Tough economic times might mean more baches for sale — but there’s a warning to think carefully before buying one.
Property listings website Realestate.co.nz said this week that there appeared to have been an increase in the number of secondary homes listed for sale in places like Coromandel and Pauanui.
Pauanui has about 65 homes listed for sale, compared to 10 to 15 at the peak of the market post-Covid.
Realestate.co.nz spokesperson Vanessa Williams said she had spoken to real estate salespeople in different parts of the Coromandel who said that, due to the rising cost of living and high interest rates of recent years, more people were choosing to sell their second homes.
“It becomes a little less obtainable to service those… especially if the second idea is to Airbnb them out and then with the cost of living, people are less likely to go on holiday and Airbnb is utiilised less.”
She said although new listings numbers were down in Coromandel — the only part of the country other than Northland to experience a drop — stock was up 15%.
“That suggests to me the stock that is on the market is sticking around quite a bit longer than people would like.”
Nick Goodall, head of research at Corelogic, said it was not surprising.
“Baches are a luxury purchase so it makes sense that in tougher times people may look to divest away from these properties, to raise cash or improve their equity position. Given difficult economic times, a weakening labour market and the squeeze on mortgage payments — even though things have improved as mortgage interest rates fall — it’s understandable that some may test the market.
“The interesting thing will be how desperate they are to sell and whether they’re willing to accept what may be seen as ‘low-ball’ offers, or whether they find a way to hold on if they can’t get the price they want or need to make it a beneficial transaction. So far we haven’t noted any materially different rates of value falls in holiday spots, but it’s one thing we’ll keep an eye on.”
Simplicity chief economist Shamubeel Eaqub said there had been an increase in bach purchases during the pandemic.
“A return to more normal working conditions, cost of living pressures and high interest rates has pushed some people out of the holiday home market.
“Plus tourism hasn’t quite rebounded back to pre-Covid levels, so holiday home demand isn’t as strong either.”
Ed McKnight, economist at Opes Partners, said he urged people not to be influenced by what was happening in their lives when they made big financial decisions.
“You might have gone to a new beach town you’ve never been to before and you think ‘this is a great spot, I absolutely love it, I would love to come back here every single summer’.
“But when people make those kinds of decisions they often don’t end up using the bach nearly as much as they through they would – maybe it’s three or four hours away and the trip gets in the way of going back and using it.”
He said, rather than buying a bach and paying rates, insurance and maintenance, people might be better to use the money to hire Airbnbs around the country, and purchase an investment property instead.
“New Zealand has a lot of very small beach towns — we don’t have a shortage — you’re not always going to get a massive amount of capital growth or house price increases. Never look at a bach strictly as an investment, it’s a lifestyle asset. Something you buy to make you happier, not make you money.”
But he said it could make sense if someone was heavily into outdoor activities.
“If you’re an absolutely keen fisher and you’ve got a boat and you love it but you live in Hamilton…. having a bach on Lake Taupō or near Lake Rotorua could make a lot of sense.
“Skiing and snowboarding is the other — buying a bach in Ohakune could make sense if you know you are going to travel to this spot frequently because you love this sport, you’ve got a bunch of gear and you don’t want to have to pack up the car every three weeks to go off to the spot, you want to turn up and all the stuff is there for you.”
Buying out a parents’ bach could also work, he said, if it was clearly going to be used.
“What I am trying to warn people against is, especially Aucklanders, going down to Ohakune one time, popping their head in the real estate window thinking ‘these houses are quite cheap, our mortgage isn’t that bad why don’t we buy a place here?’
“Then they buy it and realise it’s a five- or six-hour drive and they don’t use it as much as they thought and end up selling it three or four years later. The property might have gone up in value sometimes but you then have to pay the real estate agent. You’re engaging a transaction cost you might not have needed to.”
rnz.co.nz
