I am currently in Auckland (school holiday trip with kids) and have had few chats with some investors here. - Auckland saw a huge growth in property prices in last few years - Reserve Bank took active measures (interest rates for investors are now over 5% plus 30-40% deposit requirements for investors) As a result, market seems to have stopped in its tracks and panic is starting to set in with increasing holding costs and flatlining prices. Other than NAB, all other major Aussie banks (Westpac, Commonbank and ANZ) own subsidiaries in NZ (controlling a similar size of market as they do in Australia). Another 50 basis points increase and I don't think Sydney/Melbourne will be looking any different from Auckland. Thoughts!
Another interesting point is that while Auckland property prices have dropped this year as a result of lending tightening, the rest of NZ took an unexpected surge (over 10% increase) as investors were forced to chase better yields available in other cities. Could a Sydney/melb slow down deliver a long awaited Brisbane boom?
Shouldn't really come as a suprise to anyone. As with Sydney though, there's a mass of home buyers and investors waiting for lending restrictions or other barriers to move away and they'll pile in. I've enjoyed very nice gains this year outside the capitals, not for the first time and won't be the last. These are cycles.
ANZ, Commbank and Westpac own 80% of NZ mortgage market ($150 billion lent), out of which $50 billion has been classed as risky mortgages. They are starting to feel the heat in NZ and no wonder they are starting to prepare for the same situation in Australia by raising out of turn interest rates. If you throw any unexpected global development into the mix (like GFC or dotcom crash), I think we will be looking at a big mess.
I'm invested in that market, along with a few friends and I haven't seen anyone in a mess. Many investors can't buy, but there are enough home owners to buy anything decent. The tide has turned a bit in favour of buyers, so prices have softened a bit. Like Sydney, investors knew this was coming so had the option to sell up if they wanted to. Price drops arent life changing in any case. For those who cant find a buyer, there is also huge rental demand across nz and rents are strong. The only people in a mess would have been in a mess anyway because they ignored the basic rules eg only borrow what you can pay back, keep a buffer for unforeseen events. Oh, just remembered also saw the same thing in the UK 10 yrs ago. No mess that time either for anyone I was aware of. People often had to rent out rather than sell houses if they had to move areas but rents were strong and increased during the slump. Some people had to move out of their comfort zone and become accidental landlords and be tenants in the area they moved to. People in a mess? Anyone who overstretched with no buffer and needing to sell asap for x amount.
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