Dunedin property market ‘absolutely mental’

First-time home buyer Alison Conroy (29) is struggling to find a house for sale cheaper than $400,000 in Dunedin to be eligible for the Government's First Home Grant. PHOTO: SHAWN MCAVINUE
First-time home buyer Alison Conroy (29) is struggling to find a house for sale cheaper than $400,000 in Dunedin to be eligible for the Government's First Home Grant. PHOTO: SHAWN MCAVINUE
The Government needs to change the rules to help first-home buyers enter Dunedin’s “absolutely mental” property market, a frustrated house hunter says.

Alison Conroy, of Green Island, said she and her partner had been trying to buy their first home since early 2018.

The couple got a pre-approved loan from their bank after securing a 10% deposit of savings, gifts from family and potential KiwiSaver withdrawals.

The search for a first home had been fruitless because the residential property market in Dunedin had risen sharply, Ms Conroy said.

The couple had made three unsuccessful offers on homes and all of them had sold for more than $450,000.

“It’s so frustrating.”

The couple are looking to buy a home for less than the Dunedin price cap of $400,000, to be jointly eligible for the Government’s first-home grant of up to $10,000 and a first-home loan underwritten by Crown agency Kainga Ora.

But entry-level homes were selling for more than $400,000, much more than the rating valuations.

“It’s devastating.”

The pair said they lacked the skills required to buy a “fixer-upper” so were searching for a simple three-bedroom home in a sunny part of the city.

They want the cap lifted to $500,000, which would allow them to make unconditional offers on a home.

“A condition our bank needs is to get a registered valuation and it screws us over every time, because someone beats us with an unconditional offer.”

Ms Conroy questioned why Christchurch had a $500,000 price cap when houses there were cheaper than in Dunedin.

The latest QV data reveals the average value of a residential house in Dunedin in January 2020 was $527,101 – up 20.8% on the same time last year.

The average value in Christchurch at the same time was $510,575 – up 2.7% on last year.

Saving to buy a home was difficult because about a third of their combined income was spent on rent in Dunedin.

She works in customer service and her partner in early childhood education.

A Ministry of Housing and Urban Development spokesman said housing affordability was an issue across many parts of New Zealand including Dunedin.

“Not every home can be purchased using the grant, this is because the grant is in place to support first-home buyers to purchase modestly priced houses,” the spokesman said.

The price cap for existing Dunedin homes was raised from $350,000 to $400,000 in 2016.

The grant’s settings were reviewed periodically, he said.

“While there is no immediate plan to review the settings of the grant, the ministry regularly provides information to the Minister of Housing on the grant to ensure that the policy remains effective over time.”

A Kainga Ora spokesman said 88 grants were paid in Dunedin for the first quarter this year.

In December last year, Ms Conroy wrote to her local member of parliament, Dunedin North MP David Clark, asking for the price cap for Dunedin to be lifted to $500,000.

Dr Clark referred her to Kainga Ora.

When The Star asked Dr Clark about the concerns Ms Conroy raised, he provided a similar statement to the ministry.

Minister of Housing Megan Woods, when asked if the price cap for Dunedin was fair, said “consideration for making any changes to the first-home grant settings would need to be done alongside the Government’s other priorities for addressing the issues with housing and urban development that New Zealand faces”.

Total Realty Dunedin sales consultant Mark Ford said Dunedin’s property market remained “buoyant” and had not slowed down in the wake of Covid-19.

“It’s as strong as it was prior to Covid. This time of year it should be a lot slower than what it is – it’s being fuelled by first-home buyers but finding anything cheaper than $400,000 is like gold dust .. I do feel sorry for first-home buyers – it’s a problem.”

Most properties in Dunedin sold within a fortnight of being listed, he said.

considering we’ve just come out of Covid. I’ve sold eight properties since Level 2.”

Comments

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In our day everyone bought a fixer- upper and we learnt the skills of DIY. Youngsters need to reset their approach to getting into the market, rather than looking for handouts. A nice house on David St right now on the market for 329k. There, fixed your problem. And for the record, i take offence at the use of the word 'mental' thank you

If you don't mind me asking what is the house # and who is managing the sale? I tried looking for it but can't find it.

That's what my wife and have done for 30 years, buy a place that we could afford and do it up. People should learn to hang wallpaper, learn to paint and learn to hammer a nail into wood.
Also learn to do without and live within your means, we started out in the mid 80s onward, we had 1 car and that was a old banger and our furniture was from the 2nd hand shops, our first chair was from my wifes granddad's and that arse hanging out of it.
Dont go looking for 3 bedrooms..look at 1 or 2, start somewhere

Please, tell us more about how hard it was to save for a 1 or 2 bedroom that would have been less than 2x average salary of the time.

How about you pull your head out of your past and get with the times.

In your day, houses averaged 2.5x to 3.5x the average salary. Now days, houses average 7x to 10x average salary. A "fixer-upper" today would cost more relative to salary than a decent home in your time. And before you go down the "but interest rates!" memory trail, do the math. Netting out, high interest on a low principal of your time was a better deal than the low interest on high principal today.

I'm not doubting you worked hard for what you have, but you lack perspective on how much harder it is today.

Yes but a house valued at 329k in the current market will probably sell for over 400 as the demand is high.

Its not just property going mental. The auto sales market is also going gangbusters... Retirees splashing out with their savings due to lack of returns, a pandemic and lower fuel prices has put the private motorcar in fashion again. Those whom have a drivers licence are shunning the petri dish that is public transport and dealer stock is flying out the showroom doors. Also late model ex rental car deals are filling the void of a delayed new car import delivery network due to the virus.

The comment of Dunedin cap to Christchurch cap is relevant and the government needs to address. I do agree not everyone has the skillset and time given today's demanding jobs and the rules are to higher standards now.

Agreed, given a single income, it is hard to find anything resonable under 400k before a developer snaps it up to flick it off at a profit.

But raising the cap will fuel market even more making desperate first time buyers trying to overbid everyone. Maybe opting for less sunny part of the city and/or acquiring some DIY skills is better than stretching yourself for extra 100k of debt plus 30 years of interest.
And btw making unconditional offers in their situation is a bit reckless.

it is difficult for first time buyers..yes they can borrow money and yes there are cheaper properties out there for investors buy..trouble being banks will not loan money out to the kids if they need work, plus they cannot borrow extra money to update properties themselves.
So, they are in a no easy win position.

Fear not young Alison. We are in a recession. Before the pandemic there were but 160 houses for sale in Dunedin. Now there are over 350. Come September/Oct, when all the Gov handouts and bailouts finish, expect well over 400+. We haven't even begun to fell the full economic fallout yet, and remember it's a global thing, not just a little ol NZ thing.

Do not buy now.. we are in for a good size correction in house prices..
You do not want to be sitting on a $400k loan and watching your house price sink by 20% plus..

How about...don't buy? If you really can't afford it, don't go scraping for more bad lending. I'm not sure why there is a whole generation of FTHB looking for even more dept. Exit the market. FTHB make up about 20% to 40% of the market. I guarantee that if even a fraction of those people saying they can't afford actually stepped out, you would see a price response.

By not raising the cap the govt are effectively undermining a sense of community in Dunedin and turning it into an investor market where slum lords, not people flourish. This is a slap in the face for an area that has been loyal to labour for years. We are being used as a sacrificial lamb for out of town investors to park their cash with no regard for how that effects community--the people that live here. It's a system designed to keep investors out of other cities and dump them all here. It's a scandal and a disgrace to be treated like this.

Check out this post about it on Labours Facebook page. I agree there needs to be a petition of some kind.

https://www.facebook.com/NZLabourParty/

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