The Eastern Suburbs market has generally tracked Auckland’s decline in sales volume although this time round, prices have gone up compared to same time last year. Perhaps it goes to show that the market here is a bit more resilient compared to other Auckland suburbs.
The reason for declining sales volume but relatively stable prices could be due to the fact that credit, while cheap, is very tight. New Zealand currently has a tough bank lending environment due to high serviceability requirements that makes borrowing a pain (or outright impossible) for some buyers. This in turn leads to decreased borrowing (in particular for investors) and sucks the wind and energy out of the property market.
And it looks set to get worse. New increased capital proposals threaten to increase mortgage lending costs and/or cut lending to increase return on equity.
Looking at bank lending figures, this is consistent with the above. Interest.co.nz has pointed out that “the $5.769 billion total borrowed in what is usually a busy month was the lowest total for a March recorded in a series that the RBNZ has been publishing since August 2014.”
However, first home buyers are still around, and lending to them have increased year-on-year. If your property is suitable for first-home buyers, then you can still expect strong interest provided it’s well-located and well-presented.
Some property investors (long-term buy & hold types) are also preparing to sell so this would be positive news for first-home buyers who now have quite ample choices on the market. (I’ve got two on the market right now so have a look here).
If you are selling and expecting investors to be interested in your property, then your property will need to be attractively priced or it offers some upside potential (for e.g. easy do-up for a long-term buy and hold, possibility of subdividing etc). The increased focus on yields by such investors, rather than the traditional ‘speculator’ focused on quick capital gains, will mean that such properties will need to be attractively priced with a clear route to solid rental demand. This is expected to be more obvious as the Labour government phases out negative tax gearing.