We talk to Shane McConnell of GJ Gardner Homes, Tauranga, about investing in new builds and how to get involved.
PHOTOS JAHL MARSHALL
DID YOU KNOW?
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.
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.
Having dinner with other couples who also work together, one of the wives told us about an article she’d read detailing the perils of family businesses. It can seem, from the outside, to be a minefield.
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