The new loan-to-value ratio (LVR) mortgage restrictions, which limit new bank mortgages to 60% of a residential investment property's valuation, are starting to bite the Auckland apartment market.
At this week's regular CBD apartment auction conducted by Ray White City Apartments, eight apartments were offered up for sale but only one sold under the hammer, a clearance rate that would have been unthinkable just a few weeks ago.
Perhaps even more worrying was that four of the apartments offered received no bids at all, although one of those was on a leasehold title, an arrangement that is out of favour with many investors.
Auctioneer Ted Ingram told the auction room that the new LVR restrictions were starting to have an effect and that the agency had dealt with three potential buyers this week who had withdrawn from discussions because banks had cancelled their pre-approved mortgages, meaning they would have to renegotiate new financing arrangements.
On the same day as the Ray White auction, Barfoot & Thompson offered only one apartment at its regularly scheduled morning auction, but it received just a single bid and was also passed in.
Going against the trend was this week's apartment auction at City Sales where just two apartments were offered and both were sold.
Although clearance rates are down overall, buyers are still about and there was competitive bidding on several of the apartments.
However the new LVR restrictions may mean investors who now need to to be able to fund a 40% deposit are hitting their maximum price earlier than would otherwise be the case, leading to more properties being passed in and potentially tougher negotiations with vendors to clinch a deal.
You can see the results of recent apartment auctions by City Sales, Ray White City Apartments, Barfoot & Thompson, Bayleys and Harcourts, as well of details of recent apartment sales by Impression Real Estate, on our Auctions/Sales results page (select Auckland Central in the "area" search field), or you can simply click on this link.
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20 Comments
In my very narrow view of a recent FHB couple what I have witnessed is that they for two years watched the market unravel beneath them as prices got higher and higher and expectations of what they would buy stayed the same. I think for many they are caught up in the emotion of the buy vs the reality that this is just a starter home for a few years and not forever. Not many people can afford a forever home as a first home.
Paralyzed thinking will lead to a very tough life of hard knocks...there is never a better day to buy property than today! To get into negative equity on a starter home in AKL of $650k (government cut off for assistance) would mean the price would have to drop to below $520k. Not going to happen. You can still get houses in Titirangi / west AKL for this price.
What was the reserve on the apartments ? Who is to say they were not just over priced to start with?
Looks like someone wants to send a message that no further restrictions such as loan to income is needed.
I clicked the link. So over the last week or so 25 were for sale and 11 sold. Doesnt sound like a disaster yet. Perhaps on the day in question the foreign students were busy.
I wouldn't want to be holding a leaky or old apartment when there are plenty on new ones being built. From now on people are going to have to be smarter as to what property they buy if they want to make money in the longer term.
Good to hear the LVR's might be having an effect.
Indeed Penguin- stay well clear of the old apartments - let the "penniless" foreign students snap them up.
"The Home Owners and Buyers Association of NZ (Hobanz) suspects the majority of multi-storey apartment buildings built between 1995 and 2005 are probably non-compliant and never were."
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=115…
That's correct. The hesitancy from buyers is over the older apartments which are frequently under sized for mortgage purposes and badly build both structurally and visually. The new crop coming on while hopelessly over priced (plus 15% GST) are of a slightly better quality - which doesn't say much for them either but at least
they may last a winter or two.
... do the older apartments come with shared ablution blocks , flush toilets , or just long drops ( throw it out the window ) ... ?
If I'm paying $ 600 000 for an apartment in Auckland I expect something better than just a bucket full of saw-dust with a Warehouse $15 plastic toilet seat duct taped to the top ...
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