Christchurch homeowners juggling higher interest rates and increased living costs are shying away from making the next step on the property ladder, agents and mortgage brokers have told OneRoof.
New listings in Christchurch in the three months to the end of April were up 20% on the same period last year, but buyer numbers haven’t kept pace, with some in the mover market unwilling to take on a bigger mortgage at current interest rate levels.
EasyStreet Mortgages adviser Gareth Veale said buyers who would have planned to upgrade from their first home after three or four years will have been thwarted by the maths.
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Some will have gone to the banks expecting to be able to borrow more, but will have come away disappointed.
“They may have thought an upgrade would be easy because getting their first home a few years was easy, but when the rubber hits the road it’s unaffordable,” Veale told OneRoof.
He noted that properties in the $800,000 to $1.1 million price range were taking longer to sell “and I think it’s that situation of people’s finance falling over”.
He recently had some clients pick up a house in Aidanfield for $930,00 after an earlier, higher offer fell over because the buyers couldn’t get finance.
"The buyers who lost out had totally expected to [get finance] and the real estate agent expected them to be able to do it as well, but they just didn’t meet the servicing calculation. People expect they can get something and it shouldn’t be out of reach, but it is out of reach.”
EasyStreet Mortgages adviser Gareth Veale says when homeowners work out the repayment costs on upgrading their home they often get a big shock. Photo / Supplied
He added: “When people face the hard facts of what their repayments will be, they are like, ‘Oh s***! I can’t do that’. Sometimes the mortgage repayments are 50% or 60% of their income and that’s a bit extreme for some people.”
The size of a mover’s home loan can jump by as much as $300,000. “Once people sort of realise how expensive it is, they either wait until later or set their sights a little lower.”
Harcourt Gold Cameron Bailey said the owners of an $800,000 house recently told him that the rise in interest rates had added an extra $12,000 a year to their mortgage bill.
“So that’s $250 bucks a week just to continue living in that house. It doesn’t include extra food or petrol or anything like that,” he told OneRoof.
Some people were selling to make life a bit easier, he said. While no one was talking about mortgagee sales, there were more homeowners looking to free themselves from their mortgage.
“People that don’t have as much cash flowing around at the moment are just making life a bit easier. They might be selling a $1m property and buying an $800,000 property,” Bailey said.
“It’s certainly not doom and gloom, but a gap has opened up between buyers and sellers and the sellers all think we’re at the bottom and heading up, and the buyers are all dealing with the reality of higher interest rates, higher cost of living and things like that.”
The lower end of the market was going well because those buyers were limited by the banks, he said.
Harcourts Gold agent Cameron Bailey says some people were looking to save money by downsizing their homes and therefore their mortgages. Photo / Supplied
“They get their $800,000 approval and that’s what they can spend. The banks have already told them they can afford it.
“The higher end of the market, the high end of the market, like above $4m, they don’t probably care what the economy is doing because they’ve got usually a big business behind them or they’ve got some money anyway, they’re a bit insulated from the market.” (In the last two months, Christchurch clocked six sales above $7m including a record-breaking sale over $9m in the hillside suburb of Scarborough.)
Ray White Metro City auction manager Richard Withy said there had been a dramatic increase in the amount of stock being listed in the last two months in the city.
Buyers now had a lot more choice and this had resulted in fewer enquiries for each property.
“With increasing supply, we probably haven’t got increasing demand to match it so at some point there’s going to be that equilibrium change and the balance changes,” he said.
“It’s a good time to be a buyer because there’s more supply, there will be more opportunities to get a home they do like at perhaps a competitive price.”
For the first time in several years, there were also more offers being accepted that were subject to house sale. They made up about 10% of the properties his agency currently had under contract.
These buyer chains were more common in areas on the outskirts of the city such as Selwyn, he said. “It happens like night follows day. Why would I sell when I can go and make an offer over here subject to sale.”
- additional reporting Catherine Masters
- Click here to find more properties for sale in Christchurch
