Tough Economic Times Mean More Baches for Sale, But Buyer Beware

In today’s challenging economic climate, potential buyers are finding an influx of secondary homes, particularly in prime holiday spots such as Coromandel and Pauanui. While the number of listings has risen, experts caution that careful consideration is necessary before making a purchase.

Increase in Bach Listings

Property listings website Realestate.co.nz reports that secondary homes are becoming more prevalent in popular holiday destinations. For example, Pauanui now boasts about 65 homes for sale, a significant increase from the post-Covid peak of around 10 to 15 listings.

Vanessa Williams, Realestate.co.nz spokesperson, indicated that real estate agents in the Coromandel region have reported an uptick in secondary home sales. This trend is attributed to the elevated cost of living and high-interest rates experienced in recent years, making it more challenging for individuals to maintain these properties, especially if they plan to earn income through AirBed & Breakfast (Airbnb) rentals.

Market Factors Influencing Sales

Nick Goodall, head of research at CoreLogic, provided insight into why bach sales are surging. “Baches are considered luxury purchases,” he said. “During tough economic times, people might divest themselves from these assets to raise funds or improve their overall equity position.”

Goodall also underscored the weakening labor market and financial strain on mortgage payments as contributing factors. Despite recent declines in mortgage interest rates, some individuals are still testing the market to sell their baches.

Interestingly, despite a lower number of new listings in Coromandel — the only region outside of Northland experiencing a drop — the stock of available properties has increased by 15%. This suggests that current listings are remaining on the market longer than expected.

Economic Pressures and Vacation Trends

Simplicity chief economist Shamubeel Eaqub observed that bach purchases increased during the pandemic when more individuals had the opportunity to visit and purchase remote properties. As life returns to normal, cost-of-living constraints, high-interest rates, and a slower recovery in tourism are reducing holiday home demand.

“People must consider the usage patterns and potential costs associated with a bach,” emphasized Ed McKnight, economist at Opes Partners. “Baches bring joy but should not be viewed as investments. They are assets that enhance your lifestyle, not generate substantial returns on investment.”

McKnight advised potential buyers to evaluate their usage needs carefully. Those deeply engaged in outdoor activities such as fishing or skiing might find more value in owning a property near their preferred destinations where they can store gear and accessories.

“A bach might make sense if you frequently visit a particular spot, especially for activities like skiing or fishing,” he said. “However, buying a bach closer to a major city, especially without a well-thought-out plan, could result in underutilization and disappointing returns on investment.”

Missteps to Avoid

McKnight warned against impulsive purchases driven by momentary excitement. “Avoid making hasty decisions based on a single visit or drive. Baches are often located far from urban centers and may be rarely used if travel commitments are not as expected.”

For instance, consider a couple from Auckland considering a bach in Ohakune. While it might seem like an attractive opportunity during a casual visit, the long drive and infrequent use could lead to regret and difficulties in recouping investment costs.

Expert Advice

Before buying a bach, thoroughly assess its potential utilization and associated costs. Consider maintenance fees, insurance, and rates, and weigh these against the property’s expected rental income or personal use value.

“If you’re thinking about buying a bach, do your homework,” McKnight recommended. “Research the market carefully, understand the property’s appeal and accessibility, and consider your long-term plans. Make sure it aligns with your lifestyle and goals.”

Conclusion

The growing trend of bach sales presents both opportunities and challenges. While the increased availability may represent a chance to secure an attractive property, it’s crucial to approach the purchase with caution. Carefully consider the long-term value and potential usage of the property before making a decision.

By evaluating your financial situation and lifestyle needs, you can make a well-informed choice that brings joy and satisfaction to your life, rather than becoming a source of ongoing financial stress.

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