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Lockdown market sentiment

Lockdown market sentiment

Caution might dominate property sector participants’ takes on the market, but independent economist Tony Alexander’s latest polling reveals that not all investors are taking a step back. By The Landlord

Alexander surveyed 240 real estate agents and mortgage brokers to get their views on the property market, both now and going forward.

Not surprisingly, it turns out that most buyers and sellers are taking a wait and see attitude, although many are anticipating lower prices.

It seems that many buyers many have left the market amidst the loss of KiwiSaver funds, jobs, and incomes, with the biggest group to pull back first home buyers.

At the same time, sellers - unless potentially stressed - are also leaving the market.

Alexander reports there are many frustrated buyers who, over the past year or so, have been unable to find what they want and that they are hopeful of greater supply becoming available.

“Cashed up buyers feel they now have the ultimate upper hand and are showing no inclination toward rapid decisions at this stage.”

Yet sellers of good properties who do not have to move are expected to sit and wait as long as needed for conditions to improve, he says. “And this is expected to create a shortage of good stock, not just listings generally.”

However, it’s becoming apparent that among residential investors there are two divergent trends, with small investors deeply worried about rental income losses and larger ones less so.

Alexander says there are deepening fears that absence of cash inflows, plus an inability to quickly get new paying tenants and continuing cash outflows, will cause severe short-term hardship for “Ma and Pa” investors.

This is seen as potentially causing extra properties to be placed on the market once the lockdown ends, as opposed to high debt servicing costs being the traditional cause of “forced” selling, he says.

“In fact, existing small investors reliant on rental income have pulled back quickly from contemplating new purchases.

“There is a feeling that on top of legislative changes this will be the final straw for some – a prospect seemingly relished by the well capitalised professional long-term investors.”

That’s because a number of investors have become newly active in the market, he says.

“They’re contacting agents hoping for some bargains, focussed on the long-term which has worked for them in the past, and looking to lock in at current very low interest rates.”

It’s also worth noting that Alexander’s summary of responses show city-based salespeople are less concerned about prices falling than those in the regions.

In markets like Wanaka, expectations are high of some big declines in prices and rents.

Read full article here.

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