Lockdown market sentiment

Caution might dominate property sector participants’ takes on the market, but independent economist Tony Alexander’s latest polling reveals that not all investors are taking a step back.

Monday, April 06th 2020

Alexander surveyed 240 real estate agents and mortgage brokers to get their views on the property market, both now and going forward.

Not surprisingly, it turns out that most buyers and sellers are taking a wait and see attitude, although many are anticipating lower prices.

It seems that many buyers many have left the market amidst the loss of KiwiSaver funds, jobs, and incomes, with the biggest group to pull back first home buyers.

At the same time, sellers - unless potentially stressed - are also leaving the market.

Alexander reports there are many frustrated buyers who, over the past year or so, have been unable to find what they want and that they are hopeful of greater supply becoming available.

“Cashed up buyers feel they now have the ultimate upper hand and are showing no inclination toward rapid decisions at this stage.”

Yet sellers of good properties who do not have to move are expected to sit and wait as long as needed for conditions to improve, he says. “And this is expected to create a shortage of good stock, not just listings generally.”

However, it’s becoming apparent that among residential investors there are two divergent trends, with small investors deeply worried about rental income losses and larger ones less so.

Alexander says there are deepening fears that absence of cash inflows, plus an inability to quickly get new paying tenants and continuing cash outflows, will cause severe short-term hardship for “Ma and Pa” investors.

This is seen as potentially causing extra properties to be placed on the market once the lockdown ends, as opposed to high debt servicing costs being the traditional cause of “forced” selling, he says.

“In fact, existing small investors reliant on rental income have pulled back quickly from contemplating new purchases.

“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.”

That’s because a number of investors have become newly active in the market, he says.

“They’re contacting agents hoping for some bargains, focussed on the long-term which has worked for them in the past, and looking to lock in at current very low interest rates.”

It’s also worth noting that Alexander’s summary of responses show city-based salespeople are less concerned about prices falling than those in the regions.

In markets like Wanaka, expectations are high of some big declines in prices and rents.

But Auckland’s inner-city apartment market also looks likely to take a hit from students walking away from leases, Airbnb properties coming on the market, and no new students coming in.

Alexander didn’t set out to survey the commercial property market, but respondents provided him with information on it and it shows the situation for the sector looks much weaker than for the residential sector.

He says there is far more stress on commercial landlords as tenants exercise clauses allowing them to pay no rent, or simply refuse to pay anyway.

As a result, it seems some big discounts (of up to 50%) on commercial rents are being given.

“People need somewhere to live, but failing businesses no longer need premises, and landlords are fearful of (and starting to experience) tenant loss with a resulting lengthy period of empty premises and no rent.”

Worries about bank-forced commercial sales are far greater than for residential property.

There are investors still interested in purchasing commercial premises, but banks are failing to return their phone calls enquiring about finance, Alexander says.

In a more general sense, some banks are indicting they have no interest in real estate agents, property development, property speculators or construction companies.

“Some banks have straight out stated to brokers that they are taking no new clients at the moment. Not all, however.”



No comments yet

SBS FirstHome Combo 6.14
Unity First Home Buyer special 6.55
Co-operative Bank - First Home Special 6.79
Heartland Bank - Online 6.89
Wairarapa Building Society 6.95
Co-operative Bank - Owner Occ 6.99
Kiwibank Special 6.99
Unity 6.99
TSB Special 6.99
ICBC 7.05
China Construction Bank 7.09
Unity First Home Buyer special 6.45
Heartland Bank - Online 6.55
SBS Bank Special 6.69
ICBC 6.69
TSB Special 6.75
Westpac Special 6.75
ASB Bank 6.75
AIA - Go Home Loans 6.75
China Construction Bank 6.75
Kiwibank Special 6.79
Co-operative Bank - Owner Occ 6.79
SBS Bank Special 6.19
ASB Bank 6.39
Westpac Special 6.39
ICBC 6.39
AIA - Go Home Loans 6.39
China Construction Bank 6.40
Kiwibank Special 6.55
BNZ - Classic 6.55
Co-operative Bank - Owner Occ 6.55
TSB Special 6.59
SBS Bank 6.79
SBS FirstHome Combo 6.19
AIA - Back My Build 6.19
ANZ Blueprint to Build 7.39
Credit Union Auckland 7.70
ICBC 7.85
Heartland Bank - Online 7.99
Pepper Money Essential 8.29
Co-operative Bank - Owner Occ 8.40
Co-operative Bank - Standard 8.40
First Credit Union Standard 8.50
Kiwibank 8.50

More Stories

First home buyers making hay, investors MIA

Monday, May 27th 2024

First home buyers making hay, investors MIA

A lift in interest amongst first home buyers (FHB) remains a feature of housing activity.

Good and bad news for home owners from RBNZ

Thursday, May 23rd 2024

Good and bad news for home owners from RBNZ

The Reserve Bank's latest monetary policy statement had good news and bad news for residential property owners.

Sticky market for investors – first home buyers in control

Wednesday, May 15th 2024

Sticky market for investors – first home buyers in control

Large numbers of property investors have not come back into the market despite  the reintroduction of 80% interest deductibility for landlords and the lowering in July of the Brightline test from 10 years to two years, QV says in its latest update.

Low house prices and deposits help first home buyers

Thursday, May 09th 2024

Low house prices and deposits help first home buyers

The increasing number of low deposit mortgages being lent to first home buyers has been borne out by the latest CoreLogic research.