Housing’s perfect storm

Why it’s time to buy

Houses you may have been looking at with increasing prices, are now a bit more stable. Ashley Church

Adrop in lending to property speculators and a cooling of interest from Asian investors in Auckland dwellings has created a “perfect storm” for would-be first-home buyers to secure houses, industry experts say.

Reserve Bank figures obtained by the Herald on Sunday reveal lending to investors has almost halved since June; dropping from $2.5 billion in June 2016 to $1.4b in October 2016.

The drop follows LVR restrictions on investors, including the requirement to have a 40 per cent deposit for all new investment properties.

The restrictions, which came into force on October 1, were introduced in a bid to cool the red-hot Auckland property market.

Ashley Church, chief executive of the Property Institute of New Zealand, said while a cooling off of the market might be temporary, now was the time for those hunting a first home to get on the property ladder.

“The figures have created a perfect storm, which right now is good for anybody getting into the market, as competition in auction rooms has disappeared for a while,” he said.

“Houses you may have been looking at with increasing prices, are now a bit more stable.”

The release of the drop of lending comes after the Herald reported up to 75 per cent of Auckland homes going under the hammer were failing to sell.

Barfoot & Thompson, which has about 42 per cent of Auckland’s residential market, has also reported a cooling off in the market, with sales volumes in October falling from March’s 1341 to 778.

Church said the current state of the market was the best opportunity for potential home owners in at least six months.

“Take advantage while it lasts, as I think it will disappear in the New Year,” he said.

As well as the new LVR rules, investors were being put off by major banks stopping foreign residents using off-shore income to service loans.

Mortgage broker John Bolton, who heads Squirrel Mortgages, said he expected the level of Asian investment in residential property to wane.

“The combination of 40 per cent LVR restrictions and not using overseas income for servicing the loan are significant and have materially impacted the investor market, and the Chinese are a big part of that market.

“They can’t come back because they are not in the position to borrow more money.

“There will be some activity but the restrictions are tight enough that it is going to limit the property investor market in Auckland.”

Bolton also revealed his clients selling their homes were getting about 10 per cent less than they initially expected.

“The market has swung from a sellers’ market to a balanced market,” Bolton said.

Barfoot & Thompson director Peter Thompson said it wasn’t just foreign investors who seemed to be shying away from the market, with demand from local investors also reducing.

“Are they coming back — maybe we will have to see?”

His “gut feeling” was that most of the sales in recent weeks were in the $700,000 to $1 million bracket and were made by owner-occupiers, rather than investors.

“It could be first-home buyers, mum-and-dad types starting to move with end-of-school year and wanting to settle in before school starts.”