Auckland residential property prices remain healthy

We’re at that time of year when the property market starts to swing back into action after the winter slowdown and September didn’t disappoint in terms of price. Although Auckland’s median house price remained flat year-on-year at $848,000, this was a 1.2 percent increase on August figures.  And if we take a deeper look at Auckland’s territorial authorities, most of these areas saw increases in their median price over the past 12 months. Manukau City led the way with a 7 percent increase and also experienced a 5 percent median price increase month-on-month from August.

Sales volumes across the Auckland region decreased by 13 percent compared to August, but we’re anticipating a surge in sales now that the election is over and more choice is entering the market for buyers. Once we have a Government and things return to normal, some property experts are predicting a return to the sales volume levels that we experienced at the beginning of the year.

One interesting trend to mention is the number of properties being sold by auction. Across the country, auction numbers are down, and even in Auckland, which usually sees a large portion of sales sold by auction, only 26.5 percent of all properties sold in September were by auction.

Just as the weather is looking positive, as the sun begins to shine even brighter, we expect the property market to gather heat over the next few months.

Source: REINZ, October 2017

Banks remain firm on LVRs

For most New Zealanders, buying a property is dependent on mortgage approval from a bank or lending institution. That’s why any changes in interest rates or a bank’s lending criteria can cause ripples in the real estate market and directly affect sales volumes.

Despite predictions all year that interest rates are on the rise, HSBC Bank surprised many this month with the release of a record low home loan rate of 3.87 percent. In the New Zealand market, HSBC isn’t traditionally your mum and dad bank as it usually has higher requirements on deposit levels, so the offer reflected this – to be eligible, customers needed to borrow at least $500k or have investments over $100k with it, plus the usual lending criteria and eligibility also applied. While BNZ reduced its rates, other banks haven’t felt the need to follow suit, unlike the mortgage wars of a few years’ ago where banks were quick to react to the moves of rivals.

Indeed, banks are being a lot more cautious in lending these days. Recent Reserve Bank figures show that banks aren’t using their full capacity to lend to homebuyers who don’t have a 20 percent deposit.

LVR rules mean that only 10 percent of a bank’s total mortgage lending can be to owner-occupiers with a deposit of less than 20 percent. But in many months this year, this has dipped to 9 percent across the banking sector. This has the most direct consequences on first home buyers who are at risk of being turned down for a home loan if the banks feel they are close to their caps. Banks need to be extra vigilant as they have to keep an eye on their pre-approvals as if a swarm of these are drawn down, institutions need to be careful that this doesn’t put them over the 10 percent limit. There are serious consequences for banks if they go above this limit – they are in jeopardy of having their banking license taken away, which isn’t something to play roulette with.

How the next year will play out in terms of buyer restrictions and interest rates will be interesting to watch. Although home loan rates have stabilised, they are expected to go up in the next 18 to 24 months, which could bring about a sea change in the current market.