Land agents upbeat about market
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By Jude Gillies on Mon, 2 Feb 2009
Queenstown property professionals report the market is taking off, as buyers scramble to make the most of falling prices and interest rates.
Roost mortgage broker Mark Pullar said he had been inundated with customers, many of them first-home buyers, who have been holding out for the past two or three months, waiting to buy as property prices and interest rates dropped.
Other existing house owners sought to refinance by breaking mortgages fixed a year or so ago, when rates were up about 7%, Mr Pullar said.
The current rates were now under 6%, "But it's a double-edged sword [for buyers]. They see the affordability improving, with some sellers under pressure and interest rates lower, but the big Aussie banks are now requiring a 20% deposit, which is holding some back," he said.
Westpac was still lending to some customers with less than a 20% deposit, but had tightened its lending criteria significantly.
However, Roost had exclusive broker access to AMP Home Loans which was still lending to customers with a deposit as low as 5%. This had kept him very busy, he added. "I'm seeing customers who have been bumped back by their own bank come to me."
He was also busy with home owners wanting to break their fixed-term mortgages. But it came at a cost. Break fees for a $300,000 mortgage were up around $30,000, depending on various factors of the interest rate and term left to run but some banks were allowing customers who could afford the extra debt to capitalise the fee and add it to their loan, which assisted with weekly household cash flow, MrPullar said. "It's making it extremely busy for us."
However, the busiest months may be yet to come as people waited for the interest rate low point, he added. "We're expecting that could be mid- to late-2009." His experience was backed up by property sales consultants in the Wakatipu.
Several, who declined to be named, said they were experiencing the highest level of interest in the past 12 months as people planned to transfer their investments out of the banks and put them into property in the Wakatipu. Those who did not need to borrow were astute buyers looking for value for money.
Investors were inquiring from overseas as the kiwi dollar dropped, but also from around Otago and Southland, seeking to buy rental properties in the Wakatipu which could return about 4% instead of the 3% banks were offering.
Other interest was coming from prospective first-home buyers keen to take advantage of the competitive market where the new interest rates could make a difference of as much as $100 a week to those with a $300,000 mortgage.
While "realistic" vendors had dropped their prices by about 15%, others "right across the board" were yet to make the same adjustment.
One sales consultant described it as a "two-tier market" in which some properties were priced realistically for the market but others were yet to come down.
There was a shortage of houses in the Arrowtown area, particularly in the family bracket of $550,000 to $600,000 with multiple bedrooms and bathrooms and garaging.
New house construction falling "dramatically" combined with the falling interest rates would lead to a bottoming out in the market as demand started outstripping supply.
"We are closer to that point every day. Sections are in short supply in the Wakatipu. End of story," one sales consultant said.
Southern Lakes senior property adviser David Penrose said it was experiencing an influx of buyers who had been "sitting on the fence" waiting to enter the market again.
There were a lot of first-home buyers seeing an opportunity to buy, including expatriate Kiwis wanting to return from the UK as the economic situation there worsened, he said.
"The kiwi [dollar] exchange rate is becoming very attractive for them to enter the market and it's only going to get better as the dollar continues to drop."
However, Mr Penrose said many buyers were not paying premium prices. "People are recognising value." He also predicted a shortage of sections in the next twelve months as astute and prominent developers took advantage of the falling land prices to buy up property for land banking . He estimated there were several hundred homes "on" the market in the Wakatipu, but said only those "in" the market for at a realistic price were selling. "Vendors need to understand if they want to sell, they need to be 'in' the market."