‘They know they will be blowing first-home buyers out of the water’

A rising number of unconditional cash offers has brought a bit of pressure back into the housing market.

Agents told OneRoof that the cuts to the cash rate in August and October have boosted buyer confidence. Some buyers are eager to strike no-strings-attached deals with vendors to get ahead of the competition.

Lodge agent Blair Pointon had noticed that buyers were reducing their conditions since the rate cuts. Several experienced investors were dropping conditions altogether, he said.

Before the cuts, buyers were making offers subject to a building inspection and finance being satisfied in 10 to 15 working days or conditional or even longer if it was conditional on a house sale.

Pointon said there had been an uptick in demand for houses in the sub-$800,000 price bracket in Hamilton, with first-home buyers now facing competition from investors, who until now have largely been absent from the market.

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One of his listings, a three-bedroom home on Howden Road, in Fairfield, had received seven offers within six days of hitting the market and sold to an investor who made an unconditional cash offer of $740,000.

Pointon said buyers making unconditional cash offers had also snapped up a three-bedroom property, on Gordonton Road, in Chartwell, for $674,000 and a two-bedroom duplex on Rocky Road, in Huntington, for $655,000.

Pointon said in the three cases, the buyer was an experienced investor and had opted against getting a building report to speed up the deal.

“They are taking a calculated risk and they know they will be blowing first-home buyers out of the water if they do that.”

He said he was also seeing fewer offers from buyers who needed to sell their own homes first. He said vendors would only be tempted to take that kind of deal if the price was well above all the other offers on the table or if it was the only one being made.

An unconditional cash offer was made on a duplex on Rocky Road, in Huntington, the day after the Official Cash Rate was reduced by 50 basis points. Photo / Supplied

EasyStreet Mortgages financial adviser Gareth Veale says how quick a sale can be approved can often depend on the bank and the broker. Photo / Supplied

“People are realising they need to sell their own property first in order to buy.”

Harcourts agent David Ding, who sells on Auckland’s North Shore, said buyers had sensed the shift in the market. “They know they have to stand out to win the battle. They know the market will increase 10% next year so if they can pay only 5% more this year, they will grab it. A cash unconditional offer is definitely more attractive for the vendor.”

Ding said attendance numbers at open homes had doubled, listings were attracting multiple offers and some of the stock that had been on the market for six to seven months was now under contract.

He told OneRoof that he just received two enquiries from buyers about some of his listings. “They said, ‘I want to look at a house, today, today, today, today’.”

EasyStreet Mortgages financial adviser Gareth Veale said his workload had increased since the cash rate cuts, with clients keen to get finance approval sorted quickly to avoid missing out.

“I’ve had so many clients wanting to go to auction or bring forward an auction just because there’s a feeling that the market is heating up and they’ve got to get rid of the competition.”

A three-bedroom home on Gordonton Road, in Chartwell, Hamilton, sold this month after receiving an unconditional cash offer from an investor. Photo / Supplied

Veale warned buyers that finance approval still took time. “People can move really, really quickly if they want to. It does depend on the bank and who is pushing it along and whether or not you are going to get the response quick enough.”

He said cash unconditional offers weren’t for everyone. “It really is for those people who are experienced in the property market – the second-time arounds, the investors, not first-home buyers.”

Lawyer Jonathan Wood, who is a property expert with Court One Auckland, said people should not skip doing their due diligence. It was “unwise bordering on foolhardy” to make an offer on a property without getting a building pre-inspection report, he said.

“The chances that you will buy a property that has defect issues in it are not zero in New Zealand and you are better off avoiding that if you can. I certainly would not enter into an agreement without having [a pre-purchase inspection] as a condition.

“They are not a silver bullet and there’s a wide variety of quality in those reports, but just going in sight unseen is a risk.”

Wood said viewing a property and understanding whether what you were seeing was an indication of whether it had been built correctly were two very different things.

“An experienced pre-purchase building inspector – there’s a limit to what they can do with a visual inspection – but it is certainly better than having a look around and going ‘wow this place looks nice’ and going ahead because you won’t necessarily pick up on the minute things that will tell an experienced person whether this complies with the building code or not.”

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