Got a little sun today.
When you’re inside and working from dawn to past dusk most days, and then spend your occasional day off asleep on the couch in front of old Law & Order DVDs, “getting a little sun” means going outside for 20 mins and being burned to a crisp. Show people are all vampires.
The fact is that we got around a few less properties than I’d hoped today. We ended up spending a lot of time wandering around one particular subdivision and envisaging what we could build there. In the process, we missed two open homes because time got away from us.
It’s near two white sand beaches. It has views out over both. Each lot is a big enough chunk of land to have a little orchard and probably a goat. It’s bordered by a natural stream planted with native trees. It’s a long drive from the city, but certainly holds appeal as a retirement/summer home/place to raise kids in the fresh air. If we bought a section and built there, I think a few friends and family would want to come and stay just so they could stare at a New Zealand beach. It’s very serene.
My big problem (like lots of people, I guess) is that I see a place that I like and then in my brain I’ve instantly designed the house, built it, moved in, planted a huge garden, raised generations of animals, shared holidays there with everyone I love, renovated, started a B&B, retired, taken up pottery and died within 10 minutes of driving off the lot. And then it sells to someone else before we can get the finance together, and my whole life plan seems ruined.
Tomorrow I am going to call the bank. And the builders. And a couple of plumbers. And if the bank don’t want to play, then I’ll try some bridging finance companies. As with any new build, the problem is cash flow.
See, from the bank’s perspective, a rural section is “unserviced”. What this means is that, like most rural properties in New Zealand, it is not connected to a main sewer or water line because there simply isn’t either service available on that road. Any house would need a rainwater tank and a septic tank. This means that the bank will only lend up to 50% of the section’s value… which puts it just out of our reach.
However. It doesn’t actually cost that much to put in a septic tank and rainwater tank – only around $20-25,000. You just need to have a drainage plan and a plan for your house (both size and location). After the major plumbing stage has gone in, even if the house isn’t there yet, then the section becomes “serviced” and the bank will lend up to 80% of its value – which is well within our reach, given what we have available as a deposit. So what we need is a short-term loan to cover the other 30% of the land value, and then after the plumbing is done and we’ve refinanced the mortgage, we need another short term loan to cover the build of the house. What we’d end up with is a property where roughly half of the cost is in the land, half of the cost is in the house and development, and our equity accounts for 20% or more of the value… and then the bank will be happy and we’ll be paying a mortgage that roughly the same as what we’re already paying in rent. The end result looks tantalisingly achievable, but getting there may be a bit thorny. It’s a peach tree in the middle of a bramble thicket right now.
This is precisely why so few people are building in Auckland at the moment. It’s not simply a lack of available land – there is still plenty of land if you know where to look – it’s a lack of speculative finance. This is what’s pushed property values in Auckland up to the point where they’re currently averaging around 20 years’ salary for an ordinary person (average property price is over $900,000 while a New Zealanders’ average income per annum is around $45,000). And with values going up around 20% per year, the average house is actually earning more than Rob and I combined. If you already have a house in Auckland then you’re doing well. Really well. But if you don’t have a house then good luck getting one now. Eventually it will reach the point where we’re all peasant serfs working under feudal landlords.
It makes sense to buy – even to buy in a desperate panic – just to secure a solid future. It’s either that or end up renting forever and dying in penury. We don’t have any kids to pass on our assets to, but there are a few nieces and nephews that we like… and hopefully they’ll visit us in the nursing home if we can bribe them.
It pays to plan ahead, doesn’t it? That’s what property is all about… That and planning how our furniture will fit in our imaginary living room, and picking out colours for the imaginary kayaks that we’ll use on our imaginary trips down to the very real beach in our imaginary future…