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Swaps market offering opportunity for investorsTuesday 2 March 2010 A new website is offering an alternative avenue for investors to broker deals, where the value of the property isn't the primary concern. By Maddy Milicich Homes2Swap.co.nz offers a platform where home owners and investors alike can mutually agree to swap properties and settle on the value difference in cash. Website founder Seamus O'Sullivan believes there is huge potential for those who are in the business of downgrading, as well as upgrading properties. "Swapping will only work where people are willing to downsize, not just upsize," he says, which is where investors can come in. Traders for example can swap a new or newly renovated home for one that is in need of doing up or has subdividible potential. Having a deal based on value differences rather than on the total value of a property, plus the fact that deals need to be settled on the same day, creates an equal market for people to operate in. "Swapping creates an even playing field. It doesn't matter what the property is worth, it only matters what the value gap is," says O'Sullivan. He says the swaps market is also a good option for people who can no longer afford their mortgage and are facing mortgagee sale, to downgrade to something they can afford. "Someone with a mortgage of $300,000 but with a property worth $400,000, can effectively end up with $100,000 cash in their pocket and retain the full value of the property rather than selling at a loss at mortgagee sale." Despite the swaps market widely used overseas, Waikato Property Investors' Association president Nancy Caiger says there are issues with New Zealand being so small. "It can become tricky to get the perfect swap because of limited options," she says. "Greater density places like England, it is easy to swap. But here, you might get one property in Invercargill, 10 in Auckland and five in the Bay of Plenty, for example, but the supply demand balance in each area is different." She says agreeing on valuations could also be an issue, but O'Sullivan says they encourage people to get independent valuations. Asked if the model could be sustainable in New Zealand, O'Sullivan said that will only be discovered in hind-sight, but "the answer in this market is probably yes. People have limited choice".
Comments from our readersOn 9 March 2010 at 9:35 am Seamus O'Sullivan said:
I would like to see the definition of a 'perfect swap'. In my experience buying and selling your house is all about concession and compromise. Homes2swap provides a venue for people to advertise their prized possession and describe what their 'ideal match' would be. I have no doubt that many, many successful matches will eventuate through this process. Add your comment:Soft housing activity predicted for the rest of the year amid weak REINZ data Economists are predicting the housing market will stay soft for the rest of the year after Real Estate Institute data showed sales volumes stayed under pressure last month. Review may give investors some depreciation relief Commercial and industrial property investors should still be able to claim significant depreciation allowances, an asset depreciation expert says. Economist pushes out dates for next OCR hikes One economist has pushed out the date for the Reserve Bank’s next official cash rate hike citing recent downgrades to its forecasts for global GDP growth, including in Australia and New Zealand. |
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