I have been a little bit surprised recently seeing evidence of Wanaka property buyers making what appears from the outside to be uneducated and poorly informed choices.
Is it panic buying after missing out for months, or just letting the heart lead the head? There seems to be no rhyme nor reason as to the choices that some buyers are making when it comes to purchasing, when I try to analyse from afar.
Late in 2018 a few sales didn’t make great sense to me. There were options around for very similar properties that were comparably great buying compared to what was paid for other similar properties within a similar location.
I witnessed a property that top money was paid for, presumably because it was new, and it was then tenanted out long term. The premium paid for a brand-new house does not translate into rental income and certainly leads to a depreciating asset and reduced yield.
I saw a similar example the year before and thought that this buyer was desperate to get a home for a relocating family, but once again this property got rented out. I drive past it and know that the premium paid for the lawns and gardens was wasted on tenants.
Understanding the market helps. The best yielding property is a 4 bedroom house with a garage. Seeing a high spec four bedroom home get passed in at auction and eventually going for a pretty good price, when premiums are being paid for homes that local knowledge has you know are spec builds on a tight budget, with 3 bedrooms, just doesn’t add up.
The odd rogue buyer here and there does nothing for the rest of the buyers wanting to get into the market sensibly. Being quoted certain properties as comparable sales during a marketing campaign does frustrate me somewhat.
Price brackets also make an enormous difference to what you can get for your money. As the price creeps above $1.3 – $1.4 million there are far fewer buyers in the market. Reduced competition certainly means that buyers get a significantly greater bang for their buck than the buyers in that $1.1 – $1.2 million market. The past 2 years have really accounted for a significant rise in the median house price in the Wanaka, Queenstown and Arrowtown property market.
I know Wanaka property buying from afar is difficult – but sometimes taking local advice from someone with their eye in is a great investment. Real estate is one of those investments where a little ill-informed action can cost you a significant dollop of cash. Lemons need to be taken out of any transaction equation.