Investors seek to offload properties ahead of further price falls
As property prices continue to fall, one Auckland mortgage adviser has noticed an increase in property listings.
Marchy Pang (pictured above), managing director of brokerage Supercity Mortgages & Insurance, has discovered a trend that involves some investors deciding to part with their investment properties and sell by the end of 2022.
“Some of our clients currently selling their properties have told us that they believe house prices would drop further in 2023 before a slow bounce back in 2024, so they were hedging their bets and would try to sell now in the traditional ‘busier’ spring and summer period,” Pang said.
“Some investors are looking for an upgrade who brought their properties a while ago with some significant capital gains over the year already, so they are more tolerant of a reduced sale price when they could also buy the next property at a potentially cheaper price.”
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Pang said there was still some hesitancy amongst those investors considering selling in a tougher lending and higher interest rate environment.
“These investors think they might not be able to secure further finance based on their current financial situation,” he said.
“Although interest rates are increasing at speed, most experienced landlords have previously experienced a higher interest rate, so they would still have to adjust their discretional spending to improve their cashflow.”
Pang said he was helping a lot of first home buyers’ clients who had a 20% deposit looking to purchase an existing standalone dwelling with three or four bedrooms.
“First home buyers with less than a 20% deposit are restricted to purchase new build properties by the current tough lending criteria, unless they have strong affordability,” he said.
“Meanwhile, our investor clients are mostly purchasing new builds due to interest deductibility rules and more friendly deposit requirements.”
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Pang said following on from the September inflation data, which came in stronger than forecasted, it was clear borrowers would continue to suffer from an increase in mortgage interest rates.
“Most economists have adjusted their OCR forecast to 5% in 2023, which is up from 4% only a couple of months ago. High interest rates will mean further cuts to discretional spending and purchasing power, so falling house prices are widely expected,” he said.
“We have already started seeing some new build developers giving discounts and struggling with pre-sales as prospective purchasers are now less confident to get into the long-wait game for new builds under the uncertainty of the current environment.”
