That Home Loan Hub
Welcome to That Home Loan Hub, your ultimate guide to mastering the world of home loans and property. I'm Zebunisso Alimova, here to simplify the complexities of real estate and provide you with expert insights and the latest trends.
Whether you're a first-time homebuyer, an experienced investor, or simply curious about the property market, this podcast is for you. Join me each week as we unlock the secrets to property success and help you make informed decisions. Let's dive into the world of property together!
That Home Loan Hub
Navigating the Challenges and Rewards of Home Construction in Today's Market
Building your dream home shouldn't keep you up at night, yet for many Kiwis, the prospect has become increasingly daunting. With construction costs soaring and over 1,100 building companies folding in just two years, the anxiety is understandable. However, as we explore in this candid discussion, building remains a viable and rewarding path for those properly prepared.
For homeowners with different circumstances, various financing strategies can make building achievable. Those fortunate enough to own land outright with strong incomes can access traditional bank financing with relative ease. Others looking to remain in their current home while building might require bridging finance—a specialised solution that bridges the gap between properties. We share real client scenarios that demonstrate how different approaches work for different situations.
The conversation takes a cautionary turn when discussing those seemingly bargain land parcels that often prove deceptively expensive. Steep sections might come cheap, but can add hundreds of thousands in earthworks and engineering costs. We also examine concerns about imported building materials potentially creating future problems reminiscent of the leaky homes crisis. Whether you're actively planning to build or simply exploring options, our practical advice focuses on working with reputable builders, securing fixed-price contracts, and ensuring your financing strategy aligns with your specific circumstances.
Ready to turn your building plans into reality? Connect with us to discuss your specific situation and discover financing solutions tailored to your building journey. The perfect home may be just a blueprint away.
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Hello and welcome back. If you're curious about building, this is the episode for you. Stay tuned, I've got James on the line. Hey, james, yorah, I love it, james. We are going to talk about the build today, the big and scary and wonderful, because a lot of the time these days, people are scared to build. That's the common feeling that I'm getting, and I've built three properties myself. Enjoyed every bit of it. Some people hate it, so let's talk about builds.
Speaker 2:Cool. I mean I'm certainly not going to be somebody that ever does a build, it just looks way too stressful.
Speaker 1:I think I perform really well under stress. I create stress and then I perform really well with it.
Speaker 2:You just give it out to everybody else. So it's quite a good way to be. But yeah, at the moment, you know, building is going for a bit of a weak spot. So I know I have friends that work in the industry and I know it was starting to get a little bit busier, sort of around February, march, early in the year, and things were picking up and all of a sudden it just went pretty dead. But we actually have a couple of clients that are looking to build and with different backgrounds and different sort of requirements for what they need to get their build done.
Speaker 1:Okay, let's dive into this. So what are they doing? Okay, firstly, Client number one.
Speaker 2:The first couple own a block of land, a really nice block of land, and they've got pretty good incomes, very good incomes, and they're looking to build a really decent size, high value type home.
Speaker 2:So what's going to work for them is because they own land. They don't necessarily own the building. They don't need like a bridging finance or anything like that. They own most of the land, they've got good equity in that, they've got excellent incomes, so we're able to present a pretty strong application for them straight to any of the banks and they'll be able to get across the line for what they want. The other case is slightly different. They have an existing property which they own freehold and they're looking to build later in the year, but they want to live in their house. They don't want to sell it first, they want to live in their house until the build's pretty much finished. So it's a slightly different scenario that we're looking at there.
Speaker 1:Okay, interesting. And what sort of lending are they looking at in terms of bank support? How willing are the banks around giving money for bills?
Speaker 2:Yeah, I think in these two cases I know I've had an earlier case that got declined because the income they were trying to do the same thing but their income wasn't high enough to sort of satisfy the requirements. So it is seen as a bit more of a riskier adventure than you know, buying your first home, for example. So, it's a little bit harder to get across the line, it's not impossible.
Speaker 1:But more hoops to jump through yeah.
Speaker 1:And what I'm facing at the moment. I've got a client that wants to build in Christchurch. The land is pretty much vertical, yeah, and the challenge is there is that the lender wants to see fixed price contract, because if there is no fixed price contract, the client opens up themselves for a lot of trouble with earthworks and earth threatening and the client doesn't realize that this could be potentially, you know, in hundreds of thousands of dollars. And this is, you know, the client's first build. She hasn't built before. She just had a good deal on the land and she jumped in, bought the land with cash and now she's stuck with this land. And now I understand why that land was such a good deal.
Speaker 1:Yeah, I think someone just decided to flick it off because they realised how expensive it will be to build.
Speaker 2:And you're going to pay extra insurance once the house is built. Because what we're realizing too, because we've bought a house on not that steep but it does back off into the bush but the cost of rebuilding our house is a lot more expensive than what it would be if it was just a normal house, because it's on three levels and it's built into the landscape, so it's a lot more expensive to build. So our insurance has gone up a lot and you'll see that even with a lot of the retirement villages Now they are selling all their development land that's on land that's too tricky, too expensive to build on. That was possibly viable pre-COVID but it's not anymore.
Speaker 1:Yeah, and that's the thing. Right, the building price has increased. But hey, the good news is, you know, the government is doing something about the materials, and I think this is a whole episode in itself where I am really worried. I am genuinely worried because I feel like by opening up the doors to cheaper building supplies, it will create a similar problem we had back 20 years ago with Dux Quest Piping, for instance, where the pipes were brought into the country, installed, not really checked properly, and then we had a whole episode of leaky homes, and to me it's a concern. So if you are building, make sure you're building with reputable builders and you've got fixed price contracts and you are keeping an eye on what sort of materials they're using, because you don't want to end up with a leaky home in 10 years time.
Speaker 2:Well, I think it's the same old thing, isn't it? Every industry there's really good players, and there's, but there's also people that are not so good at what they do. So you, what you can't completely always, you have to do your own homework and research on on the builder or the or the developer to make sure you're getting the right people for you.
Speaker 1:Yeah, um, I think that's really important absolutely, and I mean, what did you say before we started recording how many developers went bust or building companies?
Speaker 2:I was reading it in one of the Wellington newspaper it was 1100. I think in the last two years Construction builders had gone out of work. Last two years, 1100.
Speaker 1:That sounds like an awful lot to me. That's a lot.
Speaker 2:And so that's a lot of unemployed construction people.
Speaker 1:Yeah, okay.
Speaker 2:I guess they're probably going to Australia and stuff like that, but even Australia is not looking quite as good as what it was.
Speaker 1:So if you are building, it's great, You're going to have a new house, it's going to be insulated, built to the code, built for today. However, keep an eye out on who you're building with, making sure that you do have a fixed price contract and if the lending is a bit tricky, come and see us. You know we will be able to find you a solution because we know other ways and tricks. But yeah, we have a couple of other clients as well. Between me and Kunsch and you, you know we've got, I think, a handful or more of clients that are building. So there are people that are building and taking the risks.
Speaker 2:And we'll do the best thing for the client, because even most recently we've got a client. What they require is bridging finance to get them through six months right. So as mortgage advisors we're not actually making any money from that, but that's the best solution for the client and that's pretty much what we do. We're not going to suggest the deals that are going to make the most money for us.
Speaker 1:Exactly yeah, as you say, we don't get paid for those. I mean there are other advisors that would probably charge a fee for bridging loans, but we don't, and I think that's also important to note when you are shopping around for advisors. Awesome, thank you guys for tuning in and we'll see you next time.
