Hous­ing at a pre­mium

There have been in­creas­ing anec­do­tal re­ports of Dunedin house prices eclips­ing sell­ers’ ex­pec­ta­tions. Si­mon Hart­ley talks to the owners and man­agers of city firms Metro Realty, Cut­lers, Har­courts and Nidd Realty about what is driv­ing the es­ca­la­tion of pre

Otago Daily Times - - FRONT PAGE - Si­mon.hart­[email protected]

DUNEDIN’S res­i­den­tial prop­erty mar­ket is run­ning so hot pre­mi­ums of $100,000 above house price ex­pec­ta­tions have been paid to se­cure prop­er­ties, ac­cord­ing to city real es­tate agents.

Dunedin me­dian prices were up 15% in Oc­to­ber and the lat­est Quotable Value data has them up al­most 12% in Novem­ber com­pared with a year ago.

While large pre­mi­ums are the ex­cep­tion, Metro Realty, Har­courts, Cut­lers and Nidd Realty have all con­firmed in­stances of pre­mi­ums of up to $100,000 be­ing paid.

The pre­mi­ums, above seller’s ex­pec­ta­tions, ask­ing price or ac­tual val­u­a­tions, can range from $50,000 to more than $100,000 on some prop­er­ties, but are not iden­ti­fied in monthly real es­tate data.

Dunedin has long been held up as an af­ford­able place to buy.

Now how­ever, it ap­pears not only are first home­own­ers re­peat­edly miss­ing out, but cashed­up buy­ers, or those able to af­ford larger mort­gages, are in fierce com­pe­ti­tion to se­cure de­sir­able homes.

Some say ‘‘pre­mi­ums’’ do not ex­ist and house price es­ca­la­tion is sim­ply ‘‘mar­ket value’’ but there are many in­stances of sales around the city which are far above ex­pec­ta­tions.

Metro Realty man­ag­ing partner Mark Stevens said the city was its busiest in decades.

‘‘I’ve never seen it busier in Dunedin in the past 34 years.’’

Open homes were at­tract­ing ca­pac­ity crowds, some homes pur­chased just two and a­half years ago had dou­bled in price and auc­tions had dozens at­tend­ing.

‘‘We’re av­er­ag­ing four to five of­fers on ev­ery house . . . for the past two years,’’ he said of dead­line ten­ders.

‘‘Prices have sky­rock­eted from three years ago.’’

He was asked if there was such a thing as an ‘‘av­er­age’’ pre­mium, of $50,000, $60,000 or $100,000.

‘‘It can be way more than that, [$100,000] for prop­er­ties with sea views or a nice set­ting.

‘‘Al­most ev­ery prop­erty is get­ting a pre­mium,’’ he said.

Cut­lers owner John Cut­ler said there were an in­creas­ing num­ber of ‘‘out of the blue sales’’, which ended up at­tract­ing pre­mi­ums near $100,000.

Four to five of­fers for a ten­der was not un­usual, while one city prop­erty re­cently at­tracted 11 of­fers.

‘‘It’s dif­fi­cult to put ask­ing prices on prop­er­ties be­cause the mar­ket is mov­ing so quickly.’’

A Morn­ing­ton prop­erty which needed work was ex­pected to sell for just over $500,000 re­cently, but ‘‘came in closer to $600,000’’, he said.

First­home buy­ers were be­com­ing in­creas­ingly frus­trated. One cou­ple had spent a year look­ing and an­other cou­ple had missed out on six prop­er­ties, he said.

Dunedin re­gional spokes­woman for the Real Es­tate In­sti­tute of New Zealand Liz Nidd also con­firmed ‘‘sub­stan­tial . . . amaz­ing pre­mi­ums’’ of up to $100,000 be­ing paid for some prop­er­ties.

She said frus­trated buy­ers with ac­cess to more cap­i­tal were in­creas­ing their of­fers so as ‘‘not to miss out again’’.

‘‘[How­ever] it makes it very hard for the first­home buy­ers, but it’s the mar­ket — sup­ply and de­mand,’’ she said.

Given the lack of list­ings at present, she pre­dicted higher prices and pre­mi­ums could be around for ‘‘some time yet’’.

Har­courts Dunedin man­ager and auc­tion­eer Richard Stringer said Dunedin was the busiest he had seen for buyer de­mand, fu­elled by low in­ter­est rates, first­home buy­ers, in­vestors and New Zealan­ders re­lo­cat­ing.

‘‘In terms of what might be con­sid­ered a ‘pre­mium’, it still varies across dif­fer­ent sub­urbs and lo­ca­tions . . . we have seen that [$100,000] in a few cases.’’

Open homes with up to 30 peo­ple at­tend­ing were not un­com­mon, he said.

A ‘‘key driver’’ at present was

low in­ter­est rates, plus pop­u­la­tion growth and in­ter­nal mi­gra­tion, Mr Stringer said.

Ris­ing prices have in part been boosted by low in­ter­est rates.

‘‘We’ve seen re­newed pos­i­tiv­ity around Dunedin as a great place to live and raise a fam­ily,’’ he said.

Mr Stevens cited a St Clair home with sea views that was pur­chased in mid­2016 for $350,000 and re­cently sold for $700,000.

‘‘In Auck­land a sea view is worth [an ad­di­tional] $1 mil­lion,’’ he said.

Dune­dinites who had grown up with sea views, or Otago

Penin­sula prop­er­ties in a semiru­ral or bay set­ting, took those ameni­ties for granted, he said.

By way of mea­sur­ing in­ter­est, Mr Stevens said a Metro agent had just con­firmed an auc­tion date next week for a prop­erty and now had 45 peo­ple to no­tify.

Mr Stringer said auc­tions suited the Dunedin mar­ket at present and asked why a seller would put a ceil­ing on ex­pec­ta­tions.

For buy­ers the auc­tion process was trans­par­ent.

‘‘There are def­i­nite ad­van­tages for buy­ers who have got them­selves into a cash po­si­tion,’’ he said.

Metro data showed some house prices in the city had risen 20% over each of two years.

Mr Stevens said there was a com­bi­na­tion of in­vestors, firsthome buy­ers and a wide­spread need for staff ac­com­mo­da­tion, given Dunedin’s cur­rent and fu­ture projects.

First­home buy­ers were go­ing away empty­handed, af­ter bas­ing their ex­pec­ta­tions on prices from last year which had gone up markedly, he said.

‘‘Peo­ple are pay­ing an aw­ful lot more than the val­u­a­tion.’’

Mr Stringer said while homes which ‘‘needed a bit of at­ten­tion’’ pre­sented some of the bet­ter buys in Dunedin’s mar­ket, the first­home buy­ers ‘‘may need to re­visit their ex­pec­ta­tions’’.

‘‘We don’t meet too many pre­pared to roll up their sleeves, grab a paint­brush and add some value to a prop­erty.’’

Mr Stringer said while in­vestor in­ter­est was part of the equa­tion, he was see­ing more in­vestors quit­ting older prop­er­ties in the face of ten­ancy law changes than in­vestors buy­ing.

‘‘So a lot of the typ­i­cal in­vest­ment homes are be­ing pur­chased by first­home buy­ers,’’ he said.

There was ‘‘def­i­nitely a loom­ing short­age in rental stock,’’ he said.

❛ It’s dif­fi­cult to put

ask­ing prices on prop­er­ties be­cause the mar­ket is mov­ing so

quickly

Cut­lers owner John Cut­ler

PHOTO: GRE­GOR RICHARD­SON

Sign of the times . . . Cut­lers real es­tate agent Bob Grif­fiths and a re­cent sale in the city. Dunedin real es­tate agents are re­port­ing many homes sell­ing with an ad­di­tional ‘‘pre­mium pay­ment’’.

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