After 7 years, we finally bought a house! (Technically, a townhouse.) I don't remember if I discussed this previously, so apologies if I repeat myself. (I know I mentioned it in passing here.) When I arrived in New Zealand in September 2014, I didn't have a work permit and my now-wife was divorced but still in the process of selling the family home, and not working. I did not think that was the best time to ask the bank for a mortgage, so when we decided to move to Wellington in January 2015, I suggested renting for a year. In fact, I remember showing my wife a chart of house prices and pointing out they'd been relatively flat for six years, so we wouldn't be "missing out" if we waited a year. Famous last words.
Fig 1: The chart that convinced my wife it was ok to rent for a year.
We found a nice house in Karori and signed a one-year lease, with the intent that at the end of 2015 we'd buy a house. Except...I didn't get my work permit until November 2015, so I still didn't have a job! We approached the landlord about moving the lease to month-to-month, which is when they announced they were moving back into the house and needed us out in January!
Suddenly, instead of looking for a house to buy, we were frantically looking for another place to rent! Thankfully we found another house in Karori and moved in. The landlords didn't even want a one-year lease, which seemed odd but they assured us they weren't planning anything. Two months after we moved in, they put the house on the market.
By then I was working and we considered buying the house ourselves, but having lived there for three months we knew how much deferred maintenance it needed, so we passed. It was also right about then my wife was first diagnosed with cancer, so that was all we were focussed on. A young family bought the house but needed to fix up and sell their old house, so they said we could stay until December. My wife had surgery and was scheduled for radiation therapy in January, so we weren't looking for a new place at all. Then a Hanukkah miracle occurred: The new owner got a job offer in Australia and so was moving his family there, and we could stay as long as we liked!
Now it was 2017 and we still hadn't bought a house, but the real estate market had shot up 40% in the past year! I honestly don't know what happened to cause that, but I was sure that it was a bubble and again convinced my wife to sit tight and wait another year.
Fig 2: In 2016, between February and December the median house prices went from $400,000 to $540,000!
Needless to say, in 2017 house prices went up another 33%!
Fig 3: From $400,000 in 2015 to $600,000 in 2018, that's a 50% rise!
At this point we were getting scared we'd be priced completely out of the market, but couldn't find anything we liked. That's when I learned about leaky homes, NBS (New Building Standard, an earthquake rating) and all sorts of weird and wonderful things about Wellington property. (I heard the New Zealand Company, which was responsible for British colonization, drew a map, divided it into sections and sold them sight-unseen to Brits without revealing the topography of Wellington! As a result, Brits would spend three months on a steamer to get to New Zealand only to find their "land" was straight up a hillside! What could they do except build a house in the hillside!)
In New Zealand (as in the UK), you have a seller's agent but no buyer's agent, so you're left to do all the due diligence and negotiating yourself. In addition, New Zealand has developed the "tender" process, which is best compared to a silent auction: Everyone submits their "best and final offers" in sealed envelopes, and at the appointed time all the offers are opened and the buyers choose the best one. (Or they can reject all of them.) In the US, if you saw a house you liked you'd submit an offer, there would be some back-and-forth, if you came to an agremeent, great, and if you didn't, you moved on. In the UK, the process wasn't quite so straightforward, but it was similar. In New Zealand, suddenly you're submitting an offer that was legally binding for three weeks! If you saw another house you liked, you couldn't make an offer until you'd heard back from the first! And you couldn't make an offer "subject to inspection" so you'd have to organise an inspection -- and pay for it -- before making an offer. You also needed a lawyer to review the paperwork so you were spending $500-$600 every time you made an offer, with no guarantee of being successful! And we were astoundingly unsuccessful: We were consistently outbid by $50,000 or more.
In one instance, we made an offer on a place we really liked of $800,000 and it sold for $875,000. Less than a year later, a nearly identical property came on the market and we were determined to get it, so we bid $900,000. It sold for $950,000. (Thank goodness; I don't know how we would have serviced a $900,000 mortgage.)
Then in 2020 Covid-19 hit, we were all in lockdown, the economists were all predicting a financial apocalypse and all I could think was, we might finally be able to afford a house! Instead, prices went up another 20%.
By this point, my wife had been told the cancer had returned and was stage 4, and the 5-year survival rate was 25%. Suddenly, having the stability of a house was more important than ever, but our requirements had changed. One of the kids had moved out so we could get away with a 3-bed, but we didn't know what my wife's mobility would be like so we started looking at single-level houses "on the flat." In Wellington, these are quite rare, and coveted by baby boomers who were downsizing, so they could outbid us every day of the week. We eventually stopped looking because the median price had doubled since 2015 and we simply couldn't afford anything bigger than a broom closet.
Thankfully, the owner in Australia was happy for us to stay and pay his mortgage. He only raised the rent once in seven years, and that was less than 8%, at a time when most rents in Wellington had gone up by about 50%. We even looked at renting a smaller house but we would have ended up paying more.
House prices peaked in 2021 and then did a 20% nose dive. This was a combination of inflation causing mortgage rates to go up; the government finally implementing restrictions to stop people from taking out unaffordable mortgages*; and the borders re-opening. So many Kiwis had returned to New Zealand during the pandemic that New Zealand had its first "net positive migration" in decades, and they were all cashed-up from working overseas. Once the borders opened again, there was a mad rush for the exit. In mid-2022 we started looking again, and in November we made an offer on a cute townhouse with an evil doll's closet. (Don't ask.) We were going to bid $850,000 but with more doom and gloom prophecies in the news, I reduced it to $825,000. It didn't matter; it sold to someone else for $875,000.
My wife was devastated. She was exhausted from looking and very worried about how much time she had remaining. In addition, sellers were holding off, so there were very few properties on the market. We were looking across Wellington, from Khandallah to Miramar, and everything was very depressing. In March a property came on in Karori, not far from our home, so we went and looked and were completely unimpressed. It smelled of mould, it looked very tired, it had the most bizarre layout (fully a third of the house was devoted to the bathroom and laundry area!) and although the house was on level, it had stairs to the front door. However, the previous owner had obviously had mobility issues as he'd installed an outdoor stair lift, so that wasn't a showstopper.
If there had been other houses to look at, I would have quickly forgotten about that one, but instead I sat down with the room measurements and realised we could turn the tiny third bedroom into a proper master bedroom with en suite, that would make the house nice and improve its resale value. My wife agreed, but neither of us was particularly interested in taking on a big remodel, so we submitted a low-ball offer. Of course we won.
We went into full panic mode. We tried to see if we could do the remodel before we moved in, but it quickly became apparent that was not going to happen. We were lucky to get the carpet replaced before we moved in! I think we had both resigned ourselves to living in a dump until we did the remodel, but with the new carpet the house stopped smelling of mould, it was warm and comfortable, and it looked much better. We're actually enjoying living here!! (But we still want to do the remodel.)
Fig 4: The full picture of Wellington house prices over the past 10 years. We figure the same house we paid $750,000 for in 2023 would have cost $420,000 in 2015, which is when my wife wanted to buy.
* The phrase "closing the barn door after the horse has bolted" is applicable here. Many young people, who had only experienced low mortgage rates and increasing house prices, had stretched themselves to get onto the property ladder. Unfortunately, when the rates went up they couldn't afford the mortgage, and when the prices dropped they couldn't even sell their homes for what they owed!
