How much below asking price should you offer on a house in NZ?

Brigid O’Connor from Barfoot & Thompson says buyers should think of their offer as a way to start a negotiation. Too low and the seller may shut the door completely. Cash offers can sometimes be $100k lower than conditional offers, but the key is being realistic. “If you like a property, then have a serious crack at it,” she advises.

If a property has recently dropped in price, expect the vendor to want something close to that figure. Josh Nixon of UP Real Estate says vendors aren’t desperate: “They’re saying, this is my price, this is probably fair, and they’re expecting a buyer to give them an offer that’s close to it.”

For example, a Mission Bay home recently shifted from $1.375m to $1.325m - $150k below CV. In cases like this, offering far less is unlikely to succeed.

“The idea that you can throw in an eye-watering low offer and beat the vendor just isn’t how it works,” Nixon adds.

Emma Duncan of Anne Duncan Real Estate says motivation is key. Every seller has a different reason for selling. Some may have already bought another home and need to sell quickly, while others might be downsizing or selling before retirement and are prepared to wait for their price, even if it takes a year or two.

If your offer is too low, a vendor may not even countersign it. But once they do, the process has started and a sale is more likely.

Duncan also suggests sharing a little about yourself with your offer. “Homeowners love the journey and the story behind every buyer. If they hear you’re a young couple or a family who love their home, they’ll be more on your side,” she adds.

Experts agree: going $100k below asking price without reason is risky. While cash buyers may offer a little less, scattergun bargain hunting frustrates vendors and wastes time. Sellers today are generally realistic, but they still expect sensible offers.

As a buyer looking at making a competitive offer on a home, do as much research as possible, suggests CoreLogic head of research, Nick Goodall. Look at all the data you can to get a feel on price and how much lower than expectations a property might go for.

If you’re already a buyer in the market or a new buyer coming in, you may be asking why buy today? Why not wait?

Chief property economist at CoreLogic, Kelvin Davidson, has done the figures on the financial implications of buying soon or waiting for first home buyers. 

He looked at a first home buyer earning the average household income, with an 80% mortgage at an interest rate of 5.1% over a 25 year term, making repayments of around $58,000 a year. In the scenario where house prices fell by a further 10% but mortgage rates rose by another 1%, he found the annual debt servicing cost barely changes – it would be around $57,000 annual debt servicing cost. 

In the scenario where the home buyer waits until house prices drop by a further 15% and where mortgage rates increase by 0.5% to around 5.6%, then the saving on annual mortgage payments would go from around $58,000 to less than $52,000 so it might be in their best interest to wait.

Kelvin adds: “Finances probably shouldn’t be the only determinant of the decision to buy. Of course postponing the decision to buy in the hope of paying a lower price later could mean that a buyer ends up with a property that they don’t like as much.”