September 2016 put a real dampener on the Auckland property market with the announcement from the Reserve Bank of a 40% deposit required by investors.

Slowing things down for first home buyers was its direct intention and this legislation has certainly made its mark in the last eight months. But, has it made things any easier for first home buyers? Here’s the take from some expert estate agents out at the coal face….



So, how has the Auckland property market changed over the last 6 months?

In all areas of the market, the wind has definitely been swept out of its sails, due mostly to the RBNZ’s lending restrictions on investors, but also to banks really tightening up their lending to anyone requiring property finance. And of course, those on the tightest budgets take the hit… first home buyers.

Donald Gibbs, who works predominantly in the inner city apartment market, says he sees banks looking for a reason to say no, rather than a reason to say yes. “They have become incredibly selective, almost legalistic, when lending for apartments – even a one metre squared difference in apartment size can require a buyer to put down 30% instead of 20% deposit.”

And that there often knocks buyers out of the market, he says, either because they cannot pull together that chunk of cash, or the rate of return just doesn’t match what they require.

Pernell Callaghan, managing director of Callaghan Real Estate says he’s seeing the same reticence from banks on suburban properties. “Where in the past banks may have needed five working days on finance and the deal was good to go, they’re now needing 10 working days, and often will say no at the last moment.”

“It feels like we’ve eased back into a normal market,” Callaghan says. “Agents are having to work harder to pull deals together, whereas for the past few years a lot deals have just come together easily, because of desperate buyers and benevolent bankers.”

What type of buyers are you seeing actually purchase?

William Tatana who sells residential property for Harcourts Cooper & Co on the Shore and Central West, says the 40% deposit ruling for investors really knocked a lot of their buyers out – 40% deposit was just not a viable option for them.

“Before the new lending legislation came in, investors made up around 50% of our market – now it’s probably 10%.” But, he says, as the market has steadied over the past month or two, investors are beginning to return, though at nowhere near the rates of 2016.

We’re seeing a lot of first time buyers through with parents, he says. Most often they have to go down the guarantor route to get into property, and KiwiSaver makes up a large proportion of their deposit almost every time.

In the apartment market, again those investors were knocked down, but they’re up again, just perhaps not to the same extent. The student accommodation market is big aspect for both investors and owner-occupiers, and it always peaks over January and February, Donald says.

A good percentage of his buyers are offshore – either investors, Kiwis returning, a lot of Australians, and many other immigrants that look at the apartment market as an ‘affordable’ step in. Yet despite the RBNZ placing restrictions on finance for those with overseas income, “offshore folks are somehow finding a way around the restrictions and purchasing,” he says.

That said, Chinese buyers are finding it more and more difficult to get their money out of China, says Donald, which has pulled that aspect of the market back a little.

What’s going to happen to the market in the next 6 months?

Donald says demand is well and truly still there, and can’t see that stopping for a long while. The rate of immigration into Auckland is high, and shows little sign of slowing. “Banks may restrict certain aspects of finance and that shows as a flattening in the market for a while, but those purchasers find another way around it and the market comes back.”

He says the apartment market is the canary in the cage, the market indicator – “We see market changes first, and then recover from them first.” As has happened in the last 8 months.

Donald hopes this year will be slow and steady. It’s an election year of course and people often sit and wait to see the outcome and repercussions. But when demand is steady and supply is just not meeting it, then even an election year can’t scare off a lot of buyers.

Pernell sees the banks in control – their reduced appetite for lending is clearly affecting the market, but the market will keep moving steadily if the banks are willing to lend. He also says that while deals are becoming harder to pull together, prices have not fallen back or fallen far, and are unlikely to with the steady demand.

“Buyers still have the ability to purchase well – things are steady, but the frenzy has gone,” says William. Don’t expect a bargain though – there are still buyers and plenty of competition out there, so you need to be very well prepped and ready to make your move.

William says, it’s all about meeting the market. A wee while back vendors could expect to almost name a price and get it, with the house in any state – it’s not like that now, he says. To sell well, you have to price appropriately, present the property professionally, market it smartly, and make sure there’s nothing nasty lurking – nothing on the property or in the paperwork that may turn a buyer or, more importantly, a bank off.

Buyers’ market? Sellers’ market? Seems it’s more like a bankers’ market at the moment with their inclination to slow the selling process and make sure every box is ticked.

And ticking boxes is exactly what you need to be doing whether you’re buying or selling in the Auckland property market. Get yourself into the best position you can – make sure there’s nothing that’ll knock your deal or your finance off the table.

Donald says he gets every purchaser he meets alongside a mortgage broker – “Where you might not be able to make it work with the bank, a decent broker will always find a way to make it work. They’re hustling banks daily.” Oh, and did we say ‘our service is free’?!

Seriously, if you’ve got any questions about where things are at and how you can get in to the market, we’re always here to talk.

About Campbell Hastie

Cam is one half of Auckland based mortgage brokers, The Go 2 Guys.

He makes a living by sharing what he knows about mortgages with people, arranging mortgages for people and then insuring people.

He doesn't claim to know everything about mortgages himself which is why he teamed up with David Mercer — hence the ‘2’ in Go 2 Guys.

He writes posts regularly on his blog and has been told he has an ability to share his knowledge in a simple and sometimes memorable way.

Feel free to comment and ask any questions. Contact Campbell Hastie m: 027 697 7789.

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