Upsizing homeowners facing huge increases on their mortgage repayments if they switch properties are sitting tight – and blocking the market for first-home buyers in west Auckland.
Harcourts agent Diego Traglia – whose daily patch is not quite the helicopters and penthouses world he portrays in the ‘reality’ TV series Rich Listers – said that has affected the entry-level market.
“It’s a bit of a chain effect. A lot of first-home buyers will only buy if someone is upsizing, but those people on 2 to 3% mortgage rates now know that if they break their mortgage, they’ll go up to 5.5 or 6%, so they’re not moving,” Traglia said.
“First-home buyers still don’t want a townhouse – there are about 600 of those on the market in Waitakere city. If people aren’t selling to buy [their next house] then that’s the blockage.”
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Traglia said investors are sitting tight at the moment, again because their mortgage rates will go up if they sell to buy another property. They’re looking at new homes to take advantage of the new home tax advantage, but that means they’re not touching near-new (one- or two-year-old properties) that don’t qualify.
“The biggest market is below $1 million, that gets a four-bed, two-bath, freestanding two- or three-year-old house. A three-bed, two bath house is early $900,000 – that $1m market has seen a 10% drop,” Traglia said.
He said developers were not back to buying yet in great numbers.
“They’re seeing drops in prices, the cost of the market for building. People are only buying [new houses] if the place is ready to occupy in two to four weeks.”
A piece of land on Ranui Station Road, Ranui, with resource and building consents for seven houses is back on the market after selling for $1.47m in December 2020. Photo / Supplied
There are some bright spots. An immaculately-presented four-bedroom brick, weatherboard and tile home in Te Atatu South on a flat 350sqm section on Bordeaux Parade, marketed by Traglia and Teide Grice, sold in less than two weeks after the vendor received four offers.
“It ticked all the boxes and sold for a profit over what the buyers had paid only three months ago [$1.025m]. That was outstanding because in three months you think it would be worth less,” he said.
This comes as Auckland’s biggest real estate agency Barfoot & Thompson reported low October sales. The company announced they had sold 627 homes in October – just 13 more than last month, and 23% down on October last year’s sales numbers.
Managing director Peter Thompson said that the “modest improvements represent a degree of confidence returning to the market.”
Sales were mostly for properties worth under $2m, as the number of houses selling for $2m and over was the lowest for over two years, Thompson reported, driving the average sale price down 2.4% on last month to just under $1.137m. New listings were down on the usual October spring uptick, but the number of houses available for sale was up 56% on last October to the highest number all winter.
Also in west and northwest Auckland, Harcourts agent Aman Gulia and Joe Steel have had a flurry of new listings come to market at the end of October as developers rationalise their portfolio.
Developers are picking up the surplus properties that have lingered on the market for months.
A pair of homes on land zoned for suburban density on1349sqm on Grenadine Place, in Unsworth Heights, sold for $2.225m, just under their combined CV of $2.5m. The properties had been on the market since March.
Neighbouring properties on Grenadine Road, Unsworth Heights, sold for $2.25m. Photo / Supplied
“Developers who are just finishing up and sold their projects have got to start a new project to keep their builders busy. They’ve got cash, or if they’re reliant on the banks, have got six to nine months before they settle to get them pre-sold,” Gulia said.
Another developer had made a similar long settlement deal for a pair of houses on over 1800sqm of land zoned for urban density on Don Buck Road, Massey, he said, paying $2.36m for the properties, nearly $400,000 under their combined $2.75m CV. The properties were listed in June.
An 800sqm site on Rathgar Road, Henderson, zoned for apartments and terrace houses and on the market since March, went for $1.6m (its CV is $1.73m).
“That’s an amazing price, it would usually have gone for $1.3m in this market. But it had a big frontage, corner site, a park on one side and will fit seven or eight terrace houses, so it got a premium for the neighbourhood,” Gulia said.
A cottage on 631sqm of land zoned for apartments on Aroha Avenue Sandringham went for $1.75m, well below its $2.05m CV.
“We’d get $3m for the same size last year. Sites on Truro Road, just a few houses away, went for $2.7m to $3.1m at the end of last year.”
Gulia said that this year, sales of $16m to $18m a month was cause for celebration “last year it was $30m, $32m, $40m before I got excited. But in today’s market that’s really good."
Like Traglia, Gulia said that buyers were wanting finished houses, while off-the-plan sales languish.
“A finished new townhouse is one of the best things we can sell. People want to see it finished, staged, looking nice versus something that isn’t finished until December,” he said, pointing to a brand-new four-bedroom brick and tile house on 540sqm in Makora Road, Massey that sold for $1.16m.
“On Triangle Road we sold four brand-new staged townhouses, but on the same street we couldn’t sell one off-the-plans for another development.
“Buyers say we’re waiting 12 to 18 months to move in, and while we’re waiting the price will come down – and our cost of servicing [the mortgage] will go up. Prices are dropping slower than interest rates are going up, we’ll buy new.”
A pair of properties on Don Buck Road, Massey, sold for $2.36m, nearly $400,000 below CV. Photo /Supplied
Gulia said that the flurry of new listings in the past couple of weeks include properties that were being quit by developers – neighbouring houses at 7 and 9 Church Street, Swanson, one of which had been bought in May last year for $1.45m; a 1012sqm site with apartment zoning in 14 Ranui Station Road, Ranui, which had sold in December 2020 for $1.47m, and another on 1179sqm at 78 Harrington Road, Henderson, zoned for urban density that had sold for $835,000 in October 2020. Some have resource and even building consents.
“These are usually developers who have a few projects on the go who thought they could scale up to five or six projects. Now they can’t fund them all, so let one or two go.
“They’ll come and ask ‘hey, which one do you think can lose the least amount of money?’
“They want to at least get their costs out plus the few hundred thousand dollars they spent on consents, but they’ll let someone else make the development margin,” Gulia said.
