New Zealand - The Good, The Bad and The Ugly.

[hayleyearth]

I did some quick comparison between the R10m vs $1m debt scenario

 

(all the above and below based on a 1:10 exchange rate).

 

In SA a R10m loan at 7% interest (current rate) over 30yrs would mean:

• R66,500 pm repayments
• R23,950,890 (~140%) paid over the total term

In NZ a R10m loan at 3% interest (0.5% above current rate) over 30yrs would mean:

• R42,160 pm repayments
• R15,177,750 (~52%) paid over the total term

So not only is the monthly cost in NZ approx. 2/3 of what it would be in SA (making it far more affordable, plus in general salaries at a direct conversion are higher in NZ), but over the life of a loan one can see how "money is cheap" in NZ.

 

That 4% makes ALL the difference!

Let's hope it stays that way over the next say 10 years!!

[Wayne Potgieter]

Na, not auction, off plan.

We will continue with our interest to purchase. Let's see if we can move in in 9 months time.

 

(I'm Very scared about the huge amount of debt we will now go in.)

Which areas?

[hayleyearth]

Which areas?

The only area cycling distance from both our works with a new development is Wai O Taiki Bay. We got one facing the reserve in a cul-de-sac with an amazing layout opening to a park and sea view through the trees. So we settled for having to drive through the other 1000 houses :/

 

My sis is also enjoying staying in the area so for us it's the best option now.

 

Edit: just now the long wait till completion...

Edited November 5, 2020 by hayleyearth

[Saag]

Our current plan is to (try) and buy the land, which has a (big) two bedroom house on it already. That way we have somewhere to live while the main house is built.

 

If you play your cards right and manage to add more value than it costs, you can actually get the construction loan with no further deposit as the final value will be more than the cost to build.

 

But, if not, building up the deposit for a house build should be easier than for the land, which costs a bundle compared to the house.

 

Spoke to Signature homes for construction and they are quite happy to engage in trying to work out what will work out best. They say construction costs are 2.4k to 4k m2.

Dave, my friends took Signature to court and won (which barely made any difference) but they are notorious for being very very very slow.

[Saag]

I found out something interesting yesterday when talking with the bank.

 

When building, essentially you have two main options.

 

1. You buy a turnkey landand build, you put down 10% and the balance pays out to the developer when certificates of completion are done.

 

2. You buy land, and then appoint a builder to do the work - banks view this as a construction loan. You pay 10% on the land, then the bank settles when the deal goes unconditional, you begin to pay interest on the land mortgage. While that is going on, you pay 10% to the builder, and the bank pays the builder in staged payments through the build. Again, you only pay the interest on that mortgage.

 

Generally speaking, you get more bang for your buck with option 2. Reason being, is with option 1, the developer has to buy the land and front 100% of the costs of the build. He is only paid out 9 months later and he has probably borrowed that cash. So he will be seeking a higher profit margin for his work. Because the house has a certain value as dictated by the market, the highest probability way to increase margin is to build slightly smaller and for lower specifications to create that higher margin.

 

So, if you can afford the interest on the mortgage while renting, option 2 provides a better return. This means that in the time that it takes to build, your investment will grow a little more than a standard turnkey.

 

I found that rather interesting.

 

EDIT:

There are downsides, time to completion on option 2 is about 3 months longer as plans need to be drawn up and sent to council. Also, you are facing higher risk as the builder starts already getting paid, so partnering with the right builder is essential.. Turnkey has less of these risks.

Wayne, some developers only settle a couple of days before you; the end customer settles. So until then they are also only out of pocket for the deposit only

Edited November 5, 2020 by Saag

[davetapson]

Dave, my friends took Signature to court and won (which barely made any difference) but they are notorious for being very very very slow.

Damn. Friend of mine used them, very happy, which is why I went to them.

 

Probably franchise related.  Whereabouts did your friends build?  Please don't say North Shore...

 

Edit:

Tony Alexander warning building companies they are going to run out of staff - if they are slow currently, it's not going to get better...

 

Edit2:

20 out of 29 houses in auctions today (Auckland, North Shore) got passed in.  The weather is filthy, but that can't be the reason.

Edited November 5, 2020 by davetapson

[Saag]

Damn. Friend of mine used them, very happy, which is why I went to them.

 

Probably franchise related.  Whereabouts did your friends build?  Please don't say North Shore...

 

Edit:

Tony Alexander warning building companies they are going to run out of staff - if they are slow currently, it's not going to get better...

Past north Shore - Hibiscus Coast (Stanmore Bay).

 

 

Seeing the same in Milldale - the lots with SIgnature signs on are just laying there and all the ones around them are going up.

 

These friends bought in Mariner Rise (you will find it on Google). They eventually moved in 13 months AFTER the original plan.

 

I just finished with Golden Homes. My feeling towards them is neutral. They were really quick, but some other areas of interaction sucked again - but then it might just be my SA mentality if you spend the above mentioned R10-12milion you should be treated like a VIP, but sadly below $1.5M, you are just another customer :-)

 

Other friends bought from  Highmark homes, and they were very happy (Milldale)

 

Yet another friend is using GJ Gardener, and around 40% complete. He also seems fairly happy. They are known to be more budget friendly.

 

 

I guess we will all have different stories and opinions and might be down to who your site supervisor is in the end.

[Wayne Potgieter]

The only area cycling distance from both our works with a new development is Wai O Taiki Bay. We got one facing the reserve in a cul-de-sac with an amazing layout opening to a park and sea view through the trees. So we settled for having to drive through the other 1000 houses :/

 

My sis is also enjoying staying in the area so for us it's the best option now.

 

Edit: just now the long wait till completion...

Its actually nice on the other side of the bay. Glen Innes used to get a bad wrap, but its really coming along. Lots of money being spent on improving the neighbourhood. Its a good investment as its increasing in value almost daily and really quite central. 

[hayleyearth]

Its actually nice on the other side of the bay. Glen Innes used to get a bad wrap, but its really coming along. Lots of money being spent on improving the neighbourhood. Its a good investment as its increasing in value almost daily and really quite central.

Yip, the end of last year we were looking at a house there, kinda in the same profile than what we are getting now (minus reserve view). That one would have been $800k, now those topically go for $1.16m.

We have to cough up a bit more now and I'm kicking my bum not for engaging last year when I thought the price was to high... Ummm

 

We love the area we are staying in, but most of the things we love (waking distance from beach, cycling to work & school for one of us now only, nice windsurfing spots, close to public transport to city) we can have that side too. With a few extras (nice view, new warm house, cycle into city/work, more windsurfing spots). The ONLY negative thing we have is now we have the best schools in our zone, there we will have to go for other options Catholic/ Montessori/hope we make the ballot/become a school board member. I've phone each and every school there that's out of zone and all said there's a possibility to get Layla in even if she's out of zone, so I feel more relaxed now.

[intern]

Uh, guys, sorry, I can't make the MTB jaunt to Rotorua this weekend because I got one of these off a mate and have to go fetch it in Auckland tomorrow morning:

 

[intern]

Uh, guys, sorry, I can't make the MTB jaunt to Rotorua this weekend because I got one of these off a mate and have to go fetch it in Auckland tomorrow morning:

[Wayne Potgieter]

 

Uh, guys, sorry, I can't make the MTB jaunt to Rotorua this weekend because I got one of these off a mate and have to go fetch it in Auckland tomorrow morning:

 

Please tag as NSFW.

[intern]

Please tag as NSFW.

Good point Wayne...

[patches]

Let's hope it stays that way over the next say 10 years!!

 

I know right! The fluctuations have played in my favour so far, but I do worry about the future.

 

Our mortgage is split into parts to try benefit from fluctuating rates, as well as offer a little certainty.

 

• 47% fixed for 1yr
• 47% fixed for 3yrs
• 6% floating in an offset account

 

Given the historic low, when it comes to re-fixing the 1yr portion in about 6 months time, I may opt to fix for longer. The 3yr will be up for re-fixing a year after that.

 

NZ is a strange one where fixed rates are lower than floating. In SA (and in Aus I believe), it's the other way, and one pays a premium to fix the rate. Weird!

[DawieO]

Good point Wayne...

So as far as getting together for a bit of a catch-up and MTB’ing the Redwood forest goes... you okes pretty much sucked.

 

Fortunately the forest has been glorious today and should be great tomorrow too.

[bertusras]

I did some quick comparison between the R10m vs $1m debt scenario

 

(all the above and below based on a 1:10 exchange rate).

 

In SA a R10m loan at 7% interest (current rate) over 30yrs would mean:

• R66,500 pm repayments
• R23,950,890 (~140%) paid over the total term

In NZ a R10m loan at 3% interest (0.5% above current rate) over 30yrs would mean:

• R42,160 pm repayments
• R15,177,750 (~52%) paid over the total term

So not only is the monthly cost in NZ approx. 2/3 of what it would be in SA  (making it far more affordable, plus in general salaries at a direct conversion are higher in NZ), but over the life of a loan one can see how "money is cheap" in NZ.

 

That 4% makes ALL the difference!

 

Valid calculation, however, how much would a $1mil house in SA actually cost though, R3mil?

 

Edit 1:

 

In SA a R3m loan at 7% interest (current rate) over 30yrs would mean:

 

• R20,000 pm repayments
• R 7 185 267.00 (~140%) paid over the total term

Same proportion of interest no matter the cost though, which is where the real value lies. However you can't discount the local cost of equivalent properties.

 

(we're slowly considering a move to Aus so I've been a lot more interested in their market the past few weeks, and from an SA point of view it's scary, but once you convert back to purchasing power, it's not all that scary. Comparatively we're spending around 12% of combined gross income on rent per month. In Melbourne we're looking at around 12% to 16% of combined gross income. Which wasn't far off to my surprise.) Edit 3: In fairness it's a smaller apartment-type property to the duplex with garden-type property that we've got now, but I was surprised.

 

Edit 2:

 

And if you change the 30 to 20 years, it makes a massive difference to the total amount repaid:

 

In SA a R3m loan at 7% interest (current rate) over 20yrs would mean:

 

• R23,200 pm repayments
• R 5 582 152.00 (~86%) paid over the total term

Edited November 7, 2020 by bertusras