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Tiny Homes Vs Small Homes

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Are tiny homes a good investment? When comparing them to small homes, it’s hard to see the appeal. Tiny homes cost as much per square metre, yet they are more likely to depreciate if they’re the type that is classified as vehicles.

So before you rush in, let’s look at tiny homes in more detail.

What Is A Tiny Home?

Some say it’s a home on wheels or a home that is easily moveable. However, in New Zealand, a tiny house means different things in different regions. Hence, its status, i.e. is a building or a vehicle, depends on the regional local authority.

What is widely accepted is the maximum size of a tiny home is 37 square metres – with the width being no more than 3.2 sqm.

Does A Tiny Home Need Building Consent?

The short answer is yes if it is connected to services for the kitchen and bathroom. Though it’s not black and white as the tiny home could be classified as a vehicle.

Classified As A Vehicle

A tiny home may be classified as a vehicle in one of three ways:

  • As a transportable load on a truck or trailer
  • Or a vehicle with its motor similar to a motorhome
  • Or towable like a caravan

However, some councils may still class your tiny home as a building even when it falls into one of three categories, as stated by NZTA. For example, in the Tasman District, the council noted a trailer-tiny home was deemed a building even though it was movable.

Intent

How tiny homes are classified seems to depend on intent. If the home is stationary, connected to services and permanently occupied, it’s a building and needs to comply with the Building Act. However, the classification of tiny homes is not as straightforward as it should be, so confusion remains exacerbated with the new building consent exemptions.

Consent exemptions

New building consent exemptions that came in August 2020 haven’t done anything to clear up the grey areas of what can be built without resource consent. Needless to say – if your 30sqm building needs a bathroom, kitchen and connection to services, it will require a building permit.

Are Tiny Homes Worth It?

While there is confusion over the status of tiny homes, make sure you have factored in ongoing costs that may include rates, service fees etc.

A 30sqm tiny home will set you back at least $150,000 or $5000 per square metre. If you were buying a new build and spending $5000 per square metre, you would get a top-quality build.

However, you can get a new small home of say 80 – 100 square metres at the cost of around $3000 per square metre, i.e. the total price of $240,000 to $300,000. There is the section to buy too, but it could be as little as $100,000 or as much as $1 million.

Today $500,000 will be enough to buy a small house and land package in a small town,

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However, if Auckland or a main city is your desired location, you’ll need to add another $300,000 or more to your budget.

The cost of purchasing a tiny home is on par with what you’d pay per square metre for a house and land package outside the main centres.

Resale Value

The investment in a small home becomes a better bet than a tiny one when it comes to selling it, i.e. your small home will value up in time, whereas tiny houses are more likely to devalue.

In the year to June 2021, property prices have risen nearly 30%.

Whereas tiny homes are expected to – wait for it – depreciate, not appreciate over time. So while a home may go up in value by tens of thousands of dollars most years on average, the tiny house, if it’s classed as a vehicle, will likely lose value – i.e. value up for less than you paid for it.

Plus, when you list your small home for sale, you know there will be a good market for it. Small homes appeal to:

  • first home buyers
  • downsizers
  • single families
  • couples

Tiny homes have a much smaller appeal, and as most of them are highly customised for their owner, they don’t appeal in the same way to new buyers as a small home can.

Another consideration is the wear and tear of living in tiny spaces. Living in a tiny home full time for 12 months has to be the equivalent of five or seven years in a small house. Tiny home sellers will either need to renovate before selling or realise their tired and worn down interior will attract buyers looking for a knocked down bargain price.

If you can afford to get a mortgage and invest in a small home, this would be a better investment than a tiny home.

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