PHOTO: Residential Real Estate
We are very pleased to be able to share the following insights recently authored by Tony Alexander. Tony was the Chief Economist at the BNZ for 26 years and is now an independent Economics speaker.
6th April 2020.
Last Wednesday I sent an email to the 240 real estate agents and mortgage brokers on my subscription list, asking for their comments regarding current conditions in the residential real estate market and thoughts and plans of buyers, vendors, and owners. 53 excellent, detailed, replies were received and this Covid-19 Supplement is a summary of those responses.
Most vendors and buyers are taking a wait and see attitude though purely electronic sales continue to be made. 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. Small investors are deeply worried about rental income losses, larger ones less so. Well capitalised investors, some inactive for some time, are contacting agents anticipating bargain purchases in coming months. 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.
Buyers submitting offers are tending to lower them. However, having so recently experienced a period of intense listings shortages, and with vendors backing away, the offer reductions are fairly small.
Buyers with pre-approved finance are waiting to see what happens. Those who are self-employed appear in a worse situation than wage earners, with income slashed and big worries about future customer flows. Most first home buyers have backed off, having seen their KiwiSaver balances decline, but this applies far less to those in jobs not much affected by the downturn (public servants in particular). Those people are hoping for better property availability and slightly better purchasing prices and they remain interested.
Cashed up buyers feel they now have the ultimate upper hand and are showing no inclination toward rapid decisions at this stage.
Some potential buyers are indicating that they will put everything on hold until after the September general election. There in fact are many frustrated buyers who have been unable over the past year or so to find what they want. These people are hopeful of greater supply becoming available.
Some buyers are having to walk away from Unconditional purchase contracts because they have lost their jobs. Some buyers who have a strong desire to transact are seeing an opportunity to purchase while everyone else is sitting on their hands and are targeting the lockdown period to make their purchase.
Some buyers, having signed the contract, are looking to place their own property on the market as soon as the lockdown ends in order 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 vendors are holding off so proper marketing of their property can be done when the lockdown ends.
Many already consented building projects are now not expected to proceed. The biggest price discounts being offered at this stage are coming from spec. builders who have taken on debt to build a house to sell and now need or want to sell it as soon as possible.
Sellers know that potential buyers cannot get access to local councils or building inspectors so are reluctant to pursue purely electronic listing while we are in lockdown.
Vendors of good properties who do not have to move are expected to sit and wait as long as needed for conditions to improve, and this is expected to create a shortage of good stock, not just listings generally.
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