Should I Buy A Section ASAP Or Save A larger Deposit?

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steve181

114 posts

Master Geek

#157658 8-Dec-2014 19:34

In two years time I plan to buy a small section in the general west direction from Christchurch within 30 minutes drive to the airport (Kirwee, Darfield etc).

This time next year I should have saved around $50,000. My max budget for a section is approx $120,000. My plan is to buy the section then place a tiny 1 bedroom home on it (prefabricated or possibly manage the build myself).

My question is should I buy the section this time next year with that deposit or should I wait another year (2 years from now) & put down an $80,000 approx deposit?

Obviously land isn't getting any cheaper but the sooner I buy the section the more interest I'll need to pay on the mortgage.

If I could see into the future & see that land prices in that area remained stagnant then it would be wise to wait the two years to put down a bigger deposit but on the other hand imagine if land prices sky rocketed?

Thanks for any input.

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2844 posts

Uber Geek

#1191765 8-Dec-2014 19:39

I would only buy if the section were exactly what you wanted, and there were no other options. You still need to maintain an empty section, and prices in that area aren't increasing as rapidly as others. I looked at the prices down there over about a 12 month period, and they didn't seem to move much. Of course, I'm in Auckland, so everything in Christchurch looks like a bargain in comparison.

scuwp

3885 posts

Uber Geek

#1191766 8-Dec-2014 19:43

Will the land be available in 2 years?
What services will be around the area then (will it provide what you are looking for?)
Does or will the land have any covenants (e.g. you may not be permitted to put a small or relocatable house on it)

As for section prices, it is a bit of a crystal ball. I don't know the area but if it is looking like an increase in services and growth is heading out that way, chances are the land will go up in value.

I haven't purchased land in a few years but mortgage lending was a lot less than a house (i.e. bigger deposit needed).

The rest depends on your personal circumstances and making the best guess after finding out as much as you can about the plans for the area.

Lazy is such an ugly word, I prefer to call it selective participation

steve181

114 posts

Master Geek

#1191777 8-Dec-2014 20:19

SirHumphreyAppleby: I would only buy if the section were exactly what you wanted, and there were no other options. You still need to maintain an empty section, and prices in that area aren't increasing as rapidly as others. I looked at the prices down there over about a 12 month period, and they didn't seem to move much. Of course, I'm in Auckland, so everything in Christchurch looks like a bargain in comparison.

scuwp: Will the land be available in 2 years?
What services will be around the area then (will it provide what you are looking for?)
Does or will the land have any covenants (e.g. you may not be permitted to put a small or relocatable house on it)

As for section prices, it is a bit of a crystal ball. I don't know the area but if it is looking like an increase in services and growth is heading out that way, chances are the land will go up in value.

I haven't purchased land in a few years but mortgage lending was a lot less than a house (i.e. bigger deposit needed).

The rest depends on your personal circumstances and making the best guess after finding out as much as you can about the plans for the area.

Both are very helpful replies! Thanks.

I think I'll arrange a face to face meeting with the Selwyn District Council to get my general questions answered about buying land within their jurisdiction.

From your replies & my own intuition the best plan of attack seems to be hold off for a while (so long as land value in the area remains mostly stagnant) to save the biggest deposit possible, however if the 'perfect' section becomes available jump on it.

oxnsox

1923 posts

Uber Geek

#1191836 8-Dec-2014 21:47

Selwyn is growing, especially in areas closer to the city (Rolleston, Westmelton, Lincoln) as the citu grows west away from the coastal red side of town. But if you're watching the market you know that.

30 mins to the airport takes you a long way across the plain so keeping an eye on what comes up is a good thing. Maybe also look out towards Leeston.
The southern motorway will reach Rolleston in the next few years so will make that side of SH-1 a little more desirable.

If you're buying for living, get in as close as your budget allows, petrol won't get cheaper in the long term. If you're buying for lifestyle and weekends, look a little further out to the foothills around Horarata, Coalgate. But I'd try and stay on the city side of the Rakaia as that bridge will increasingly cause delays.

itxtme

2102 posts

Uber Geek

#1191837 8-Dec-2014 21:53

Someone correct me if I am wrong, but I thought you cant insure land?? This would make this type of investment quite risky, given that you are buying in Christchurch!

Niel

3267 posts

Uber Geek

Trusted

#1191839 8-Dec-2014 22:05

12 years ago we bought an old tiny 2 bedroom house. 3 years ago we replaced the house with a brand new one, gave away the old one for removal at no cost to us. Doing that was cheaper than renovating/extending/moving. We even lived in the old house while building the new. Was a cost effective way of going to a 3x larger house. Having 2 places at the same time (including if one is rented) is not cost effective.

You can never have enough Volvos!

xpd

Geek @ Coastguard NZ
13765 posts

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Retired Mod

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Lifetime subscriber

#1191924 9-Dec-2014 08:40

Its never a bad time to get into the property market...... prices just keep going up, so that extra money you could save over the next few years is going to mean nothing really because the purchase price will be higher anyway.
Just make sure you can keep up with the payments, and after a few years you could look elsewhere with less hassle.

We bought at a time people were saying "dont do it, wait 3 months prices are dropping" - we bought a few weeks later.... 3 months later the prices started skyrocketing.

Gavin / xpd / FastRaccoon / Geek of Coastguard New Zealand

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Swanny

107 posts

Master Geek

#1191952 9-Dec-2014 09:12

I'd say subdivisions are all out as covenants vary from strict to crazy.

Most talk about no relocatable or prefab buildings and could have minimum dwelling sizing as well.

From memory you can only borrow to about 60% on bare land.

meesham

973 posts

Ultimate Geek

#1191956 9-Dec-2014 09:22

itxtme: Someone correct me if I am wrong, but I thought you cant insure land?? This would make this type of investment quite risky, given that you are buying in Christchurch!

That's correct, which is why the empty section owners along the river were unhappy with the forced buyback at 50% of GV.

wasabi2k

2096 posts

Uber Geek

#1192012 9-Dec-2014 10:59

xpd:

Its never a bad time to get into the property market...... prices just keep going up, so that extra money you could save over the next few years is going to mean nothing really because the purchase price will be higher anyway.
Just make sure you can keep up with the payments, and after a few years you could look elsewhere with less hassle.

We bought at a time people were saying "dont do it, wait 3 months prices are dropping" - we bought a few weeks later.... 3 months later the prices started skyrocketing.

I have to heartily disagree. Buying at the peak of a bubble is an incredibly bad time to get in to the market - there were plenty of people with mortgages greater than their property values after the last crash. Identifying those peaks and troughs (to sell high buy low) is the challenge.

Property is cyclical - with an overall long term increasing trend.

Over 20 years, the value will increase.
In 3-5 it depends entirely on the market.

Your anecdote is great, but should be balanced with the people who did wait months, then saw prices drop. There are way too many variables in play - some macro-economic, some geographic.

OP: Please make sure you talk to someone who offers this advice professionally.

steve181

114 posts

Master Geek

#1192340 9-Dec-2014 18:29

oxnsox: Maybe also look out towards Leeston.

If you're buying for living, get in as close as your budget allows, petrol won't get cheaper in the long term. If you're buying for lifestyle and weekends, look a little further out to the foothills around Horarata, Coalgate.

Leeston is definitely on my radar, I haven't seen any sections there for sale though to date.

I am buying to live on the land so getting as close to the airport (I work nearby) as possible is important but it's a balancing act because section prices rise somewhat steeply the closer you get to the city compared with the foothills. There is some awesome sections in Hororata (almost 100k = 1000m2) but of course it's a 35 minute drive to the airport. It's hard to let go of the sections all the way out there when I remember that all 100k (which is hard earned money for me) will get me in the city is a ghetto Aranui 400m2 TC3 section next to a gang headquarters. I haven't done the math but if a really fuel efficient motorbike turns out to be about 50% cheaper to run than my car I would consider selling it for a bike which would make living in places like Hororata less radical in terms of commuting cost.

Niel: 12 years ago we bought an old tiny 2 bedroom house. 3 years ago we replaced the house with a brand new one, gave away the old one for removal at no cost to us. Doing that was cheaper than renovating/extending/moving. We even lived in the old house while building the new. Was a cost effective way of going to a 3x larger house. Having 2 places at the same time (including if one is rented) is not cost effective.

I'm pretty sure that wouldn't work in my situation. For example if a house on land is $300,000 without the house lets say the land is worth $200,000, that means if someone removed the house for free I have lost $100,000 into thin air unless there is a market for people to buy old, crappy houses for 100k inc removal costs.

Swanny: I'd say subdivisions are all out as covenants vary from strict to crazy.

Generally I've been completely avoiding subdivisions when I've been window shopping for sections. In saying that a friend of mine who lives in Lake Hayes Estate, Queenstown showed me a tiny dwelling (slightly bigger than a caravan) sitting on a section there on 6 concrete blocks. Remarkably it meets the covenants & Queenstown council laws.

wasabi2k:
OP: Please make sure you talk to someone who offers this advice professionally.

What type of professional would be best for me to speak to? Like a real estate agent?

mattwnz

20142 posts

Uber Geek

#1192344 9-Dec-2014 18:48

How does your council rate you? Some will rate on land value, so you end up paying the same rates for an empty section, as you would if it had a house on it. Is the land good value, and if you miss out, are you going to struggle to find land at the same price and probably most importantly, in the area you want it.

Niel

3267 posts

Uber Geek

Trusted

#1192429 9-Dec-2014 22:16

steve181:
Niel: 12 years ago we bought an old tiny 2 bedroom house. 3 years ago we replaced the house with a brand new one, gave away the old one for removal at no cost to us. Doing that was cheaper than renovating/extending/moving. We even lived in the old house while building the new. Was a cost effective way of going to a 3x larger house. Having 2 places at the same time (including if one is rented) is not cost effective.

I'm pretty sure that wouldn't work in my situation. For example if a house on land is $300,000 without the house lets say the land is worth $200,000, that means if someone removed the house for free I have lost $100,000 into thin air unless there is a market for people to buy old, crappy houses for 100k inc removal costs.

I guess it is a bit different in Aucland where there is virtually no (good) land left, only landfills. Was under the impression Christchurch was similar in that lots of land is not suitable for building, or maybe old houses are worth more due to the shortage of builders. We struggled to give away the 2 bedroom 1960's house, but was cheaper than a $10k demolition cost.

You can never have enough Volvos!

TLD

902 posts

Ultimate Geek

#1192443 9-Dec-2014 22:39

We 'almost' bought a section with a view to building new and moving closer to town. We got as far as a conditional offer, but the more we looked into it, the more we discovered it would cost to build. If we'd put the new build on the market as soon as it was finished, we'd have made a huge loss! In our case we were up against the Marlborough District Council putting a substantial fee onto the each new section sold, so we were looking at $255 just for the section.

We also looked at other rural locations, which would have added a well and septic tank to the build cost. We had to pay $6000 for a new well where we are last year! In the end we decided the project was madness, and we discovered how much we liked living where we are.

Trevor Dennis
Rapaura (near Blenheim)

Fred99

13684 posts

Uber Geek

#1192480 9-Dec-2014 23:08

Niel: Was under the impression Christchurch was similar in that lots of land is not suitable for building,

That's an incorrect (yet widely held) belief.
There are about 8 thousand sections in Chch "red-zoned" (about 5%).
The vacant (farmland) surrounding Chch if drawn in a semi-circle centred on Cathedral Square but transecting Rolleston (not as far out as some of the suggestions for the OP, Oxford etc) could probably accommodate the entire population of NZ at low to medium-density housing level.
There is no shortage of land - only a shortage of political will to do something to free it up.
Compounded by the fact that people buy homes out in the sticks, then complain bitterly that councils (ie "other" ratepayers) don't want to stump up the vast amount of money needed to provide them with rapid rail systems, new motorways, and other services to make their "cheap country life" less stressful. That is not sustainable - nor desirable - and local or central government will oppose it.
For obvious reasons, there's been westward drift in Chch, as affordable building sites for the displaced from the East is a problem. Many of the worst hit areas had mainly low-income households, these "new buyers for sections" in the market in no position to borrow the kind of money that an average double-income "household unit" elsewhere might be prepared to do. But counting on that to continue as a future trend may be a big mistake.

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