A 5% deposit and fixed-price contracts are just some of the incentives construction companies are offering to lure buyers amid a national economic slowdown.

Company boss says supply chain issues, materials
The price hikes and delays plaguing the industry are easing, but the biggest challenge right now is lending standards in the banking industry.

It has been said that some banks’ revenues are stress-tested at 8% on top of 15% of construction costs. Another thinks more builders will start building spec homes.

New Zealand’s largest bank, ANZ, said its Blueprint to Build offer was at a 2.76 per cent discount to its two-year standard variable rate and had generated $3.5 billion in loans since its launch in July last year.

Classic Group director Peter Cooney said building in a market that was softening rather than spiraling was a good option.

“Building new homes does have its advantages, and while we’ve seen material and labour costs increase recently, the cost of building materials is not going back to where they were.”

Cooney said the main challenge for buyers was getting financing, with many banks giving 90-day approval.

”If this lapses, the buyer needs to reapply and may or may not be approved again, depending on the criteria or if their position has changed.You’ll see more builders start building before buying [spec building] Supports buyers who can only receive financing if the home is completed and settled within 90 days. “

Classic Group does not have any comprehensive incentives as it depends on the market segment involved.

However, on a case-by-case basis, a contract fixed price and a 5% deposit can be offered.

He said because the Bay of Plenty was one of New Zealand’s most desirable places to live, it had to “work quite hard” to bring all kinds of high-priced new homes to market.

Its two-bedroom homes in Ōmokoroa start at $655,000, while three-bedroom, two-story terrace homes start at $735,000. House prices start from $870,000 in Pāpāmoa and $825,000 in Ōmokoroa, which is below Tauranga’s first home buyer grant cap of $875,000.

Barrett Homes Bay of Plenty branch manager Lianne Simpkin said 41 Pāpāmoa townhouses would be launched soon.

“They will be built in commercial areas, providing end users with backyard access to restaurants, cafes and a trendy coastal lifestyle. We expect substantial uptake from investors and young couples looking for a relaxed care lifestyle.”

It also offers lower deposits from 5% and turnkey service upon application.

make big life choices [like building a home] It’s tough in these volatile times, she said.

”If you build a new home now, you can enjoy good capital gains, but the supply of homes is still in short supply. Submitting your project now allows you to securely determine the price of building your project. History has shown that now is the best time to build a home, and the assets of a residential property can be great to protect and increase your wealth. ”

Finance is its main challenge in the industry.

“The process involved in getting a loan has become more challenging. The best advice we can give is to talk to a broker who can help you navigate the financial maze.”

Its land and house packages start at $795,900 in Ōmokoroa and $889,000 in Pāpāmoa.

Classic Builders Lakes District owner Paul Taylor said all of its upcoming home and land packages will have the option to pay a 0 per cent deposit on progress payments.

”This means you don’t have to pay anything until the title arrives and settles on the land. From a lending perspective, the bank sees this as a positive because the land is safe until construction takes place. ”

In the current economic climate, banks have imposed tighter restrictions on lending, making it harder for customers to obtain financing.

Classic Builders offers fixed-price contracts, so buyers can rest assured that the price initially set won’t go up, Taylor said.

Its current Rotorua house and land packages range from $600,000 to $950,000 and will be released in the coming months.

“In the current real estate market, building a new home is often the more cost-effective option. It gives you the opportunity to design a home that is built for your lifestyle.

“We’re seeing a lot of people relocating to these areas from larger centres, and a lot of Kiwis returning home or new Kiwis getting residency.”

He said enquiries were steady and people were able to get more out of existing land as the new medium density rules came into effect.

Venture Developments director Mark Fraser-Jones said there was never a really “bad” time to buy as it depended on many factors, and current market conditions were just one of them.

”Keep in mind that you may own your home for a long time, so the possibility of your interest rate going up or down is unavoidable. The sooner you get up the ladder the better in the long run. ”

Demand has been fairly slow since late last year, but recently saw more people flocking to show homes, which is usually a good indicator that people are ready to buy again.

Venture Development’s Pāpāmoa home is priced under $875,000, meaning buyers may be eligible for a First Home Grant and First Home Loan of up to $10,000, which reduces the down payment requirement to 5 per cent.

Signature Homes national marketing manager Kim Harris said it had just completed a survey of 2700 respondents, 352 of whom wanted to build but couldn’t get a loan.

She knows that some banks are doing an 8% revenue stress test and then adding another 15% to the construction cost.

Harris said it offered a fixed-price home build price with warnings to deal with the situation.

”We are trying to lead new conversations and give people confidence again. So what we’ve seen from the survey is that people are nervous because they’re being thrown new messages saying don’t build, it’s horrible and it’s too expensive.

“We’re just trying to slow them down and give them the facts of what we’re seeing.”

Another standout from the survey was that 719 people were concerned about increased material costs, but the situation is improving.

Master Builders Association chief executive David Kelly said enquiries had slowed, which could be good news for those looking to build.

“For the past three years, you couldn’t even come in and talk to a builder or a designer because they were too busy. You had to wait a few months before they were even interested in starting the process.

“But there are builders and designers available now.”

Kelly said people can start the process and learn everything without having to commit.

In his view, this is an opportunity for people to understand the design they want and can afford, but on the other hand, the current market may be prohibitive for others.

”They tend to stop and wait. They’re looking for bargains, which may not be realistic because prices don’t come down. Then everyone came back at the same time and flooded the market again.

That’s a risk in itself, Kelly said.

ANZ external communications manager Kristy Martin said new builds were exempt from the Reserve Bank’s LVR for owner-occupied properties and could be a good option for many customers with deposits below 20 per cent.

Since its launch in July 2021, it has helped more than 7,000 customers build new homes – providing $3.5 billion in loans based on our Blueprint to Build rates.

” It’s important to note that while building a new home is exciting, it does require a lot of planning. While not uncommon during construction, it can be stressful if people don’t allow cost overruns.

“We do take into account potential cost overruns when assessing construction loans and review our policy regularly to ensure it is appropriate in the current inflationary environment.”

A Kiwibank spokeswoman said demand for construction loans was steady.

From full approval, customers have six months to begin drawing down construction loans, and a fixed-price contract is not always required.

”Kiwibank allows a cost escalation contingency amount as part of our affordability assessment. Contingency measures ensure that the client can cover the total construction cost in most cases where cost overruns are encountered during construction.