The Boom That Just Keeps on Coming
Finance advice with Nathan Miglani
OTHERS MAY HOLD A DIFFERENT view (or hope!), but I’m not holding my breath for a downturn in the market. So far this year, I’ve been even busier than in the latter months of 2020 (traditionally hot months in real estate). A lot of this is driven by record-low interest rates: buying really is cheaper than renting right now. I have contacts who have been in real estate for 40 years and they tell me that what makes this market unique is the fact that property prices are going up at the same time as interest rates are going down!
All of which is remarkable but, in my view, what’s really pumping up the market right now is property investors who secured mortgage preapproval just before the banks changed their policies last year. ( Yes, the Reserve Bank has only just made the reinstatement of LVR restrictions official, but the banks acted late last year, as soon as the Reserve Bank hinted at what was coming.) These investors are now racing to beat the expiry of their preapprovals – if they don’t, they’ll have to come up with a bigger deposit. They’re cashedup and in a hurry, and they’re adding fuel to the property market fire.
Once these preapprovals expire in the coming weeks, I think we’ll see some breathing room for other buyers – but don’t expect it to last long.
After the earthquakes, Christchurch real estate boomed on EQC and insurance money. Then the local market plateaued as the rest of the country took on more debt and other housing markets boomed. Now it’s Christchurch’s turn to boom on debt, as buyers tap into their equity to purchase investment property. As a consequence, I don’t think the LVR restrictions will contain things for long and I strongly believe that property values will be up another 10 per cent by this time next year.
For one thing, housing stock on the market is simply not keeping up with demand. There were 2,000 properties listed for sale on Trade Me at the start of 2020 (pre-COVID-19) and at the start of this year there were just 1,300. At the same time, we are seeing a huge level of demand in every part of the market – yes, there’s interest from overseas, but it’s mostly driven by locals: investment property, of course; first-home buyers realising that renting doesn’t make financial sense; the usual undercurrent of those upsizing or downsizing; and even those buying holiday homes.
All of this means that whether you’re entering the market for the first time or trading homes, you really need to be in a strong position to compete. You only get one chance to make a first impression with the banks, so a good mortgage adviser is a huge asset, prescreening your application and polishing out issues to ensure you’re at the top of your game before you get in front of the decision-makers at the banks. At Loan Market Paramount, we’re proud to have an 80 per cent conversion rate with the mortgage applications we submit, but that’s only possible due to hard work behind the scenes.
From buyer competition to riskaverse banks, it’s just not easy out there at the moment, so you need all the help you can get!