Kiwis are better off building homes from scratch instead of buying existing homes, due to high market prices that have already affected sales in some cities such as Auckland. ANZ economists said that existing home values in New Zealand had surpassed costs for construction and land.
However, property developers would require resource consents before they can pursue new projects, as Kiwis would likely choose to buy newly built homes.
Rising Home Prices
Land and construction prices have only increased 30 percent since 2012, as opposed to a 50 percent increase in existing home prices, according to the ANZ economists.
Take note that location can be a factor for the relative price difference, although building instead of buying residential properties seemed to be the general consensus.
This manifested through an increase in building consents. While building a new home is considered relatively cheaper, most Kiwis should expect that affordable housing would continue to be constrained particularly in Auckland.
Homes worth less than the median price of $900,000 will remain scarce, as the cost of construction excluding land reached $2,100 per square metre in February.
If you plan to sell a house, you experience some difficulty. In March, the Real Estate Institute of New Zealand (REINZ) said that sales fell almost 10 percent year over year to a total of 7,768 houses. REINZ figures showed that Auckland had affected the overall market.
Sales in the city dropped by 12 percent to 2,386 properties. It also took sellers more time to close a deal compared to the same month last year. Nationwide transactions closed within 34 days on average, while those in Auckland closed within 36 days.
Building a house from scratch may be a cheaper option than buying an existing home, although there are many nuances that you should consider such as land acquisition and resource consent.