Buyers and sellers have largely pushed pause on New Zealand's $3 billion-a-month house sales market but wealthy landlords see rich pickings and are already calling agents about bargains.
Economist Tony Alexander has today issued survey results from 240 real estate agents and mortgage brokers which found that despite a few electronic sales, the once-thriving market had quietened. Around 53 parties gave detailed replies.
"Buyers are anticipating lower prices, but many have left the market amidst loss of KiwiSaver funds, jobs and incomes. The biggest group to pull back is first home buyers. Vendors - unless potentially stressed - are also leaving the market," Alexander said of his findings.
Less wealthy landlords are worried about rent losses.
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Real Estate Institute chief executive Bindi Norwell said average monthly settlements from March to April were around $3.6b in the past three years so that was the value of the market now lost in the alert level 4 lockdown. In Auckland alone, $1.5b of property sales were usually made in that period, she noted.
Owen Vaughan, editor of NZME-owned property listing site OneRoof, said while market activity had dropped, buyers and vendors were still managing to do deals, with virtual walk-throughs taking the place of open homes and several agencies running auctions online.
"Some of the sales in the past week have seen vendors enjoy above-CV prices, while cashed-up, financially secure buyers are making offers on properties without having physically inspected them," Vaughan said.
"It's likely that once the lockdown lifts there will be a rush back to open homes by those who were already well-advanced in their buying journeys. Audience numbers for OneRoof show buyers and sellers are using the lockdown to do their research."
Alexander said city-based real estate agents were less concerned about prices falling than those in the regions and he cited Wanaka where drops in sales prices and rents are expected "as new buyers back away and many existing owners look to sell their high-priced properties to free up capital for their businesses. Auckland's inner-city apartment market looks also likely to take a hit from students walking away from leases, Airbnb properties coming on the market, no new students coming in".
Well-capitalised landlords, some inactive for ages, are now calling agents about bargains coming up, Alexander found.
"Some, not all, banks have pulled back on accepting new loan applications but it is not clear if this is due to lack of willingness to lend, or just a temporary staff capacity issue. Spec builders are very worried.
"Cashed-up buyers feel they now have the ultimate upper hand and are showing no inclination toward rapid decisions. Some potential buyers are indicating that they will put everything on hold until after the September general election. There are many frustrated buyers who have been unable in the past year or so to find what they want. These people are hopeful of greater supply becoming available," he found.
Some buyers are having to walk away from their unconditional purchase contracts because they have lost their jobs - potentially losing their deposits.
Buyers keen to operate see opportunities in alert level 4: while everyone else is sitting on their hands, they are targeting the lockdown period to make their purchase, he said.
"Some buyers, having signed the contract, are looking to place their own property on the market as soon as the lockdown ends to get a quick sale. They are fearful of deposit loss should they fail to settle and uncertain about getting bridging finance if needed."
Some sellers are holding off so proper marketing can start when the lockdown ends. They know potential buyers are frozen, so won't pursue purely electronic listings.
Landlords with tenants who can't or won't pay rent have deepening fears that the lack of cash flow will cause severe short-term hardship for the investment sector.
"This is seen as potentially causing extra properties to be placed on the market once the lockdown ends," Alexander said.
In fact, existing small investors reliant on rental income have withdrawn quickly from the market, partly due to the Government's proposal to permanently end no-cause terminations. Those are barred during the lockdown and rents are frozen.
Alexander said planned law changes could drive some landlords to sell: "There is a feeling that on top of legislative changes, this will be the final straw for some – a prospect seemingly relished by the well-capitalised professional long-term investors."
Some landlords expect post-lockdown bargains and want to lock in current low interest rates to new mortgages: "They feel that listings are going to dry up and the properties on the market will mainly be distressed sales."
Interest from Chinese investors in new development projects appears to be as strong as ever, he said.
On the lending front, many property owners suffering financial hardship wanted to convert from interest/principal loans to interest-only loans via mortgage deferrals, he said.
"Applications for new finance have largely dried up. Some banks are offering only three months' deferral with a review in three months."
Mortgage brokers complained of low bank staffing levels, unable to handle pre-lockdown mortgage applications and no better now: "That may explain why banks no longer appear to have interest in refinancing mortgages from other banks," brokers told him.
Banks were enforcing minimum 20 per cent deposits for owner/occupiers and 30 per cent for investors on existing house purchases, he said.
"In fact, banks are tending to make debt servicing calculations only on the current low level of income being received by workers receiving the Government wages subsidy. They don't intend using higher income levels until people can prove that is in fact what they are earning. Some banks have straight out stated to brokers that they are taking no new clients at the moment. Not all however."