Best house, worst street – it’s now a good thing

The adage of ‘‘location, location, location’’ may be going out of vogue. Thanks to the slump in the property market and the cost of renovations, ‘‘quality’’ houses are beating ‘‘do-ups’’ for buyer interest, writes Colleen Hawkes.

Arecent Stuff story about ‘‘the worst house in the best street’’ selling in Napier prompted a reader to reply about the opposite situation: ‘‘How nice. We, on the other hand, have a best house in the worst street in Napier. Sadly. Would love to sell and move. Alas, sale price means we are stuck.’’

But, how much of a problem is it to own the best house in the worst street? It turns out that reader may in fact be in a much better position than they think. That’s assuming they don’t own a $3 million house in an area when the average value is $900,000, which would make any property difficult to move.

That’s not so likely, however. Craig Lowe of Lowe & Co Realty Wellington says in today’s market selling houses that are already ‘‘done up’’ – the better ones – is a lot easier than selling those with ‘‘potential’’. Which is the opposite of the situation before the market turned.

Mind you, Lowe always says there has never been any money to be made in renovating to sell, by the time you take in the cost of materials and labour, including your own.

‘‘There are exceptions – when someone is very shrewd about buying stuff and has a particularly good eye – but that’s not common. It’s really hard to even make a skinny margin, and the downside is it is easy to stuff it up. Mostly people think they are adding value, but they’re not.

‘‘Now the situation is even worse. The rapidly rising cost of materials and labour is making do-ups a lot less appealing. And the flip side of this is that there is a real flight to quality. And it’s the quality homes getting the most interest, which is the reversal of what was happening two years ago.

‘‘This is good news if you did a renovation in yesterday’s dollars, but bad news if you have to do it in today’s dollars.’’

And it’s good news if you have the ‘‘best house in the worst street’’.

‘‘The adage has always been location, location, location,’’ Lowe says. ‘‘But with the boom we had, a lot of the more established areas didn’t do as well. There was significantly more demand in those areas that are slowly becoming more gentrified, and will be better or just as good.’’

The agent says if the ‘‘best house in the worst street’’ is not selling, most of the time it simply means it’s overpriced. However, there are different markets in other parts of the country that can make it more or less difficult to sell.

Nick Cowdy of Nick Cowdy Real Estate in Christchurch says there are always people who will buy for the house rather than the location. ‘‘I do a lot of the architectural mid-century modern houses, and with something like that people want to look at the house rather than the street. But I think it [best house, worst street] is something that’s coming into play more now that the value of housing has increased. And suburbs are gentrifying as people invest money into doing up property. That will pull a suburb up.

‘‘And today it can be cheaper to buy something already renovated than to do it yourself.’’

Cowdy also says people are usually trying to live within their means, which may not match their expectations.

‘‘Most of us have a budget and end up compromising on the area or compromising on the house. And people don’t seem to be as interested in doing up homes. It’s the way the world has changed. I think people want instant gratification. They want to be able to buy it and move in. Lifestyle is more important than ever. They will pay for the ease.’’

The agent says many of the suburbs that were once overlooked are becoming more popular now that property has increased in value. ‘‘Often, too, these suburbs have character.’’

But it seems you still can’t go wrong buying good real estate in Christchurch. ‘‘Top locations will still appreciate the most and the fastest,’’ Cowdy says. ‘‘But they are getting so out of reach people are changing their buying habits.

‘‘When it’s the land underneath that holds all the value, people can often pay so much for a location there’s nothing left for renovating.’’

The first-home buyer factor

First-home buyers are another factor in the ‘‘best house-worst street’’ equation. Affordability issues mean suburbs with lower house prices are proving most attractive.

A CoreLogic survey last year on first-home buyer patterns showed that in suburbs, such as Aranui (Christchurch) and Birkdale (Auckland), first-home buyers were paying more than the typical price for the suburb.

CoreLogic said it may be that they were buying more ‘‘upperend’’, or larger, properties in those suburbs than is typical.

And in Flaxmere, Hastings Property Brokers Hawke’s Bay regional manager Joe Snee said over the previous two years investors had been selling up to capitalise their gains, and many properties were being bought by first-home buyers. ‘‘That is changing the face of the neighbourhood.’’