Real estate, post level 4

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#2771870 4-Sep-2021 01:33

quickymart:

Speaking of supply...

https://www.stuff.co.nz/life-style/homed/real-estate/126243225/number-of-houses-for-sale-falls-to-14year-low

Probably not surprising during lockdown. But what happened to all these investment properties which investors said they would be selling due to the healthy homes requirements, and also the tax changes.

IMO the changes are only going to reduced supply even more, and the governments changes will likely lead to even less supply and house prices rising even more.

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Handle9

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#2771871 4-Sep-2021 01:40

mattwnz:
IMO the changes are only going to reduced supply even more, and the governments changes will likely lead to even less supply and house prices rising even more.

Did developers become allergic to money?

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#2771879 4-Sep-2021 07:02

Handle9:

There's a difference between a secured loan and an unsecured loan. Businesses can often access secured loans at better interest rates than a residential mortgage.

I'll be cautious with my words, and I stand to be corrected, but I really do not think this is correct. Can you tell us why you say this?

When I worked in banking (retired eight years ago) that wasn't the case and I doubt much has changed. Unsecured business loans are rare (except in high-level corporate lending under Negative Pledge arrangements) and are very expensive.

Secured commercial business lending can be secured by a floating charge against the company's assets and/or by a mortgage over property owned by the business and/or the business owner's home. Regardless of the type of security, business lending is typically structured as a base rate plus a margin. Currently base rates appear to be between 4% and 9% depending on the type of loan. The margin can be anywhere between 1% and 8% (?) depending on the creditworthiness of the business.

In addition, under RBNZ rules, home loan lending requires the lending bank to hold a lower level capital reserves than commercial or corporate lending - because it's less risky - and that results in home loans being significantly cheaper than business loans.

I believe @Handsomedan is a banker - maybe he can comment on this.

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#2771883 4-Sep-2021 07:30

My experience is in a major international corporate so I can't speak to small business rates but our cost of borrowing is significantly lower than mortgage rates.

It's not a small business scenario.

eracode

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#2771885 4-Sep-2021 07:40

Handle9: My experience is in a major international corporate so I can't speak to small business rates but our cost of borrowing is significantly lower than mortgage rates.

It's not a small business scenario.

In that case I'm not sure why you said "Businesses can often access secured loans at better interest rates than a residential mortgage" when you are referring to a major international corporate borrower, in a thread about NZ real estate. The comparison hardly seems fair or relevant.

It may be ironic that your major international corporate is likely to be borrowing under a Negative Pledge arrangement - where there is in fact no security held by the lenders. That would be usual and normal for very large borrowers of that type.

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#2771889 4-Sep-2021 07:55

It was in response to a blanket statement about "business interest rates." Businesses can borrow in a variety of ways depending on their risk profile, size and what you're buying.

Perhaps that's unfair. It is true though.

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#2771903 4-Sep-2021 08:47

mattwnz:

Probably not surprising during lockdown. But what happened to all these investment properties which investors said they would be selling due to the healthy homes requirements, and also the tax changes.

IMO the changes are only going to reduced supply even more, and the governments changes will likely lead to even less supply and house prices rising even more.

Given that media stated that there were less investors at open homes, it seems to have helped. Im sure many have or will have sold. Im unsure how any sales or less interest from investors reduces supply as each one that opts out is one property released into the market, for a live in the home buyer.

quickymart

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#2772950 6-Sep-2021 15:07

If you're looking at a new build...

https://www.stuff.co.nz/business/property/126289729/builders-face-shortages-all-over-the-place-thanks-to-berserk-housing-market-and-aucklands-lockdown

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#2773374 7-Sep-2021 08:45

https://thespinoff.co.nz/the-bulletin/07-09-2021/how-house-prices-are-dividing-the-country/

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#2776750 12-Sep-2021 11:01

TV NZ: Three in five homeowners couldn't afford to buy their home at current value

...Consumer NZ's Gemma Rasmussen explained the new figures on Breakfast.

"So three out of five property owners would not be able to afford the house they live in at its current value - we know home ownership is at a 70-year low and in the last year we saw price increases around 25 per cent, so it really is no surprise that so many people are finding that they're in a home that's worth a lot more than they expected," she said.

"I think what it's saying is we're reaching a point in New Zealand where we're reaching a real divide between the people who have a home and who do not have a home, and if you don't own your own property at this point it's becoming very difficult to get in."

GV27

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#2776861 12-Sep-2021 13:38

Yup. Country's bjorked. I will take a $200K impairment in my property value for the greater good if the Government will credit my Kiwisaver with $200K, and provided they bring in heavy property transaction taxes so it's not impossible for me to buy a bigger house when family warrants it.

Otherwise I'm now stuck with a house that is increasing in value, but not by as much as the next house I'd need to buy.

Which means a bigger mortgage on the same wages. For a house that could have been bought for a smaller mortgage.

I'm one person, but this spread across the entire population (with people already putting off kids later and later and having fewer of them due to living costs) and you get a rapidly accelerating problem and the solution required just gets more and more drastic.

Obraik

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#2780724 19-Sep-2021 17:52

I'm starting to get nervous.

3 Months ago we started looking at some land in Canterbury. Before we put an offer down, we checked out the prices of some housing plans that we liked the look of to make sure that we weren't going to buy something we couldn't afford to build on. Everything looked good - we'd be well under the maximum amount we wanted to borrow, likely with enough left over to build a large workshop building on the land too. In the time it took for the deadline sale to complete and for us to go unconditional on the land, the original plan we were looking at is now being priced at $140k more than it was 2-3 months ago. The title for the land isn't due until Feb and I don't imagine the price rises are done with yet 😬

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tdgeek

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#2780729 19-Sep-2021 18:09

Obraik:

I'm starting to get nervous.

3 Months ago we started looking at some land in Canterbury. Before we put an offer down, we checked out the prices of some housing plans that we liked the look of to make sure that we weren't going to buy something we could afford to build on. Everything looked good - we'd be well under the maximum amount we wanted to borrow, likely with enough left over to build a large workshop building on the land too. In the time it took for the deadline sale to complete and for us to go unconditional on the land, the original plan we were looking at is now being priced at $140k more than it was 2-3 months ago. The title for the land isn't due until Feb and I don't imagine the price rises are done with yet 😬

Ouch. Is that rural or semi rural? ChCh due to the EQ's and the subsequent builds and development has been low on the list of price increases. Supply was there ahead of demand. Post EQ, over supply. But maybe its catching up? Like many "not that far from Auckland" towns that had stable prices then they took off.

Obraik

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#2780731 19-Sep-2021 18:12

Semi-Rural I guess? Within 30mins of the city. I'm not sure that's playing much part in this particular increase though, this is just for building materials.

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tdgeek

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#2780742 19-Sep-2021 18:26

Obraik:

Semi-Rural I guess? Within 30mins of the city. I'm not sure that's playing much part in this particular increase though, this is just for building materials.

Building materials are scarce. Prices are high, and delivery is tough, thats possibly why. From what Ive read, if I was building now, no issue we can build it in 12 weeks, but the issue is we cant get the timber for 20. Covid related, no doubt that will subside in time.

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