Open homes may be off limits for now but the lockdown is affording Kiwis plenty of time to re-think their living situation and research potential property options.
OneRoof asked real estate agents and property experts across the country if buyers should put their plans on hold given the uncertainty in the market and the wider economy as a result of the coronavirus.
Most reject the idea that there are no options for buyers right now and argue that the lockdown is a good time for who are financially secure to get the drop on their competition.
David Palfreyman, who coaches real estate agents around the country, says most of the Kiwis who have bought properties since the government's Level 4 restrictions came into effect last month had managed to get to inspect in person beforehand, although a few purchases have been made via virtual walk-throughs.
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He says interest in buying property is “rapidly developing” and he describes the lockdown as a prime time for making inquiries.
“At the moment, [most of] the sales done in the last week and a half were initiated before the lockdown. But we are still in the first two weeks of the lockdown and I expect that will change in the weeks ahead.”
Potential buyers are doing their research and making appointments for properties post lockdown, which is when agents will be flooded with interest, he says.
Less competition
People who are prepared to buy during the lockdown, though, could have an advantage.
“It’s a good time because there’s less competition and you do not have to go to an auction. Another huge bonus is agents will be proactive,” Palfreyman says.
He acknowledges that there is financial uncertainty for many Kiwis, so potential buyers will be making sure their income is stable before committing to a purchase.
“If your job has just been axed, you cannot complete a purchase,” he says.
He adds that the uncertainty in the market will definitely lead to a change in buyer and vendor sentiment. In the months before the coronavirus disrupted New Zealand life, market activity had been rising in Auckland and there were several economic projections of big lifts in house prices.
Auckland's housing market has seen deals during the lockdown as agents find ways to get buyers through properties online. Photo / Fiona Goodall
Now, Palfreyman says, buyers will be hoping property prices contract, and vendors who had been planning to come to market before the crisis escalated will be thinking "I’d rather not sell and lose money".
"But no one knows exactly what’s going to happen. People hate to lose money even more than they like to make it."
However, not everyone is in the same position and investors have an advantage over first home buyers. “If you are investor and you just pulled money out the stock market, you’d be more likely invest it in property, rather than having it sit in your bank account.”
Palfreyman recommends buyers protect themselves by putting conditions in their sale, which could be satisfied post-lockdown. An escape clause is a protection on sellers' behalf, which means they can settle on the more favourable offer, if they wish.
Market sentiment has changed
Economics commentator and former BNZ chief economist Tony Alexander says the market quietened. "Buyers are anticipating lower prices, but many have left the market amidst loss of KiwiSaver funds, jobs, and incomes. The biggest group to pull back is first home buyers. Vendors - unless potentially stressed - are also leaving the market," he says.
Alexander polled real estate agents and mortgage brokers across the country to assess market sentiment during the lockdown. He found that agents in the major metros were less concerned about price drops than those in the regions.
"In the likes of Wanaka, expectations are high of some big declines in prices and rents as new buyers back away and many existing owners look to sell their high-priced properties to free up capital for their businesses. Auckland’s inner-city apartment market looks also likely to take a hit from students walking away from leases, Airbnb properties coming on the market [and] no new students coming in," he says.
He also found that less financially secure investors are also worried about losses in rental income but that well-capitalised landlords are now contacting agents hoping for some bargains.
"Cashed up buyers feel they now have the ultimate upper hand and are showing no inclination toward rapid decisions. Some potential buyers are indicating that they will put everything on hold until after the September general election. There are many frustrated buyers who have been unable in the past year or so to find what they want. These people are hopeful of greater supply becoming available," Alexander says.
Interest from Chinese investors in new development projects appears to be as strong as ever, he says.
Investors on the hunt
Christchurch agent and real estate business owner Vanessa Golightly says investors will be the most active buyer group during the lockdown.
“Purchasing without viewing is something that's done by risk-averse investors and people who have extreme motivation to buy - for example buyers who have just sold a house and now need somewhere to live,” she says.
Due diligence that needs to be done physically on site, such as building and toxicology reports, are the biggest hold backs to purchases, she says.
If these reports were done prior to the lockdown, a buyer is more likely to proceed with a sale as other documentation such as council reports and banking and legal checks can be done remotely.
It’s highly recommended that any offers made during the lockdown are subject to building reports after the country emerges from Level 4 restrictions, Golightly says.
“The reality is people won’t be able to go unconditional until the lockdown is lifted,” she says.
Time for research
Ray White agent Stuart Morris, from North Canterbury, says only buyers who are in a stable financial situation are making enquiries, while others are doing their research.
Morris says Kiwis, particularly Cantabrians, are conservative and tend to hold back when things are uncertain.
“The first week of the lockdown, people were not worried about buying property; they were worried about buying food and having a job.”
So far investment properties and high-end properties are receiving the most interest from potential buyers, he says.
He adds that prior to the lockdown, the market in his region was active and while now the sales are on hold, he expects an increase in activity post-lockdown.
Owen Vaughan, editor of OneRoof, says that while market activity had dropped, buyers and vendors are still managing to do deals, with virtual walk-throughs taking the place of open homes and several agencies running auctions online. "Some of the sales in the past week have seen vendors enjoy above-CV prices, while cashed-up, financially secure buyers are making offers on properties without having physically inspected them," Vaughan says.
"It's likely that once the lockdown lifts there will be a rush back to open homes by those who were already well-advanced in their buying journeys. Audience numbers for OneRoof show buyers and sellers are using the lockdown to do their research."
Are you buying, selling or renting a property during the coronavirus lockdown? OneRoof wants to hear from you
- If you are in the middle of a house sale, have a house on the market or are even planning to list your home but are worried about the effect of Covid-19, please contact us. Email [email protected] or [email protected].
