Home buyers “are chasing rainbows” and expecting “champagne on a beer budget” while vendors want a “Lotto win for selling their property”.
That’s the view of Professionals Rotorua McDowell Real Estate principal and auctioneer Steve Lovegrove, who says inflated expectations are slowing activity in the market.
It comes as latest data shows nationally the number of first-home buyers getting on the property ladder is increasing as banks offer cashbacks of up to $5000 for people getting their first mortgage.
“Buyers are beginning to understand it is a buyer’s market. If they find something they like and they miss out... they are much more confident than we’ve seen for the last few years that they will potentially find something else,” Lovegrove said.
However, some prospective buyers were “chasing rainbows” as there was no urgency to make a decision.
“They will then distract themselves and run off and look for another one. They’re just sitting in a holding pattern of shopping.”
Buyers were also often reluctant to borrow a lot of money as they did not want the pressure of having to meet high repayments.
“So, they look for a smarter purchase because they’re trying to find ... the champagne home on the beer budget if they can.”
Vendors were also competing and Lovegrove said they were reluctant to accept that.
“Because of course, they’re all looking for a Lotto win on selling their property. If people are reselling the properties they bought three or four years ago they could still be looking at making a loss on that sale.
“The best property at the right price is always going to win.”
He predicted the market would change later in the year.
We’ll see the turnover and the churn start to happen more rapidly later this year or next year.
First National Rotorua principal Ann Crossley said feedback from her salespeople was that buyers, including first-home buyers, had become “very fussy”.
“They have got no urgency as they have a bigger selection to look at, so they are going ‘I don’t like this one, I’ll just wait for the next one to come on’.”
She said on one occasion a person had put in an offer on a property and the bank had come back and said the offer was too high.
“I think stock levels will continue to build ... I think things will happen as the Government unwinds some of that landlord tax policy and the landlords will come back into the market. At that point, I think things will start to move along again.
“Whether that is six months, nine months or 12 months away I think that will be the thing that unchokes the market.”
Crossley said although interest rates were still reasonably high, “now is a perfect time for first-home buyers”.
“I think the market’s bottomed out and it is consolidating now.”
New Zealand Home Loans Rotorua owner Sally Copeland said the cost of living, interest rates, and house prices had made it challenging.
“However, we’re hearing stories of young people in their early 20s purchasing a home as this has been their goal which they have focused on.
“Some are pooling resources to buy with family members or friends and some are fortunate to be helped out by mum and dad. The key is getting advice early; a mortgage mentor can help you make an achievable plan for home ownership and provide guidance on what you will need to do to get there.
She said another critical factor was age once you hit “40 the time frame gets shorter and shorter” due to the lifetime of the mortgage and whether you can pay it off while you are working.
First-home buyers needed at least 5 per cent of genuine savings, she said.
That could be from Kiwisaver or a savings account to show commitment to their goal of home ownership and capacity to repay their mortgage.
An ANZ spokeswoman said last year it had 9400 first-home buyers compared to 7500 in the year before.
Their average age was 35 and about three-quarters took a fixed home loan.
“Lenders are required by law to capture and check specific information about a customer’s income and expenses before granting them credit. This can include debt owed on credit cards and Buy-Now, Pay-later schemes.”
First-home buyers could qualify for a $5000 cash contribution.
Westpac NZ consumer banking and wealth acting general manager Helen Ryder said it held first-home buyer seminars about alternative ways to get on the property ladder including Kāinga Ora’s first home loan scheme.
Mortgage applications were assessed case-by-case.
“This means assessing incomings and outgoings, which may include debt repayments, student loans and credit cards.
First-home buyers with a home loan of $250,000 or more might be eligible for a $3000-plus cash contribution.
Kiwibank home lending general manager Nicole Pervan said its home lending grew 2.7 times faster than the market.
Co-ownership was an alternative option where friends and family could team up to get on the property ladder sooner. It also had a partnership with Kāinga Ora that provided access to home loans with a 5 per cent deposit and cashback offers.
BNZ head of consumer lending Sarah Falanitule said it had not changed its lending criteria for properties requiring remediation or renovation.
“We continue to apply standard affordability requirements to ensure our customers can manage both the purchase and any necessary repairs.”
BNZ had a $3000 cashback incentive for first-home buyers, applicable on a minimum lending amount of $300,000 if they met criteria, she said.
Reserve Bank of NZ data shows there were 26,727 first-home buyers in the 12 months from February 2023 to January compared to 23,024 over the same timeframes the year before.
Those first-home buyers for the 12 months to January collectively borrowed $14,859,000 million compared to $13,170,000m the 12 months before.
First-home buyers made up 24.1 per cent of total new mortgage commitments in January 2024 up from 23.1 per cent in January 2023.
According to the OneRoof House Price Report at the end of January, the average property value of a house in Rotorua was $746,000.
Carmen Hall is a news director for the Bay of Plenty Times and Rotorua Daily Post, covering business and general news. She has been a Voyager Media Awards winner and a journalist for 25 years.
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