Venture Developments director Mark Fraser-Jones says more and more people have started visiting the show homes. Photo / Provided
5% deposits and fixed-price contracts are just some of the incentives construction companies have put on the table to attract buyers amid a national slowdown.
Business owners say supply chain issues, hardware
the price hikes and delays that have plagued the sector are easing, but the biggest challenge now is with the banking sector’s lending criteria.
One says some banks’ earnings are stress tested at 8% on top of a 15% construction cost. Another thinks more builders will start building specific homes.
New Zealand’s biggest bank, ANZ, said its Blueprint to Build offer was a 2.76% discount on its standard floating rate for two years and had generated $3.5 billion in loans since then. its launch in July last year.
Classic Group director Peter Cooney said building a home in a weaker market rather than an upward spiral was a good option.
“Building a new home has its perks, and while we’ve seen material and labor costs go up lately, the cost of building materials won’t come back to where it was.”
Cooney said the main challenge for buyers was getting financing, with many banks giving 90-day approval.
“If this expires, the buyer must reapply and may or may not receive approval again depending on the criteria or if their position has changed. You’ll see more builders start building a home before it’s purchased [spec building] to support buyers who can only obtain financing if a home is completed and paid for within 90 days.
Classic Group did not have coverage-wide incentives as it depended on the subdivision in question.
However, depending on circumstances, fixed prices on contracts and 5% deposits may be available.
Because the Bay of Plenty was one of the most desirable places to live in New Zealand, she had to work “quite hard” to bring a variety of affordable new homes to market, he said. he declares.
There were two-bedroom houses in Ōmokoroa starting at $655,000 and a three-bedroom two-story townhouse for $735,000. Free-standing homes in Pāpāmoa cost from $870,000 and in Ōmokoroa from $825,000, which were under Tauranga’s subsidy cap for first-time buyers of $875,000.
Lianne Simpkin, branch manager of Barrett Homes Bay of Plenty, said she will soon be launching 41 Pāpāmoa townhouses.
“They will be built in a commercial area, providing the end user with rear access to restaurants, cafes and a trendy coastal lifestyle. We expect a strong turnout from investors and young couples looking for an easy-to-maintain lifestyle.”
It also offered lower deposits starting at five percent and turnkey on demand.
Make big life choices [like building a home] in these changing times was difficult, she said.
“If you build a new house now, you could enjoy good capital gains, with houses still scarce. Committing to your project now gives you the security to set the price for your construction project. History shows that the best time to build is now, with residential real estate assets well positioned to protect and grow your wealth.”
Finance was the main challenge she faced in the industry.
”The process of obtaining a loan has become more difficult. The best advice we can give you is to speak with a broker who will help you navigate the financial maze.”
He had land and house packages in Ōmokoroa starting at $795,900 and $889,000 in Pāpāmoa.
Classic Builders Lakes District owner Paul Taylor said all of his upcoming home and land releases have a zero percent deposit option on progress payments.
”That means you don’t have to pay anything until the titles come in and you get settled on the pitch. From a lending perspective, the banks find this positive as there is security in the land before construction progresses.”
In the current economic climate, banks have introduced tighter restrictions on lending, making it harder for customers to obtain finance.
Classic Builders offered fixed-price contracts so the buyer could be reassured that the price initially set would not increase, Taylor said.
Its current Rotorua home and land packages ranged from $600,000 to $950,000 and would be released in the coming months.
”Building a new home is often a more cost effective option in today’s housing market. It gives you the ability to design a home specifically for your lifestyle.
“We’ve seen a lot of people moving into the areas from major centres, as well as many New Zealanders returning home or new Kiwis gaining residency.”
Inquiries were regular, and with the new medium density rules coming into force, people can get a lot more out of their existing land, he said.
Venture Developments director Mark Fraser-Jones said there was never really a “wrong” time to buy as it depended on a number of factors and the current state of the market was only one of them.
“Remember that you will probably own your home for quite a long time, so the likelihood of your interest rate adjusting up and down is inevitable. The sooner you get on the ladder, the better it will be in the long run.”
Demand had been fairly slow since late last year, but it had recently seen more people move through show homes, which was normally a pretty good indicator that people were ready to buy again.
Venture Development owned homes in Pāpāmoa for less than $875,000, which meant buyers could qualify for up to $10,000 for the first home grant and first home loan, reducing the deposit requirement at 5 %.
Signature Homes national marketing manager Kim Harris said he had just completed a survey of 2,700 respondents, and of those, 352 people wanted to build but were unable to get a loan.
She figured out that some banks stress test income at 8% and then add another 15% to the cost of construction.
Harris said he was offering a fixed-price home build price, with caveats to combat that.
”We’re trying to lead the conversation about new construction and restore people’s confidence. So what we’ve seen with the survey is people are nervous because they’re being thrown new information saying don’t build, it’s too scary and too expensive.
“We’re just trying to slow them down and give them the facts that we see.”
Another highlight of the survey was that 719 people were worried about rising material costs, but it was improving.
Master Builders Association chief executive David Kelly said inquiries had slowed, which could be good news for people who wanted to build.
“For the past three years, you couldn’t even get in the door to talk to a builder or a designer because they were so busy. It would take months before they would even be interested in starting this process.
”But now there are builders and designers available.”
Kelly said people can start the process and figure it all out without having to commit.
In his opinion, it was an opportunity for people to see what models they wanted and could afford, but on the other hand, the current market might put others off.
”They tend to stop and wait. They’re looking for a bargain and that’s probably unrealistic because the prices don’t tend to go down. Then everyone comes back at the same time and floods the market again.”
Kelly said that in itself was a risk.
ANZ’s head of external communications, Kristy Martin, said new builds are exempt from the Reserve Bank’s LVR restrictions for owner-occupied properties and could be a great option for many customers with lower deposits. at 20%.
Since its launch in July 2021, it has helped over 7,000 customers build a new home – with $3.5 billion in loans taken from our Blueprint to Build rate.
”It is important to note that while building a new home is exciting, it requires a lot of planning. Although not unusual in the construction process, cost overruns can be stressful if people haven’t considered them.
“We consider potential cost overruns when evaluating construction loans and regularly review our policy on this to ensure it is appropriate given the current inflationary environment.”
A Kiwibank spokeswoman said there was a steady demand for construction loans.
From full approval, clients had six months to begin drawing down a construction loan and this did not always require fixed price contracts.
“Kiwibank allows a contingency amount for cost increases as part of our affordability assessment. The contingency ensures that customers will be able to cover full construction costs in most cases where they encounter cost overruns during the construction period.”