Investors feeling the financial squeeze in South Auckland are deciding to sell off their properties now to avoid forced sales, agents have told OneRoof.
Harcourts Papakura listing agent Alex Dunn said he had one client who was selling all three of his investment properties, starting with a three-bedroom home at 5 O'Connell Street, in Manurewa.
The listing for the property highlights the pressure the vendor is under. "Our owner is at breaking point and has to get this home sold. Renovated with an intention to live after marriage plans have now changed and this homeowner is stretched to capacity. Make us an offer to relieve some pressure!"
Dunn said the investor was feeling the pinch due to the interest rate rises and rental income not going up as quickly as he initially thought. “He’s really in some trouble that guy," Dunn said.
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“He was just going one year, one year, one year and has just come off a fixed (rate) and gone onto a higher fixed for one year and he just doesn’t want to live with that kind of fix.”
He is not the only landlord cashing out. Dunn is also selling several investment properties, including one at 5 Artillery Drive, in Papakura, and carrying out appraisals for others because the owners are either feeling the squeeze or have held the property for a long time and have decided it’s time to move on.
It is a combination of rising costs including having to refix at a time when interest rates are peaking, he said.
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“Across their entire portfolio, across their entire balance sheet, it all just puts the squeeze on.”
Some landlords are holding out until after the general election in October with the hope it might bring a change of government and get better, he said. One of National’s election promises is to reinstate tax deductibility on rental properties. “I’m not sure that will be the case or that it will be implemented as quickly either.”
Most of the investment properties being sold off are typically stand-alone three or four-bedroom, one-bathroom homes on larger sections priced between $750,000 and $1 million.
An ex-rental property at 2/35 Secretariat Place in Randwick Park, Manukau, is likely to be snapped up by one of the many property traders currently sniffing around. Photo / Supplied
Harcourts Papatoetoe salesperson Harsh Kathuria has sold three investment properties in South Auckland for three different clients in the last month and has another two rental properties going online in the coming week.
“First of all there is the higher interest rates and, of course, the new financial year is approaching soon, and they will have to pay a very heavy tax on the property, and most of the people have their refinances coming so they are trying to liquidate or get rid of the properties prior to them coming under pressure to sell the property.”
Kathuria said investors usually try and sell off one of their properties first and tend to choose the one that needs a lot of investment or maintenance as most of them are older homes.
“They will try and liquidate that property and test the water and see how the market is responding and based on that they will make a decision on the next properties they have.”
He said investors are very realistic and will get rid of it if they can get the price they need while the market is still doing okay.
Ray White Manukau agent Charlie Brothers said some investment properties and older owner-occupier homes are being snapped up by property traders who are buying the do-ups with the intention of renovating them and flipping for a profit.
The owners of a near-new townhouse on Siddal Place in Richmond, Christchurch, decided to take a small hit on their investment property rather than hold onto it. Photo / Supplied
An investor is selling a three-bedroom, one-bathroom home at 2/35 Secretariat Place, Randwick Park, which Brothers said is likely to be bought by a property trader cashing in on the strong demand from first-home buyers for renovated properties.
“Some of these investors have owned these properties for a period of time and they are selling them, but again they fall under the do-up property,” he said.
“It’s easier for the home buyers to get a loan from the bank if the property has been renovated and there’s no hindering in terms of the building report which kills their finance from the bank.”
Some investors are selling because they have over capitalised, and want to put more money in their business, or are moving overseas, he said.
Bayleys Canterbury salesperson Angela Webb said investors have been selling up for the last 12 to 18 months.
She has been working with clients to help them decide which houses in their portfolios are the best to sell in the current market, and one client selected 14 properties from her large portfolio to offload.
Webb said rental properties that can be converted to family homes are getting better results at the moment. The landlord will give the tenants notice, clean it, carry out some maintenance and stage the property to make it look beautiful and appealing to owner-occupiers.
Core Logic chief economist Kelvin Davidson said there are reasons why some investors maybe selling up, but also why others won't be. Photo / Peter Meecham
“Traditionally you would just leave the tenants in and sell it to another investor, but investors aren’t buying that stand-alone three-bedroom house at the moment ... there’s just not enough value or return in those stand-alone basic family homes stock anymore.”
A two-bedroom unit on Fairfield Avenue, Addington, which had been a rental, was snapped up by a first-home buyer who paid in the low $400,000s for it. An overseas investor sold a unit on Holly Road, St Merivale, to a retiree for $380,000.
While a new townhouse on Siddal Place, Richmond, purchased by an investor in 2021 for $479,000, has just been bought by a first-home buyer for $469,000. Webb said the investment hadn’t worked out as well as the investor had expected with the rising interest rates, so they had decided to take a small loss rather than hold onto it.
CoreLogic chief economist Kelvin Davidson said there’s no real evidence around investors selling up in droves, but it may be happening in some pockets.
However, he wouldn’t be surprised if investors are considering it because of the shortfall between interest rates, which are around 7% and yields, which are on average 3%.
“That’s a lot of cash you are having to fork out to keep these things going on a day-to-day basis in terms of top-ups.”
However, some people may be waiting for their bright-line period to pass so they don’t have to pay income tax and others won’t want to sell for less than they could have got at the peak of the market.
Davidson said a lot of investors also appear to be waiting to see if there will be a new government later this year. “For the average punter it might not turn a negative cashflow into a positive one necessarily, but it helps, and it certainly might help the mindset and it certainly makes it more positive for new investment too.”
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