The $500,000 property question
If you earn an average wage for the Nelson and Tasman region, and are looking at buying your first home, what can you get for your money?
The bad news for first home buyers earning the average wage is that $500,000 will not go far in the Nelson and Tasman region these days.
You are also likely to face stiff competition from other buyers, and are unlikely to have money left over for renovations.
The good news is that it’s not Auckland prices. And – if you search hard enough – there are some good homes left in the halfmillion-dollar bracket.
As prices march upwards – an average property is now valued at $594,000 in Nelson city, and $586,000 in Tasman district – the Nelson Mail wanted to discover whether half a million dollars could still buy you a decent entry into the market.
In short, it still can, but there are a number of variables and conditions.
Firstly, there’s the issue of how much you can borrow and whether you have enough for the deposit.
TSB Bank says that for a couple without children and on a combined income of $90,000*, a loan of $500,000 is within reach.
If the couple have no short- or long-term debt, the half-milliondollar loan (based on the bank’s maximum 30-year term) ‘‘would look within reason for affordability’’. This is assuming they both contribute the minimum 3 per cent towards Kiwisaver to qualify for the HomeStart grant.
While such a couple could afford to look at houses with an asking price above $500,000, they would need a deposit of at least 20 per cent (more than $100,000) of the sale price that also meets lending criteria, the bank says.
What does half a million dollars get?
Real estate agents in Nelson, Richmond
and Motueka say competition in the $500,000 price range is fierce.
Buyers could still get a threebedroom house for $500,000 in parts of Nelson South, Stoke, Tahunanui and, if they were lucky, The Brook, owner and director of RE/MAX Elite Nelson, Kate Bradley, said.
They could expect to get change for that amount in certain areas in Toi Toi, she said, but those homes would ‘‘definitely be dated’’.
‘‘It’s probably still got a 1970s kitchen it in, it’s not going to have double glazing, and it’s not going to have all the batts in the wall, and all that kind of stuff. It’s going to be the kind of house that we all grew up in.’’
Houses in that bracket were attracting multiple offers, which was driving up prices, Bradley said.
‘‘We had a little two-bedroom house in Stoke on the market for offers over $429,000.’’ People offered $450,000, and others then offered $480,000, during the sale four
‘‘We get dozens of calls a day from people looking in that price range. It’s tough – we just have to tell them, ‘Good luck’.’’
Tracey Sturm, Richmond real estate agent
months ago, she said.
A shortage of homes for sale in Nelson meant demand was outstripping supply, said Bradley, who has been selling real estate in the city for 29 years.
She said the city had run out of flat space to build houses on – ‘‘we haven’t got anywhere else to go’’.
‘‘Unfortunately, the only sections that I know of that are coming on the market will be higher-priced ones.’’
Vendors tended to be moving out towards Richmond, because there was more choice for buyers there, she said.
Buyers need ‘‘good luck’’
Richmond real estate agent Tracey Sturm says half a million dollars is now the bottom end of what a family needs to buy a decent home in the area.
‘‘It’s a struggle to get three bedrooms [for $500,000], and you’re definitely getting older homes,’’ said Sturm, from Ray White in Richmond.
A four-bedroom home backing on to a bypass recently went on the market for offers over $485,000, she said. It attracted multiple offers, and sold for $511,000.
Properties costing $500,000 or less attracted the greatest pool of house hunters, including first home buyers, investors and ‘‘downsizers’’, Sturm said.
‘‘We get dozens of calls a day from people looking in that price range. It’s tough – we just have to tell them, ‘Good luck’.’’
It could be a stretch for such buyers to carry out the renovations needed, she said.
‘‘When purchasers get in the position where that’s such a competitive price range, they find themselves competing, so they’ve actually had to pay more . . . just to secure the property. So that just sucks up their ‘Oh, we’ll fix that up’ budget.’’
Multiple offers were common around the half-million mark because of short housing supply, Sturm said.
‘‘We’ve definitely seen an
increase in out-of-town buyers coming into Nelson.
‘‘I guess at the end of the day, new homes aren’t keeping up with the amount of people we’ve got living here.’’
It was taking longer to sell some properties, but Nelson had yet to experience the slowdown in growth in house prices being felt in other parts of New Zealand, she said. This was despite high costs involved in owning a home in the area.
‘‘We’ve a lot of weatherboard . . . homes here in Richmond, and they’re not cheap to maintain, and your rates are really expensive in Richmond especially. You’re looking at over $3500 a year for rates for a standard three-bedroom property on a 600 sqm section.’’
But it wasn’t all doom and gloom. ‘‘We’re seeing people become really resourceful at figuring out ways to get into homes,’’ Sturm said.
‘‘We’re seeing brothers and sisters buying homes together, just so they can get on the property ladder, young people in their 20s that are going, ‘Right, we’re going to get ahead of this’.’’
For a family looking for a home around the $500,000 mark in Motueka, there are some properties out there, says Sharon De Jong from Summit Real Estate.
‘‘But you have to be prepared to do a little work. And a lot of people, they find that difficult.’’
Newer homes were still available, but involved compromise, she said. A new three-bedroom house on 412 sqm, which sold for $515,000 in July, had one bathroom, a shared driveway and a single garage.
Many 1960s builds were now selling in the mid-$500,000 range ‘‘because of the section size . . . and the ‘solid as a rock’ build’’, De Jong said.
Competition had eased slightly in Motueka since winter, when fewer houses had been listed, she said. There had been a ‘‘big run’’ in property in the $550,000-$950,000 range since then.
‘‘When we look at the median house price, five years ago it was $307,000, and today it’s $480,000.
‘‘It’s heartbreaking for me sometimes, because a lot of these guys are getting valuations, they’re getting building reports done . . . they’re coming along and they’re in a multiple offer, and it makes your heart sink when you know that they’re going to be in competition.’’
* We assumed a combined income of $90,000, based on median income estimates in Nelson and Tasman from Statistics New Zealand, local salaries advertised by job website Seek, and advice from mortgage lenders on typical scenarios.