40 House Buying Tips
How to buy property in New Zealand
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Buying a house or apartment is likely to be the biggest purchase of your life, so it’s important to have a good understanding and maximize your bang for buck from day one. Small mistakes and misunderstandings can cost BIG later on, and cause unnecessary amounts of stress and uncertainty. Our team has put together a fool proof house-buying guide, with 50 clever tips to give you everything you need to know.
This guide includes what to look out for and everything to ask when you make the jump into home ownership.
Disclaimer
As with all our guides, we have made all reasonable efforts to ensure accuracy. The guidance does not constitute legal advice for your personal circumstances. By using this guide, you do so at your own risk.
This guide includes what to look out for and everything to ask when you make the jump into home ownership.
Disclaimer
As with all our guides, we have made all reasonable efforts to ensure accuracy. The guidance does not constitute legal advice for your personal circumstances. By using this guide, you do so at your own risk.
New Zealand Houses - A Warning
Our view is simple: buyers should focus on making sure their home purchase is affordable today and in the long term, before panicking and overstretching financially in an attempt to buy into “the Kiwi dream”. Despite what anyone (and everyone you know might be saying), no one can predict what is going to happen to house prices in the next few years. By focusing on financial security first, buyers can avoid a mountain of debt and regret, and instead comfortably climb the housing ladder.
Mortgage lending is New Zealand’s biggest debt, and a mortgage will be most people’s biggest single financial commitment, often spanning half of their adult lives. Small differences in how much you borrow can have a massive day-to-day effect on your life.
- Since 2007, prices across New Zealand have risen to all-time highs, surging in Auckland, Hamilton, Wellington and Queenstown, with significant jumps in the regions as well.
- This has been led by intense competition for existing property as demands exceeds supply and an ongoing media frenzy, despite record new house building consents being issued.
- The end result has led to a difficult game for anyone trying to buy. Mortgages often require 10% to 20% deposits and with the average price in Auckland around $600,000, this can be as much as $120,000.
- Today, with new legislation limiting foreign ownership, prices have begun to cool off and buyers can take a breath and decide when and where to buy.
Our view is simple: buyers should focus on making sure their home purchase is affordable today and in the long term, before panicking and overstretching financially in an attempt to buy into “the Kiwi dream”. Despite what anyone (and everyone you know might be saying), no one can predict what is going to happen to house prices in the next few years. By focusing on financial security first, buyers can avoid a mountain of debt and regret, and instead comfortably climb the housing ladder.
Mortgage lending is New Zealand’s biggest debt, and a mortgage will be most people’s biggest single financial commitment, often spanning half of their adult lives. Small differences in how much you borrow can have a massive day-to-day effect on your life.
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The higher your deposit as a percentage of your house price, the better the mortgage deal you can getFearing a housing crash, previous government forced banks take a deposit of at least 20% from home owners in an effort to protect banks if house prices sink. The good news is that this 20% can be paid in cash and/or KiwiSaver money. And with the rules of mortgages, the higher the deposit as a percentage of your house price, the lower the mortgage interest rate. While 20% sounds doable, it’s still a huge chunk of money for the ordinary Kiwi - 20% on a $800,000 house around Auckland is $160,000, 20% of a $650,000 house in Wellington is $130,000.
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Budgeting for Your Move
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Understand and Plan for the True Cost of Buying a PropertyBuying a property is not a straight forward process, and it’s almost guaranteed to cost a lot more than you think and items won’t be covered by your mortgage. We list below exactly what to factor in a number of fess you need to stump up to get a house purchase over the line:
We itemise these in detail below so you know just how much to set aside. |
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Conveyancing/Legal fees - covering the legal process of buying a propertyConveyancing is the process of transferring the ownership of the property from the seller to the buyer. The steps are straightforward; a lawyer verifies that the property you plan to buy is in fact owned by the seller and that it's free of legal issues. A lawyers examine the draft contract and supporting documents and raises any issues with the seller's lawyer.
A series of legal 'searches' are performed to make sure there are no hidden issues, i.e. is a road planned to be built through the front garden? Was the property subject to a leaky building settlement? How much?
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Mortgage arrangement or establishment feeNew Zealand banks and credit unions charge a fee to 'arrange' or 'establish' a mortgage, on top of the interest rate. This fee is non-refundable fee even if you change your mind later on and don't go ahead with the mortgage. The fee is designed to cover the paperwork that comes with a mortgage.
How Much?
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Valuation report, (valuing the property for the purpose of making an offer)This fee is optional, but recommended to get an accurate value which assists with making an offer. Without a valuation, it's harder to have a firm This can be better than websites like QV.co.nz or homes.co.nz which don't give detailed reports offer local expertise.
How Much?
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Pre-purchase home inspections thoroughly check the condition of the propertyAs New Zealand has a poor reputation for the quality of housing, it makes sense to invest in a property inspection report to avoid buying a problem house. Leaky buildings are just the start - meth contamination is also something to watch out for. If you want peace of mind, look for a building inspector whose report offers:
How Much?
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If you own a lot of stuff, budget for removal costsUnless you have minimal stuff and can fit them into a car, or have a close friend or family member with a van, you will need a removal company.
How Much?
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Set some money aside for unexpected DIY repairsMany new home owners find they need to DIY a few things which they didn’t expect, specifically plumbing, roofing and painting. Many things are probably passable, but sometimes
How Much?
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Budget for decent furniture and essential itemsIf you currently live in a furnished flat, you're unlikely to own a lot of furniture (if any at all). If you do own furniture, make an estimation as to whether or not it's enough. If you're leaving a rental property for a bigger property, extra beds, bed-side tables, tables, chairs and bookshelves are probably going to be needed. And then there are the less exciting pieces - light bulbs, lighting shades, indoor plants, door mats and plates and cutlery if you don't own any.
Many people make the mistake of getting less-than-desirable items as a filler, hoping to soon upgrade once they're settled in their new house. This can be problematic as priorities once owning a home change and replacing furniture can fall from the top of the list. For this reason it is worth considering making an upfront investment in items you see as being in your home for the long-term. The upfront cost will be higher, but you'll save the hassle and expense later on. How Much?
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Nail the Property Hunt with Must-Do Actions
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Have a Mortgage Budget and Leave Some Decent Breathing SpaceUnsure of what you can borrow and how much you can afford to pay on a mortgage? Use this recommended mortgage calculator. Remember, banks want to sell mortgages and while they need to be responsible lenders, there is a risk you could borrow more than you can really afford – don’t listen to them. Do your own budget and be realistic – mortgage struggles are rife all over New Zealand and it creates a lot of stress and tension in any relationship. Having a manageable mortgage is an undeniable way to live happier.
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ONLY View Properties you CAN AffordIt’s pointless having unrealistic aspirations about house hunting. While a fair few homes are marketed as auctions, you can easily find out a price range from the agent. Be prudent – there’s no point in wasting your time and the seller and agent’s time if you can’t afford the price. Agents will remember you and it may cost you more.
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Don’t Muck Around an Agent - They WILL Remember YouNew Zealand is small, and agents talk among themselves. No matter the shape of the market, you will be remembered if you stuff people around and it may make it harder to negotiate if you have a bad reputation. Don’t make an offer if you have doubts, and always be responsive to an agent if you’re serious about a property. Be honest,
David, a MoneyHub reader, recounts: "I offered a reasonable sum of money for a house in West Auckland, but then after thinking about it I changed my mind. I ignored emails from the agent, so eventually they dropped me. I then went to visit another open home in the same area, loved the house and then made an offer before finding out it was the same owner! He wouldn’t deal with me unless I put down a non-refundable deposit. I got the place but was on the back foot throughout the process. Learned from that one". |
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Look at free house sale price data to get an idea of recent sales and pricesKiwis are now very savvy with online tools that isolate and value property. This information is available free of charge in most instances. Popular sites include:
Expert Tip - You can also search the address, and use Google cache to see deleted property adverts with all the pictures and prices. |
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Be Familiar with the House Buying Process BEFORE Visting Your First Open HomeIt can be an easy road, from looking online for a property to getting the keys and moving in, but it depends on how much you know about the process. Generally, the steps involved are in this order:
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Build up your credit score well in advance of applying for a mortgageYou will usually be given a mortgage if you meet the following criteria:
The 'suitable credit score' factor is important, and to make sure the credit history lenders see is correct, it's worth spending $10 to $20 to access your credit history. Read our credit score and credit history guide for more information. |
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Be proactive and arrange a “mortgage in principle” (MIP)Banks offer a “mortgage in principle” (MIP) which is a provisional amount you can borrow once you find a property. This lets you shop for a home within the dollar amount. An MIP has a time limit, and does not fix the interest rate you’ll be charged. Having an MIP in place gives you the confidence to make an offer, as any offer you make will not be conditional on financing.
How does an MIP work? David and Sarah go to their bank and ask for an MIP. They show their bank statements, pay slips and show that they have a $150,000 in savings and KiwiSaver balances that they can use for deposit. The bank assesses everything and gives them an MIP of $600,000. This allows David and Sarah to look for a house of up to $750,000 (their deposit of $150,000, plus the $600,000 MIP). How Mortgage Brokers can help If you prefer to talk to someone who is not a lender, making an appointment with a mortgage broker can be helpful. Besides working for you to find the best mortgage deal, they can give you an idea of how much you can borrow. |
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Know For Later: Remortgage When Your Interest Deal ExpiresWhen your mortgage deal expires, it will usually jump to the bank’s floating interest rate. In almost all cases, the current mortgage rate deals will be much cheaper, between 1-3% currently.
A 1% reduction in your interest rate on a $300,000 mortgage will save you $3,000 a year or $250 a month. It’s big money, and you should mark in your calendar a reminder a month or two before your current mortgage expires so you can research the best deal and switch with precision saving you money. |
Picking a Property - Do Your Homework and Get the Best Property
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Scope out the neighbourhood
As your property is your largest purchase, location location location what matters most. You may love the home, but if you don’t love the area you will never be able to move it. Visit the neighbourhood at different times, specifically in the evening after work and during the weekend and be on the lookout for clues. Is there a lot of graffiti? Noisy cars/traffic noise? Traffic jams? Do you like the local shops? Is there a supermarket close by? Public transport? What are the restaurants and bars like? Are the cars clean and well cared for, or burnouts? Are there local parks for families, playgrounds, quiet safe roads? You can even have a holiday in the area by booking an AirBnB for a night and survey the area, asking your hosts what it’s like. It’s not creepy – the investment justifies your research! The Police give statistics on crime, so look at these. Also, check the government school reports (NAME) to see the school decile and achievements. Google the area, searching under “news” to see what exactly has been happening. 'Sun Map' the property
We love a north facing property, with plenty of sun and the idea of a perfect lifestyle. To see when the sun hits your house (and leaves it) at any time of the year, check out http://suncalc.net/. Any day of the year is covered, so you know exactly how much sun you’ll get on cold winter days and warm summer nights. If the sun map doesn’t deliver what you’re looking for, you can move on to another property. 3. Google the address
This may be an obvious step, but Google can reveal the most surprising things about a property, from crime information to old photos and real estate agent listings. Before you go into any property sites or buy valuation reports, a simple eye over the search results will better inform you of the basics. 4. Use the best property finders
The internet has made the Property Press and agent windows far less relevant, and do not be intimidated by asking prices as there is a big difference between what a seller wants and what they will get for their property. To be in the know, register with local real estate agents who can then give you first dibs on a new property. This gives you the upper hand, and beats waiting for it to show online. Trademe Property – the biggest collection of listings Realestate.co.nz – second only to trademe when it comes to comparing homes available for sale. Valuations NZ Get in the Know - Ask the agent for the cold hard facts
Before you make an offer, you need to ask key open questions and get the answers in writing if possible. When it comes to buying a property, information is your biggest advantage! We have a list of 20 hard-hitting questions to ask your agent:
6. Take Photos at the Open Home
An open home is the best opportunity to photograph the property, so after politely asking the agent if it’s OK to snap away, take photos of everywhere you visit. Re-visiting the same rooms/areas in the same viewing helps you take more in, beyond what you photographed. Best of all, the photos will be useful later on when you’ve visited a few properties and need to be reminded. Also, if the open home timings vary, visit at different times to see how much sun comes and any flaws in the home, where as early evening indicates better as to what the neighbourhood is like – does the neighbour blast techno when he gets home from work? 7. Follow an Open Home Checklist to Avoid Nasty Surprises
When you visit an open home, taking photos is important, but doing an inspection is critical. We’ve outlined some must-dos to tick off for every viewing. As you see more houses, you’ll become an expert! Make no apology, you’re investing hundreds of thousands of dollars so checking everything out thoroughly is essential.
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Visit the NeighboursIf you know of anyone who lives in the area, even a friend of a friend, visit them or set up a coffee with your friends who know them. Basically, ask around – everyone knows someone – so you’ll be sure to get the best insights if you put in the efforts here. Ask what the area is like, ask what the seller is like (if they know of them), and ask what changes are likely to happen in the area over the next few years.
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Don’t Underestimate the Importance of ResaleIt’s unlikely the house you buy will be the one you live in forever. You may want to go for the lifestyle block with the long commute, but it will be a lot harder to sell than a four bedroom house close to good schools. Ease of resale is really important. And it’s not just location, it’s also the asthetics of the house. No one wants a house with a bathroom attached to the kitchen, nor do they want a house with a neighbour’s spa pool humming loudly beside the kids bedroom. What you tolerate will be different to the mass market.
As moneyhub reader Annette writes: My brother and I spent a lot of time and money renovating a beach house both our families could use. However, our kids got older and married and by the time we wanted to sell it there wasn’t much of a demand. We had spent more than we sold it for, and that’s before taking into account our time invested. Location really is everything. moneyhub’s reader Maria says: We bought an apartment with a big support column through the lounge. It was significantly cheaper than the other apartments on the plan, but I know that when we sell it that column will be talked about! |
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Find Out How Long It’s Been for SaleA property that’s been for sale for a while can be a red flag. Is something not quite right with the street, the neighbours, the noise or something else? Ask the agent how long it has been listed for.
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What to know about buying a house at an auctionInsert text
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There may be a Possibility in Arranging a Private SaleIf you like a certain area and can’t find the house you want, it may be worth junk mailing a street you would like to live in with a letter saying you want to buy a house. It’s not done often at all – most of the letters people receive looking for property are from real estate agents. Your sincerity may just strike a chord with someone who was thinking about listing their home. It’s worth a shot; private sales aren’t common in New Zealand but things are changing with the launch of https://www.sellahouse.co.nz and the general state of the property market.
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Beware of expensive property management/body corporate chargesAs the saying goes, people spend other people’s money freely. Property management companies can select insurance, services and maintenance contracts that pay the most commission and not deliver the best value. Beyond verifying the annual service charge, ask for financial statements so you know exactly what time of position the property is in. If there is no spare money for improvement works, then you as the owner will be liable for a share which can be tens of thousands of dollars. In short, apartment hunters MUST get annual charges in writing before buying.
Also recommended is a Google of the property management company – does it have complaints or a bad history? You are free to ask apartment owners in the same building their views on the service provided – is it excessive, slow, substandard or dismissive? |
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Get Quotes for Conveyancing – Don’t go with the first lawyer you contactConveyancing is the legal process that transfers property from one person to another. Lawyers all over New Zealand offer this service, but fees can vary. There is a bit of work involved (legal property searches, paperwork preparation and contract drafting) and you can’t DIY the process nor can you risk getting a bad lawyer for cut price. Our suggested approach is as follows:
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Check what's being built in the neighbourhoodThe last thing you want is to find out is that the old house beside you is going to be bulldozed for a three story apartment block to be built. To know exactly what’s going in the area, contact your local council and ask them to provide you with all and any resource and building consents. It’s best to be aware of these things than stuck beside a building site or have your backyward overshadowed by a new development.
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How much to offer?There is no straight answer -
If the offer is accepted, the property will be taken off the market |
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Stay in contact with your lawyerA property purchase is a big deal to you, but to a lawyer it’s a standard transaction and lawyers are human too (despite their reputation) and will work at the pace of anyone else. You don’t want surprises so it’s best to check in with them if you’ve not heard from them for 3-5 days and they’re not waiting on anything from your side. Lawyers don’t like being hounded, but if you feel as if your lawyer is dragging their feet, give them a call and ask them where your file is at.
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Get an inventory of “Fixtures and Chattels” confirmed, in writingIn Section 1 of your Agreement for Sale and Purchase there will be a specification to list the chattels that will be included in the sale. These include items like a stove, fixed floor coverings, blinds, curtains and light fittings. You must specify other chattels you expect to be included, such as heat pumps, aerials, heaters and garage door openers. Don’t be caught out by not knowing what you’re buying - be thorough with what will be included, and get the list signed. Removing a fixture without agreement may delay settlement or cause the purchaser to claim compensation. A seller is also not permitted to remove an existing chattel and replace it with another one of lower value.
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Know when and if you can pull outYou can decide to
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Get quotes for required workIf the building report finds problems, ask a trusted builder for a quote to make the repairs. You can then ask the seller to either fix the issues before you exchange or ask for a discount off the final price.
If there are issues with damp or not, get a couple of professional opinion to make sure you’re not caught out. New Zealand houses have |
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Leaky Building? What to knowInsert text
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Top 10 last-ditch questions to ask sellersYour life will be easier if you remember to ask the previous owner all the essential questions before they give you the keys. To help, we've compiled a list of top questions to ask:
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Preparing for the Day You Own a Home
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Get quotes for movingIt’s likely you will need a moving company and https://www.smartmove.co.nz/ offers comparison quotes for moving. If you’re buying your first property, you might have less stuff to move so could get away with a man with a van and some friends. Make sure whoever you use is reliable – being stranded on move day by a no show is going to be a nightmare. Also packing takes longer than you think, and it’s a good chance to sort things out and throw away/sell what you don’t need.
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Be a Trademe warrior – sell what you don’t needWith a moving date fixed, if you can make the time you can make your move easier by selling what you don’t need in advance.
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Get home insurance quotesYou’ll need home insurance before you settle – get quotes as soon as possible so you’re protected from day 1 of owning your new property. Get as many quotes as possible, and read our Home Insurance guide (LINK).
<h3>Resist buying your bank's life insurance</h3> |
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Get the best broadbandComing soon
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Save money on electricityYou will need to sign up with a new provider – get the best deal by…
It’s essential that you take meter readings when you move in so there’s no disputes later on. |
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Look for furniture on trademe, Facebook groups and retailer salesIf you need additional furniture, don’t pay top dollar from a furniture shop when you can save $100s or even $1000s by going online.
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Don’t sign up to insurances offered by your bankBanks will offer all sorts of insurances such as mortgage, income protection, home, house and contents – it’s likely to be the best in the market, nor the cheapest. Politely consider the policies, but don’t be under any obligation to say yes to what they offer – their aim is to make more money of you, not provide you with the best deal.
If you have a spare room, or even rooms, you could rent then out and put the money you earn directly on your mortgage with minimal tax liability (CHECK THIS). The more attractive and well located your property, the more you can earn. Tax obligation??
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