Head of Auckland's biggest real estate firm believes RBNZ clamps on low equity mortgage lending will make housing more affordable

The head of Auckland's largest real estate firm believes that "speed limits" on high loan to value (LVR) lending are likely to have a positive impact on the housing market.

Managing director of Barfoot & Thompson Peter Thompson told interest.co.nz the limits, coming into effect on October 1, were "going to be a great thing" for affordability. See here for articles on LVRs.

Thompson, whose firm accounts for about 40% of Auckland house sales thinks LVRs will be good for affordability "because it is not so much about the price - it’s about people’s expectations".

"And if they can’t borrow as much as they would really like to live in the dream area they are going to have to move to a slightly less suburb that they can afford with a slightly less mortgage.

"And I think that over a period of 12 months – it’s not going to happen straight away – I think you will start to see prices come back to make it more affordable, and that’s got to be good for everybody."

The LVRs were likely to "make people be able to afford what they can actually afford rather than over commit", Thompson said.

Rising interest rates

"And interest rates will go up over a period of time. They’ve never stayed this low for such a long period. And if interest rates do go up and they’ve borrowed so much more against the property it does put them in a position and, dare I say, it that’s where we start seeing split marriages, or split relationships, mortgagee sales - and we don’t want to go down that line again."

The B&T sales figures for August showed an easing of price in the Auckland region. But while there was a strong pick-up in new listings, relieving pressure on tight inventories of available houses, the number of houses sold remained at high levels.

Thompson believed the Auckland market was now "steady" after some fairly sharp prices rises earlier in the year.

“We are in a very settled market now, which is quite pleasing to hear,” he said.

More on the market

“...There is a lot of confidence that the market is starting to see more property come on to the market to match the number of buyers that we’ve got there.

“I think we are going to see a steady period for six months and then we get the new properties that are under consent at the council possibly coming on the market at that time as well.”

However, he said it was “fair to say” there could be something of a crunch if numbers of new listings don’t continue to pick up along with the inevitable rising in buying interest that the onset of spring will bring.

“We’ve got a lot of buyers out there. And what we are seeing at auctions is properties selling in a shorter timeframe and that’s because there’s good buyers and people are making pre-auction offers that the price is acceptable to the owner and we are bringing forward the auction.”

Where are prices heading?

Asked about where he thought prices were heading in coming months, Thompson said: "...There is a seasonal factor and traditionally when we get to October-November and even the beginning part of December we will see the prices go up a little bit. They will fall away a bit say in December-January and beginning part of February and then most probably increase again end of February through to April.

“So, that’s the seasonal trend and it does have an effect on the price, but overall I think if we take all those into consideration over a 12-month period, I think we are going to see prices remain relatively where they are at the moment. There’s not a lot of movement. One month it may be up one month it may be down but very minimal.”

Barfoot & Thompson currently sells about 55%-60% of its houses through auctions.

“And that’s mainly because the market’s generated because of the lack of supply,"  Thompson said.

Plenty of buyers

"We’ve got plenty of buyers and people are making good offers on these properties. It does shorten the campaign of the property and that’s a concern to us, but at the end of the day if a vendor says I want to take that offer we’ve got to make sure that they do take that offer."

There has been some criticism levelled against the auction process, along with suggestions that some vendors could simply organise their own registered auctioneer to sell their property and cut out the estate agent.

Thompson was asked about this.

“You could [organise your own auctioneer], but would you get the best price? At least the real estate agents know the market, they know how to do the campaigns. It’s not just about having an auctioneer calling the auction. It’s also about the preparation, the marketing, and that’s where the real estate agents come into their niche."

Thompson suggested in any case that the current trend toward auctions may ultimately reverse.

“I think once we start to see more listings on the market, more competition for sales, I think you could eventually move away from the auction and go back to more the traditional - but certainly the auction at the moment is the best way to be selling your property here in Auckland. It is not a nationwide thing it is mostly here in Auckland."