Value shakedown
Owners of new builds in Auckland could see values drop before they’ve stepped in the door, a broker says.
Buyers who sign up for newly developed property in Auckland could be in for a price shock.
John Bolton, founder of mortgage broking firm Squirrel, said developers who had to sell their properties into a cooler market this year could shake the values of new homes.
‘‘We have plenty of land under development in Auckland. In my opinion, land developers are going to get burnt or at least have to face into significantly lower profits. Builders are going to struggle to sell at current prices in a softer market,’’ he said.
‘‘Unlike existing stock, developers and builders must meet the market eventually and you’ll see that reflected in prices.’’
Owner-occupiers were less affected by a slow market, because they would usually opt not to sell if they did not have to.
‘‘It becomes a stalemate. But developers and builders can’t do that – they have to sell whatever market they’re in,’’ Bolton said.
He said there were a lot of apartments coming into the market. Some developers would find that people who had purchased off the plans were no longer in a position to settle.
He said values could drop 10 per cent between the time a project was sold and when it was finished, and there could be a 20 per cent drop in land values.
‘‘The same applies for subdivisible inner-city sites where speculators have paid too much.
‘‘If you’re in the market this year for a new-build property it’s going to be a bit interesting.’’
Bolton said the market had started to favour buyers in the second half of 2017. He said he had seen properties going for as much as 10 per cent less than they would have at the peak of the market.
Auckland property investor Marty, who did not want his surname used, recently bought a three-bedroom inner-city apartment for $506,000.
The development is due to be finished in mid-June. He was not concerned about a drop in prices because the yield on the property was good.
‘‘Now Jacinda [Ardern] is giving out free university I believe there has been a 15 per cent increase in student enrolments, along with increases to student allowances,’’ he said.
‘‘So this should all work together to keep the CV strong.’’
He expected further relaxation of loan-to-value ratio (LVR) restrictions, which would help the market.