- Christchurch’s property market has an oversupply of two-bedroom townhouses.
- High interest rates have made it difficult for owners to hold onto these investment properties.
- Three-bedroom townhouses with car parks are still in demand.
Hundreds of new or near new two-bedroom townhouses are flooding Christchurch’s property market and agents say there are far more for sale than there are buyers for them at the moment.
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Overall there’s been a massive surge in properties for sale in Christchurch in the last few months, but the lift has seen one property type – two-bedroom townhouses – in oversupply.
There were more than 1700 properties for sale on OneRoof in Christchurch in mid-December and about 10% were two-bedroom townhouses.
Harcourts Gold salesperson Cameron Bailey said there was a definite oversupply of new or near new two-bedroom townhouses for sale in Christchurch. Photo / Supplied
But Harcourts Gold salesperson Cameron Bailey said there was actually a lot more than that for sale because often the listing might just be for one even though there were many more in the same development also up for grabs.
“Two-bedroom townhouses – there would be heaps and the thing is you are not even seeing half of them because they’ve got a block of six but they list one of them. So there’s one online or two online but there’s really eight for sale or six for sale because it’s kind of a hidden thing.”
Bailey said a lot of the townhouses for sale had been bought at the peak of the market or off-plans as investment properties and it did not make financial sense to hold onto them now.
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“People were sold them when interest rates were 2% and 3% and now they are 6% or whatever they are and it’s hard to get them to stack up now.”
Vivacity director Aaron Pero said the hardest ones to shift were two-bedroom, two-bathroom townhouses with no car parks.
While there was demand for them mainly from investors, he said there were currently more for sale than there were buyers for them.
“The demand has dropped back from when everybody was buying them and everyone was buying them as investments based on the advice they had from financial advisers.”
Most of the two-bedroom townhouses for sale were brand new or being sold off the plans, but there were some that were completed a few years ago and had been tenanted.
A two-bedroom, two-bathroom townhouse on Bangor Street has a car park, which will appeal to owner-occupiers. Photo / Supplied
Pero said some of the owners of these townhouses had decided they could not afford to keep them because the high interest rates meant the rent was nowhere near covering the mortgage repayments.
“I’m appraising quite a few where people would have bought them two years ago for $800,000 and are now reselling for under $600,000.”
“That’s a pretty tough conversation to have with some people because they had aspirations of becoming wealthy off these properties and now they are being told that their neighbour sold not long ago for $200,000 less, so that affects the value of their property. There are people that want to sell, but know if they do sell they will be losing hundreds of thousands of dollars.”
Some people had bought them using equity in their homes so weren’t necessarily losing cash, but were losing equity in their family homes if they sold, he said.
Pero said two-bedroom townhouses with no car parks only tended to appeal to investors as owner-occupiers usually required something bigger and at least one if not two car parks.
Central Christchurch has been revitalised with new housing stock since the earthquake. Photo / George Heard
“No car parks are a pretty big deal-breaker for first-home buyers because they are owner-occupiers.”
As a result, some of the listings for two-bedroom townhouses had been languishing online for more than a year.
“They will sell, but it might be at a price point that the vendor may not like. Some of them just sit there and hope that somebody will come along and pay the price.”
However, three-bedroom townhouses with car parks were much more in demand and this year he sold three townhouses in the Worcester Terraces development on Worcester Street, in Christchurch CBD, which had made gains of around 30% in a few years. The properties had been picked up for about $1m and been resold this year for between $1.25m and $1.3m.
Pero believed they had been able to turn a profit because they were high spec, in a desirable location and had car parks, which made them suitable for owner-occupiers.
He’s selling a two-bedroom, two-bathroom townhouse at 13/7 Bangor Street, in Christchurch Central, and believed this would appeal to first-home buyers or downsizers because it had a car park.
The current owners had purchased it in June 2021 for $449,000 as their first home but were starting a family so had decided to move out to a larger property in the suburbs. The asking price of $539,000 was still below its RV of $610,000 and one he thought they would achieve.
“It’s a pretty usual scenario – people go from buying in the central city when they are young and then they move out and will probably come back when they turn 60.”
Trinity Real Estate agent Damian Dellabarca was also aware of some townhouse owners who had bought them off the plans during the boom and were now staring down the barrel at some big losses if they sold now.
“They were cheap investment properties. It was a cheap easy investment opportunity for people to get into. And long-term they still will be a good investment as long as you don’t sell it in the short-term.
But some of the owners of the two-bedroom townhouses he had spoken to couldn’t afford to keep them because the increase in interest rates had made it too expensive for them to hold, he said.
“Some of them – if they have to sell – will be selling at a loss.”
The townhouses for sale weren’t just in the CBD but scattered all over Christchurch, he said.
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