The property market is currently being driven by a “division of confidence”. In other words, there seems to be two types of buyers. The buyer who feels confident they are going to be employed in the foreseeable future and is eagerly hunting for their next home, and the buyer who is unsure of their employment status and has put their home-hunting on hold.
Any confident buyer is likely viewing the property market as a good opportunity.
A reasonable percentage of the buyers that were prowling the open homes four months ago have, at least temporarily, disappeared.
It’s one of the main reasons, in my opinion, we’re seeing an uptick in mortgage pre-approvals and property purchases at the moment. It is, quite unexpectedly, a buyer’s market for anyone that can prove they are in a good financial position.
Start your property search
If you already own your home and are looking to upgrade, now could be a good time to be looking but you will need to think carefully about how you manage your mortgage through the process.
There are three options that an upgrader has, assuming you aren’t keeping your previous home as an investment property.
Contemporaneous settlement, when you are buying your new home and selling your current home on the same day. This is usually the best option.
Or you could sell your current home, and rent while you look for a new home.
The third option is to buy your new home before selling your current home. This requires bridging finance
Banks are still extremely cautious as we enter Level 1 making finance more difficult, but not impossible. The two key data points they are watching is the unemployment rate - particularly after the Wage Subsidy Scheme ends - and property values. Until they see those numbers return to a near normal state, banks will continue to be cautious.
As a result, upgraders will need to show their income is stable and will need to have reasonable equity (borrowing more than 90 percent on the new home is extremely difficult).
Salary earners can confirm their income with a confirmation from their employer. Business owners will be case by case, but will need to show a good client pipeline and a good explanation of why they haven’t been significantly affected by the lockdown.
If you’re planning to sell your home but are going to buy before that, you will need to look at bridging finance. The banks are still open to it if you have enough equity and there are non-bank options which are more expensive but usually cheaper than paying for a short-term rental.
If you’re frustrated with finance at the moment, I promise you the banks will return to normal lending sooner than you think. The policies are already starting to relax a little and NZ is setup for a quicker recovery than most other countries.
If you are considering upgrading your home, it would be worth preparing your house for sale (ie; get the touch-ups and renovations done now) and starting to seek a pre-approval from the banks. Even if you are declined today, it could easily be an approval next week or next month.
- Rupert Gough is the founder and CEO of Mortgage Lab and author of The Successful First Home Buyer.
