Fi­nance crunch hits apart­ment mar­ket

The Press - - Business - SU­SAN EDMUNDS

Thou­sands of buy­ers could be caught out with apart­ment pur­chases they can­not com­plete over the next three years.

Martin Dunn, of spe­cial­ist apart­ment sales agency City Sales, said banks had ‘‘pulled the plug’’ on the apart­ment mar­ket, with stricter lend­ing cri­te­ria and more re­luc­tance to lend on apart­ment pur­chases.

He said lawyers told him banks were go­ing through con­tracts for off-the-plan apart­ment sales and point­ing out de­tails to al­low them to get out of the deals.

City Sales had al­ready dealt with a num­ber of in­vestors who bor­rowed de­posits for new apart­ment build­ings but then been turned down by the bank when they tried to get a mort­gage to com­plete the pur­chase.

Many had bought apart­ments af­ter go­ing to prop­erty in­vest­ment sem­i­nars, he said.

‘‘They’ve got swept up ... There’s a sem­blance of ov­er­en­thu­si­as­tic in­vest­ment by un­so­phis­ti­cated peo­ple, a lot of them from out of Auck­land. They are ap­proach­ing banks say­ing, ‘of course I’ll need this mort­gage come Jan­uary or March next year’ and the bank’s say­ing ‘don’t talk to us, how are you go­ing to af­ford that’?’’

About half the 4500 set­tle­ments due to hap­pen over the next three years could be af­fected, he said.

Loan-to-value re­stric­tions for in­vestors had also made it more dif­fi­cult to buy apart­ments as in­vest­ment prop­er­ties.

City Sales’ data shows that the amount of new sup­ply com­ing on to the mar­ket had dropped from 2700 new apart­ments in 2005 to 1493 this year – on track to drop to 449 new apart­ments in the mar­ket in 2021.

Dunn said there were a num­ber of apart­ment build­ing de­vel­op­ments that had been ad­ver­tised that would not go ahead.

Sup­ply was driven by banks’ will­ing­ness to lend to de­vel­op­ers, he said.

The mar­ket would have to wait un­til the banks loos­ened their lend­ing cri­te­ria again. It was ‘‘not a good look’’ for a city that needed more hous­ing.

‘‘I’m see­ing a two-year wob­ble in the mar­ket. We’re go­ing to have dis­tressed brand-new own­ers,’’ he said.

‘‘There will be good buy­ing for peo­ple – some peo­ple are go­ing to be a lit­tle bit hurt over the next cou­ple of years. We’re deal­ing with a bit of it now but I think there’s go­ing to be a very large num­ber.’’

PHOTO: DENISE PIPER/FAIR­FAX NZ

Thou­sands of po­ten­tial apart­ment sales could be af­fected by a tougher line on fi­nance.

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