Wednesday, March 07, 2012

H is for Houses

How convenient: The letter H rolls around for ABC Wednesday just when I’m ready to talk about what I’ve been up to for the past couple months, the thing that’s kept me from having time for blogging or, especially, podcasting. We are house hunting.

Overall, houses in New Zealand aren’t all that different from my native Illinois, but they are different in some significant ways. Most noticeable for me, Kiwi houses traditionally had the toilet in its own little room (more like a closet), separate from the bathroom. Sometimes the room—called a toilet—also has a little sink, and when they do, it’s often a ridiculous little thing with separate hot and cold taps no adult could ever get their hands under. All that’s beginning to change as houses get smaller or devote more space to other rooms, so the toilet is now often found in the bathroom.

Indoor/outdoor flow is important to Kiwis, as is offstreet parking and garaging, especially in places like Auckland. While sections (what we called "lots" in Illinois) used to be a quarter acre (a little over a thousand square metres), they're now usually much smaller in urban areas.

Auckland houses built before the 1980s often had little or no insulation because it wasn’t required. Gradually, the minimum amount of insulation required has been increased, and the government has a programme to help owners of older houses insulate. Modern houses are well-insulated.

Related to that, central heating is rare in New Zealand, and air conditioning only took off in the past decade (we’ve put it in every house we’ve owned together, four so far, the latest a whole-house ducted system). Most Kiwis heat their houses with woodfires, oil-column radiators or LPG (aka propane) gas heaters (New Zealand is one of only two countries in the world that allows un-flued LPG heaters in a house; the other is Italy). An increasing number of Kiwis are now installing heat pumps in one or more rooms.

Finding and buying a house is also very different from Illinois. There, a person sees a house they want to look at and they contact any realtor who arranges a viewing. This works because of the “multiple listing service” that realtors belong to. We have nothing like that in New Zealand. If a person likes a house, they ring up the agent listed in the ad or on the sign or, at the very least, an office of the realty firm selling the property; they are the only ones who can show the property. If buyers want to see a house from another firm, they ring up that firm, and so on. Realtors also usually hold one or more “open homes” on a weekend, usually around a half hour for any interested person to view the property (the owners leave during that time).

A relatively new phenomenon in New Zealand is the “buyer’s agent”, basically a specialist negotiator to whom buyers give limited power to act on their behalf. The agent will, for a fee, do basic research on the property to arrive at a fair asking price, place the offer and conduct any follow-up negotiations, all under the buyers’ instructions. One of the advantages of this is that it makes it impossible for a real estate agent to pressure buyers because they deal only with the buyers’ agent. It’s also especially useful when buyers have no idea what a fair price would be.

So, a house is found, an offer is placed, and the parties have agreed on a price. Buyers’ offers are usually conditional, which means that certain things need to happen before the sale is finalised. The typical ones are that the buyer obtains finance, second, and related, that they have the property valued by a registered valuer (this is for the mortgage—is the property worth enough to justify the price/mortgage?). Next, most buyers will require a builder’s report, basically an inspection as to the structural integrity of the building. These three conditions are usually required to be completed within ten business days. Finally, the other most-common condition is sale of the buyer’s own home, and the time allowed for that is negotiable, maybe 30 days to three months.

The buyers’ solicitor (lawyer) also does a title search to make sure there are no legal encumbrances (like liens); if there are any problems, that could kill the deal. If buyers want out of a sale, they will often invoke the finance clause, saying they didn’t obtain suitable finance.

When all the conditions have been met—finance obtained, a valuation high enough for the mortgage, the building is sound and buyers’ own house has sold—the deal is considered unconditional. At this point, it’s pretty much impossible to get out of the deal, though obviously lawyers have a few tricks up their sleeves.

At this point the clock starts ticking toward what’s called the settlement date. In Illinois, we called this “closing”, and the buyers and sellers and their lawyers met in one of the banks’ meeting rooms to sign all the paperwork and, once done, the keys were handed over to the buyer.

In New Zealand, the buyers and sellers meet with their solicitor privately to sign all the documentation for the property and the mortgage. This is done in the time between the offer going unconditional and the settlement date. On settlement date, the buyers’ solicitor authorises money to be moved around and, once the sellers’ solicitor receives confirmation that the sale is complete, they authorise that the keys be handed over. Typically, the buyer picks up the keys from the sellers’ realtor (or sometimes solicitor), and that’s it. It’s possible for all this to happen without the buyers and sellers ever actually meeting in real life.

The selling side is mostly the other side of the equation above, but begins when the sellers sign a sales agreement. This is usually a sole agency agreement—only that real estate firm can sell it—but sometimes sellers will use “multiple agency”, meaning they authorise more than one firm to sell their property. My own feeling is that this is a bad idea as no one agent has an incentive to work to sell the property, so it won’t be the first one they mention when presenting similar properties to prospective buyers. These listing agreements typically last three months.

In February, the average time it took to clear the inventory of unsold houses in New Zealand was 36 weeks, down slightly on January and down 26% on the previous year. This refers to clearing the stock of unsold houses, not necessarily how long a typical property takes to sell, which in Auckland is less than a month.

Overall, sales are up 25% as demand remains strong and the number of listings slowly grows. Asking prices in February were up 2%, which may seem small, but it was a new high national average of $426,575 (roughly US$350,000). Higher asking prices means, of course, higher sales prices.

According to QV, the average national sale price over the past three months was $396,958 (roughly US$325,000), up 2.7% over the past 12 months. Average prices in Auckland are significantly higher than the national average, at $527,617 (roughly US$432,000), up 5%. In North Shore, where we live, the average sale price in the past three months was $579,246 (roughly US$475,000), up 4.1%.

And that’s a bit about houses and the house selling/buying process in New Zealand. The photo at the top of this post is one I took before our house was listed (to show a potential private sale). It shows part of the deck we had extended last year. I like it because it’s from up high, like professional real estate photographers do. This raises a related issue: I haven’t decided whether I’ll post links to the listing for our house or not. On the one hand, the more exposure, the more potential buyers who will see it. On the other hand, let’s face it: It IS a bit stalkerish to allow random readers of my blog to see our house.

Any questions about New Zealand houses or the real estate market, fire away in the comments. Oh, and would you post a link to your house’s real estate listing?

Click the badge above to visit other bloggers taking part in ABC Wednesday—there are a lot of interesting and very diverse blog posts!


Gigi Ann said...

WOW... All the information is overwhelming. Happy House Hunting...

d said...

Had no idea you guys were looking to move! Good luck and keep us updated. :)

P.S. You may want to clarify the difference between what is considered a "heat pump" here versus the US...they may be wondering why there is one per room here!

Roger Owen Green said...

Well, I did, of course, know that you were house hunting (only because you mentioned it on that podcast you used to have).

I must say that I fdound buying a house overwhelming the first time and am not looking forward to revisiting it any time soon...
ROG, ABC Wednesday team

Chubskulit Rose said...

We were looking at the possibility of moving to NZ, very interesting.

House in the Prairie
Rose, ABC Wednesday Team