Weekly wrap - Friday 19th February
New Zealand real estate experiences a 17.3% growth in the last 12 months
This is of course of interest because Lauren Hall is our resident kiwi lending specialist here. But also because some changes coming out of there may have a flow on effect over here. In December, the REINZ, which is the Real Estate Institute of New Zealand, came out with a year-on-year growth of 17.3% in New-Zealand in the last 12 months, and even 18.1% in Auckland, which is phenomenal.
New Zealand is therefore trying to pull the handbrake a little bit so it doesn't get out of control. Lending is the first thing to look into to do so, and loan-to-value ratios in particular. Some rules that are about to change as of March 1st. Lenders will only be able to allow for 20% of the business they write each month to have a loan-to-value ratio of greater than 80%. So only 20% of their business can have less than 20% deposit. If we look at our market at the moment, it is really common over here to be lending up at levels up to 80%, 90%, 95%. New Zealand on their side are now expecting deposits to be much more built up in order to slow things down.
Regulation is going to happen over a couple of stages, but come May 1st for investors who are going to be hit the hardest, that loan-to-value ratio will be 60%, meaning in New Zealand, 60% of loans granted by lenders to buy or to have lending for investment purposes must have a 40% deposit.
This type of regulation is not unseen in New Zealand: 2013 was the first time they did it for the same reasons and it worked really well. It did curb the market a bit, there was still plenty of activity, a lot of people buying, but it did the job. So now, interestingly, they've brought it back in response to the market going nuts after COVID.
A lot of Australian banks have banking in New Zealand, so the regulators are watching this. We haven't probably gone at that level, we might be half of that, still 5%-10% in our market. But at 20%, the hand brake comes from lending. So we're waiting to see what maybe happens over here.
Brokers vs. bankers
We read a really interesting article this week sharing some statistics about the amount of people using brokers or using banks. A thousand people in the process of refinancing were surveyed. 94% said that they trusted mortgage brokers more than their bank when it came to recommendations around refinancing. Why is that? Approximately half of them said that they were worried they wouldn't get the best deal if they went directly to their bank. The other half felt that by going with a broker, the process would be more streamlined and would save them hassle as well. 6 in 10 Aussies now use a broker.
When we look at the Best Interest Duty legislation that came in on January 1st, brokers are legally required to act in your best interest. Consumers are starting to feel it and to see that banks work for banks or for their shareholders and brokers work for you, our client.
Deferrals of mortgages coming down
According to one of the major banks, at their peak during COVID, they had around 38 billion in residential home loans on mortgage deferrals, and around 19 billion in business loans, which was massive. As of February 3rd, 90% of those had now clipped over to going back to normal mortgage repayments. That is excellent news regarding Australia's economic recovery.
It’s getting increasingly difficult to rent so get your timeline lined up!
Another interesting number we’d like to share and that is probably a sign of what's happening in the market - and no doubt, this isn't just Gold Coast. We were chatting with one of the businesses during the week: they would normally have 3,500 inquiries in January for rentals.
Last month, they had 14,000 inquiries. Those numbers are just insane. If you're a seller or a buyer and think: "Oh, well, I've sold my place. I'll just quickly grab a rental." It's just not happening, you can't just grab a rental right now. It's very difficult. There's still 20 people at an open home, but there's now double that at a rental. So beware of the terms in a contract, if you think extending a settlement for a week will make you okay, just know it's getting more and more difficult to rent.
You've got to get the timeline lined up. Properties are selling quickly, almost as soon as they're going on the market, and then the seller wonders where he’ll live. If the finances aren't organized, and we don't have that timeline lined up, it starts to get challenging and really stressful.
There are only advantages to being organised, having your finances ready, and working with your A-team, and it's getting more and more important. Let's have the chat early. Get someone like us involved as early as possible and we'll talk through the dates.