Real estate, post COVID-19 level 4 (since 2020)

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#2801254 26-Oct-2021 11:36

People are still returning, Auckland airport saw nearly 54,000 international arrivals for Aug/Sept, June/July saw 250,000+. Now not all will be staying but there's still a non-zero number of people returning.

Stats NZ still shows around 40k more people since March 2020 (https://www.stats.govt.nz/topics/population) with a slow down in growth but not negative?

I can't speak for other regions but Northlands auction's are still red hot. 4+ bidders are almost the default and going ~8-10% over the "on the market" price is common. Price growth seems to have slowed but isn't yet stopped or negative and days to sell are still very low at just 35-45 days. Overall inventory seems to be low overall with just 10-11 weeks worth for all of 2021 which is 1/2 to 2/3's what it was pre covid

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Paul1977

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#2801416 26-Oct-2021 15:36

If FHBs weren't screwed before COVID, they certainly are now.

In Christchurch sale prices are going up faster than sites like homes.co.nz or oneroof.co.nz can keep up with. The estimated value of our house (new 2020 build 236m2) on these sites has increased 30% since 1 Jan 2021. For comparison, our old house (1940s 81m2 + single garage) has increased 32% in the same period. So the increase seems pretty consistent across the board.

That means a FHB with a $500,000 budget in January, now needs to pay $650,000 for the same thing. Assuming a 20% deposit required, that's an extra $30,000 just for the deposit. How many potential FHBs can save an extra $30,0000 in 10 months just to keep up with increasing house prices?

GV27

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#2801422 26-Oct-2021 15:46

Paul1977:

That means a FHB with a $500,000 budget in January, now needs to pay $650,000 for the same thing.

An extra $150K for no extra bedrooms, no extra bathrooms, no extra utility and all of the interest costs that come with it.

mattwnz

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#2801429 26-Oct-2021 15:58

Paul1977:

If FHBs weren't screwed before COVID, they certainly are now.

In Christchurch sale prices are going up faster than sites like homes.co.nz or oneroof.co.nz can keep up with. The estimated value of our house (new 2020 build 236m2) on these sites has increased 30% since 1 Jan 2021. For comparison, our old house (1940s 81m2 + single garage) has increased 32% in the same period. So the increase seems pretty consistent across the board.

That means a FHB with a $500,000 budget in January, now needs to pay $650,000 for the same thing. Assuming a 20% deposit required, that's an extra $30,000 just for the deposit. How many potential FHBs can save an extra $30,0000 in 10 months just to keep up with increasing house prices?

I do wonder how much of effect raising interest rates are going to have. Raising interest rates potentially could help FHBs. Prices are largely based on affordability., So unless banks increase the term of mortgages, or share equity schemes become more common, house prices in NZ have to follow some form of logic. But NZs market is being currently used as one of the worst markets in the world at the moment. Houses people live in are still being seen as investment, when that shouldn't be the case, , unless we want gains to be taxed.

Divhon88

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#2807311 4-Nov-2021 10:22

I've seen bank's interest rate now doubling about to sub 5%.

I've just paid a 10% deposit for a new build hopefully to be finished mid next year.

Have I just shot my two foot on my way climbing the ladder of property?

heavenlywild

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#2807315 4-Nov-2021 10:25

Divhon88:

I've seen bank's interest rate now doubling about to sub 5%.

I've just paid a 10% deposit for a new build hopefully to be finished mid next year.

Have I just shot my two foot on my way climbing the ladder of property?

Both ANZ and ASB have really good offers on new builds. If I recall ASB's was 1.79% for x number of years, floating. Check it out.

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GV27

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#2807316 4-Nov-2021 10:33

mattwnz:

So unless banks increase the term of mortgages, or share equity schemes become more common, house prices in NZ have to follow some form of logic.

If the market was logical then we'd never have gotten into this mess in the first place.

mudguard

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#2807325 4-Nov-2021 10:45

mattwnz:

So unless banks increase the term of mortgages, or share equity schemes become more common, house prices in NZ have to follow some form of logic.

The previous finance companies used to have unofficial rules about lending, none under 18 or over 65. Banks will be extremely wary of making terms longer than 30 years.

I'm in that position myself, just turned forty, just bought my first home. All going well it shouldn't take thirty years but I'm sure everyone says that.

alasta

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#2807331 4-Nov-2021 10:57

Divhon88:

I've seen bank's interest rate now doubling about to sub 5%.

I've just paid a 10% deposit for a new build hopefully to be finished mid next year.

Have I just shot my two foot on my way climbing the ladder of property?

It really depends on a few things:

Do you have a pre-approval that will still be valid at the time your build is complete? Or are you working on the assumption that you will get approved?
Is the 10% you've already paid the only equity that you will have? Or are you looking to add more equity when you settle?
What is your serviceability situation? i.e. what will be the debt to income ratio of your loan?

Depending on the answers to the above, you may or may not be exposed to any significant risk.

quickymart

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#2807525 4-Nov-2021 14:21

This would be interesting if it happened.

https://www.stuff.co.nz/business/300445514/house-price-crash-warning-its-impossible-to-save-people-from-their-mistakes-forever

mattwnz

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#2807537 4-Nov-2021 14:36

quickymart:

This would be interesting if it happened.

https://www.stuff.co.nz/business/300445514/house-price-crash-warning-its-impossible-to-save-people-from-their-mistakes-forever

The problem in NZ over the last year is the reserve bank dropped interest rates due to covid, which caused the housing market to go berserk. Up 40% since the start of last year. Housed values are assessed by the bank and the bank then lends to people. As the interest rates were an emergency measure, IMO the banks should have kept their stress test higher, because these were only temporary low rates. Higher rates mean people can afford to borrow less, and therefore can't afford to pay as much for a house. First home buyers were essentially like a lamb to the slaughter from all the messaging in the media about FOMO etc

Some houses do definitely seem to be taking longer to sell at the moment, maybe partly because of the high prices people are asking and there are quite a lot more houses coming onto the market.

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tdgeek

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#2807538 4-Nov-2021 14:37

quickymart:

This would be interesting if it happened.

https://www.stuff.co.nz/business/300445514/house-price-crash-warning-its-impossible-to-save-people-from-their-mistakes-forever

A crash? Doubt it will happen, they may ease down somewhat but media will call that a crash and it will dominate headlines

Interest rate increase crashing paypackets is more the issue for many I would say, but most will have warning and time to decide how to work around that, i.e. just pay the extra, extend the loan etc for short term benefit. If prices did go down somewhat, that fuels more demand from FHB's, with the lower mortgage helping to offset some of the interest rate increase. I feel there will always be pieces of demand ready to mop up prices drops, which would help stabilise larger drops

tdgeek

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#2807541 4-Nov-2021 14:40

mattwnz:

The problem in NZ over the last year is the reserve bank dropped interest rates due to covid, which caused the housing market to go berserk. Up 40% since the start of last year. Housed values are assessed by the bank and the bank then lends to people. As the interest rates were an emergency measure, IMO the banks should have kept their stress test higher, because these were only temporary low rates. Higher rates mean people can afford to borrow less, and therefore can't afford to pay as much for a house. First home buyers were essentially like a lamb to the slaughter from all the messaging in the media about FOMO etc

Some houses do definitely seem to be taking longer to sell at the moment, maybe partly because of the high prices people are asking and there are quite a lot more houses coming onto the market.

Hindsight, but if this happened again, the better option (if it was possible) was to exclude mortgages from interest rate reductions, and focus that extra unearned interest revenue on business support somehow

(Unearned, as interest effectively overcharged)

lxsw20

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#2807610 4-Nov-2021 17:05

Considering locking in for 2 Year at 3.99% on offer for 2 years. My current fixed term expires in June, but looking at the way things are going it's probably worth the hit of paying an extra 1.5% for 6 months.

Zeon

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#2807612 4-Nov-2021 17:11

tdgeek:

Hindsight, but if this happened again, the better option (if it was possible) was to exclude mortgages from interest rate reductions, and focus that extra unearned interest revenue on business support somehow

(Unearned, as interest effectively overcharged)

Banks will hardly give you a look for SME lending unless you offer up property as collateral so it does create some complexities... With crazy house prices it upped the collateral for SME loans which may have been necessary and was part of the plan all along?

Speedtest 2019-10-14

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