con­struc­tion, assess whether it is bet­ter to sell the house straight away to release cash for oth­er projects, or wait to extract poten­tial­ly big­ger gains. I sug­gest you get as much advice as you can from as many sources as pos­si­ble.

Q Where can I buy a sec­tion?

We usu­al­ly have stock avail­able all over Tau­ran­ga: peo­ple just like you are still find­ing great oppor­tu­ni­ties. Go to gjgardner.co.nz and check our ‘Tau­ran­ga list­ings’. They change fre­quent­ly with new ones being added, so it’s worth check­ing reg­u­lar­ly or give us a call to find out the lat­est.

Q Do you have to be reg­is­tered to buy the­se pack­ages and build on them?

You must be reg­is­tered as a New Zealand tax­pay­er with an IRD num­ber. You can use a trust or a com­pa­ny to buy and sell prop­er­ty. Before get­ting involved, I sug­gest you talk to your accoun­tant and lawyer about the best set-up for you.

Q Should I just build the house and sell it, or get some­one else to do it?

With the new health and safe­ty laws firm­ly in place, our respon­si­bil­i­ty con­tin­ues long after the build ends. It con­tin­ues for many years to come. As an indi­vid­u­al it is very dif­fi­cult to find the best qual­i­ty labour, and if there is a prob­lem with the home dur­ing the build or in the future after you’ve sold it, you will be treat­ed as the ‘head con­trac­tor’ and legal­ly, the buck stops with you. If you build with us, you get the ben­e­fit of our hard-earned rep­u­ta­tion, and the qual­i­ty and val­ue of our estab­lished trade and sup­pli­er net­work. You also get an indus­try-lead­ing, inde­pen­dent, Cer­ti­fied Builders, Halo ten-year guar­an­tee. That is a lot of peace of mind.

 

GJGARDNER.CO.NZ

TAURANGA 07 571 2032