While a few spokespeople pushed in the last fortnight for Reserve Bank restrictions on home loans to be eased, in the vain hope of maintaining overall sales in a declining market, Bank of NZ chief economist Tony Alexander took a different course.
Mr Alexander suggested first-homebuyers look closely at the wording of ads for clues on how to pitch their offer.
Words such as “bargain”, “take advantage” & “motivated” sprang to mind.
He said a flick through the www.realestate.co.nz website the night before he wrote his BNZ weekly overview column showed 11,195 Auckland homes on the market, and 2766 of them – 25% – carried agents’ words warning of some distress.
What to do about it? “The time is ripe for you, first-homebuyer, to start taking advantage of their pain. Relax. Take a few breaths. Take your time. Look at a number of properties. Start throwing in lowball offers in case you catch a truly panicked fish. Alternatively, simply make an offer for what you think a place is really worth – and stick with it. Don’t let the agent work you. They know that at this point in the housing cycle the effort they need to put in is on the vendor – convincing them that the days of stupid prices have ended.”
Mr Alexander said the chances weren’t high that the Reserve Bank would ease loan:value ratio restrictions soon: “The rules were announced in August 2013. Comparing now with then, although house price inflation has slowed nationwide from 6.3% to 5%, (Auckland 11% to 2%), lending growth is higher at 7.7% from 5.2%, and imbalances clearly persist between demand & supply growth in Auckland.
“The next 12 months will bring pain for late-cycle investors hit by the 40% minimum deposit requirement for new investors, tighter bank lending rules and an oversupply now of developable land in Auckland. Many will be looking to offload an asset they now see falling in price. This then becomes the best market facing first-homebuyers for many years.”
Attribution: Alexander column.