Houses rise $511 a day - homeowners buy before they sell

Property Editor·NZ Herald·

4 Aug, 2015 05:00 PM4 mins to read

The Gluyas family, Nick Gluyas and Tania Gluyas, with children Mia, 8, and James, 6. The family are selling their house at 79 Fancourt St, Meadowbank, Auckland. 24 July 2015 New Zealand Herald Photogr

Auckland house hunters are buying new homes before selling their existing properties out of fear of being cut out of the spiralling market.

Buyers who take the time to look for the perfect new home after selling now face average price increases of $3575 a week - or $511 a day.

Harcourts chief executive Hayden Duncan says the trend emerges when listings are tight.

"We saw it after the earthquake in Christchurch when stock was scarce. Now, with Auckland's market currently favouring sellers, it's not surprising we're also seeing an increase in buyers holding off selling until they've bought another property."

But there are risks, he says.

Buyers who have not sold their current home may not know its true market value, and therefore how much they can spend on a new home.

Bayleys national residential manager Daniel Coulson said while there was no hard data on buyers purchasing new homes before selling their current ones, he had noticed more auctions were being concluded with longer settlement periods requested by purchasers.

"A standard auction document may have a 30-day settlement, but some buyers are asking for that period to be extended to give them time to get their home on the market and sold before they settle on their new home - this of course is subject to the vendors' approval, but it is becoming more common now than we have seen previously."

According to the latest QV figures released yesterday, the average house price for the Auckland region has increased about $3575 a week - or $511 a day - during the past three months. That is an increase of roughly 5.7 per cent.

"There can be a risk that they sell and then aren't able to find something to buy - which would then force them to rent while the Auckland market moves along at a rate of 5 per cent in three months in some areas," Mr Coulson said.

"Vendors need to be pretty sure about the numbers they're working with if they go down this path though, and generally take a conservative approach to their own home's value and saleability when stacking up the price differential and timeframes."

Fear of missing out led to Meadowbank couple Nick and Tania Gluyas striking a contract to buy a house in the same area before having sold their existing home.

The parents-of-two envisage selling the first house before they settle on the second.

"It seemed sensible to buy before we sold as we've got a young family and didn't like the idea of a two-stage move," Mr Gluyas said.

They bought their home on Fancourt St in June 2005 for about $495,000, but the latest Auckland Council valuation was $820,000. It is expected to sell for well over that.

"We felt we were extending ourselves at the time we bought it, but things have moved in 10 years," Mr Gluyas said.

"At the time, I couldn't see the day when our house would be worth more than $1 million. If you're in the Auckland housing market, you don't want to be sitting on the sidelines."

Mortgage specialist Bruce Patten, of Loanmarket, said buyers were "panicked" by the thought of not getting the property they want, so were not prepared to sell until they had actually purchased. This was causing a few issues, he said.

"The main risk [are] the ones that make the call without the bank's approval, then something happens and they don't sell."

Everyone thought their house was worth more than it was, he said.

Probably only one out of 10 people were able to get approval for open bridging, he said. One reason was the Responsible Lending Act, which came into place on June 1.

The act made sure lenders didn't put clients in a position where they could be unduly or unfairly disadvantaged, Mr Patten said.

"And that's why the banks are so much harder on doing these open bridging plans."