Keen house buyers take shortcuts

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Property experts concerned that people are signing $700,000 to $800,000 contracts without legal advice

Desperate house-hunters are rushing into purchases without legal advice as the "always-missing-out" experience drives up property prices.

With building reports, valuations and legal advice costing about $1000, the pressure to secure a home is being keenly felt as more houses are sold at auction. Costs begin to add up after five or six unsuccessful attempts.

The Herald's quarterly Property Report, published in today's paper, outlines how heated the Auckland property market has become, with 17 Auckland suburbs now with average values of at least $1 million, and Herne Bay just off the $2 million mark.

Million-dollar sales are increasing in areas such as Waterview and Mt Roskill, with properties regularly selling at 30 to 40 per cent above capital valuations set less than two years ago.

Anne Duncan, principal of Mt Albert-based Anne Duncan Real Estate, said it was becoming less rare for buyers to reject the advice of agents to see a lawyer before signing an agreement.

People worried about being beaten to a house by an unconditional buyer, she said.

"People who spend $5000 on a car will get an AA check and take their time to make sure it's okay, yet some people are prepared to sign a contract for a $700,000 or $800,000 house without checking with their lawyer," she said. "That's really ill-advised."

Property commentator Alistair Helm said it was frightening to think some buyers were feeling pressure to buy without taking proper legal advice.

"I'd be horrified to think there is anyone believing that they can't justify seeing a lawyer about potential properties or making unconditional offers. That's scary."

He said recent Realestate.co.nz statistics showed the inventory of unsold houses - the number of weeks it would theoretically take to sell all unsold housing stock on the market - fell to just 12 weeks in Auckland.

That was "unbelievably low", he said.

The shortage of supply, strong demand and the increasingly common choice of auctions to sell meant house-hunters would be feeling frustrated, and risked spending above their means.

"Don't get caught up in it. Property prices may well increase, but there's going to be a balance at some stage, and it's going to come at some point ... maybe the winter is going to take a bit of heat out of the market."

While the Government wants to work with Auckland Council to see 39,000 new homes built in the city over the next three years, a more immediate impact will come from Reserve Bank measures.

Lenders are offering the lowest short-term rates in history as they compete to lure customers before an expected rise next year.