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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 cashed-up 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 a-half 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.
First-home 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 first-home 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, first-home 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 mid-2016 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 semi-rural 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, first-home buyers and a widespread need for staff accommodation,
given Dunedin’s current and future projects. First-home buyers were going away empty-handed, 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 first-home 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 first-home buyers," he said.
There was "definitely a looming shortage in rental stock," he said.