Tumbledown cottage that bust reserve by half a million

There’s the three-bedroom house in Lower Hutt’s Stokes Valley whose owner sold it in September for 50 percent more than they paid six months earlier. Or there’s the “brand new” home in Auckland’s Castor Bay that sold that same week for $2.4 million – a $310,000 resale gain over the same period. A beautifully refurbished Herne Bay villa sold in August for $6.5m, which was $2.1m more than the owner paid less than five years earlier.

CoreLogic has analysed its database of every house sale in the country for Newsroom, to identify those leading the resurgence of the residential property market.

It reveals that this year, even as many potential vendors shied from trusting their homes to a declining market, there were a few who backed themselves and won.

Overshadowed by the swanky North Shore mansions and elegant Herne Bay villas that bucked the trends of the past two years, there was one small house that stood out.

No 11 Colum Place in Bucklands Beach, in east Auckland, wasn’t a quick resale by a chancer investor. It was a modest family home where Peter and Marina had brought up their two children.

Peter fondly recalls balmy evening walks around the back of Macleans College and down the bush-lined stream to Eastern Beach. “Those are memories…”

But with the kids finishing up at the college and off to university, he and Marina had already moved out of the house, leaving it empty as they considered developing the site.

At the start of this year, they examined the sales figures for their suburb and decided the time was right – not to develop, but to sell.

They sat down with their real estate agents, Cassie Su and Mike Lu from Barfoot & Thompson, and closely scrutinised what had happened to the scant number of listings in the neighbourhood. They discovered that investors and developers were returning to the market and every time one property was purchased, there were other unsuccessful bidders who walked away.

They finally took the dive and listed the property, with a few weeks’ viewing before going to auction. It was an unassuming listing. It rightly played up the location near the beach, two primary schools, an intermediate and Macleans College.

The listing played down the existing three-bedroom house, which had become increasingly derelict since Peter and Marina moved out two years ago: “While this property requires some maintenance, don’t let that dampen your excitement!”

The section, it said, could be “a perfect canvas for your new home”.

“You know, there is a demand for more houses in that area. A lot of people are now moving into the area so the children can go to a good school, a school they like. And there’s just not enough houses there.”

Peter, vendor

The rateable value was $1.925m, but since interest rates began going up as Auckland came out of lockdown, nothing in the city had been selling anywhere near RV for the past year.

What value there was, was all in the site; the house itself with its unpatched tile roof and peeling carpet and sagging deck was valued at just $50,000.

But it had barely gone on the market, when they received an offer for $1.82m. So the estate agents brought forward the auction and held it onsite. “And we still had at least another four to five bidders,” says Cassie Su.

In quiet discussions with their realtors, Peter and Marina had placed a reserve of $1.82m on the house, to match the offer already on the table.

But with competitive bidding, it sold under the hammer for $2.27m. All the bidders, says Su, had been developers. They’re back in the market with a vengeance, she reckons.

The attraction will be to build several townhouses on the site, she says, to market to young families looking to get into the school zones.

Two or three standalone houses? 6 or 8 townhouses? “Honestly, I don’t know,” she says. “The buyer may just rent it out for a couple of years until the time comes to develop it.”

Property economist Tony Alexander asks, why are investors looking to buy now? “They can see prices are rising, so fears of losing capital from falling prices have almost entirely disappeared,” he writes at the NZ Herald today.

At CoreLogic, chief economist Kelvin Davidson says the emerging turnaround for property values has strengthened resale performance in some areas. The Christchurch and Hamilton markets are strengthening, and Auckland is holding firm. Only Wellington and Dunedin are lagging.

As always, he says, the longer one holds a property, the greater the likelihood of a strong return when you sell it.

“It’s also important to note any resale gains for owner-occupiers aren’t necessarily cash windfalls,” he adds. “Instead, that equity just needs to be recycled straight back into the next purchase, unless they’re downsizing or moving to a cheaper location.”

Among the strongest resales, he says, was a villa on Sarsfield St in Herne Bay that sold in August for $6.5m, a $2.1m gross profit on the purchase price five years earlier. The vendors of a two-storey home in Whangamata quadrupled their money over 10 years; buying in 2013 for $621,550 and selling in September for $2.5m.

And Peter and Marina had bought Colum Place for $520,000 in 2006, holding it for 17 years before selling.

Peter and Marina were happy with the $2.27m they received. They posted an endorsement on the estate agency’s website, noting the “huge interest” created in a very short time. “Our property was sold within three weeks of going to the market and fetched a price that realised its full potential.”

Now, a few months on, Peter says they were always confident, after doing their numbers before putting the house up or sale. “I think the timing was was perfect,” he says. “The price exceeded our expectations.

Fond as his memories are of bringing up a family in the home, he accepts that it’s time for a developer to tear it down and build more, better housing on the site.

“You know, there is a demand for more houses in that area. A lot of people are now moving into the area so the children can go to a good school, a school they like. And there’s just not enough houses there.”