News and Opinion, sponsored by RaboPlus

By Emma Geraghty

Banks are increasingly looking for ways  to make it easier for baby-boomer parents to help their children buy expensive houses in the wake of the property boom.

The essential problem is that parents and grandparents may have savings locked up in term deposits or in house values, but don’t want to simply hand the cash over to their kids, while their kids lack either the deposit or the income to make the big leap into home ownership.

BNZ launched its TotalMoney home loan three years ago. It allows savings in up to 10 related accounts to be ‘pooled’ or ‘offset’ against a mortgage, which allows the borrower to borrow more and generates an effective return for the savings that is higher than a regular term deposit rate. However, it means the related savers (often parents, grandparents, aunties, uncles etc) are sacrificing their interest payments so that the kids or grandkids can borrow more.

BNZ’s Chief Operating Officer for Retail, Glenn Patrick, said parents can make a difference to the amount of money their children can borrow and the level of interest they will pay.

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Seamus O'Sullivan

A website has been launched this month called homes2swap where owners list their home online and swap them with the difference being paid as a cash settlement.

Homes2swap Managing Director Seamus O’Sullivan said the website could save sellers up to $NZ 20,000 in relestate agents fees.

“There is a world wide trend — also in New Zealand — where there are more sellers on the market than there are buyers to buy them. There is probably over 1000 houses listed through private sale. There’s certainly a market where people are looking to sell their properties without real-estate agents,” said O’Sullivan, who is the former General Manager of the InterIslander and is also chairman of the Taupo Tourism Advisory board,

“Spending upwards of NZ$20,000 on real-estate agents is a fair chunk of their equity. A normal house of about NZ$400,000 will cost close to NZ20,000 to sell. It is standard that a real estate agent will charge a listing fee and marketing costs. You’re going to save fees of some where between NZ$15-20,000 on an average house,” he said.

Along with reduced selling fees, the website aims to grow the number of property transfers with same day transactions, avoiding losses through changes in the market between sales, O’Sullivan said.

“Because you’re dealing in the market at the identical time, the relative value of the two properties been swapped remains constant,” O’Sullivan told interest.co.nz.

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Auckland’s largest real estate agency group, Barfoot and Thompson, has reported sales volumes in February of 626, up 7.4 percent from January and up 12 percent from February a year ago. These are the first house sales figures reported for February and suggest a pickup in volume from a very weak January. (Update 1 includes chart).

Barfoot and Thompson’s average house price in February was NZ$521,323, up 3.2% from January and close to the average for 2009. Barfoot and Thompson Managing Director Peter Thompson said listing volumes surged to 1,714 in February, the highest in almost 2 years.

“Given the balanced state of the market sellers need to ensure their price right if they are to sell,” Thompson said.

See the release below:
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By Bernard Hickey

Listings data collected from realestate.co.nz and trademe.co.nz/property shows landlords have rushed en-masse to put their houses and apartments up for sale since late January as speculation has grown that the government will announce closures of various tax loopholes in the May 20 budget.

The shift in property from being listed for rental to being listed for sale is similar to the patterns seen in early 2008 as property owners moved at the peak of the market to cash out their capital gains. This created an oversupply of listings, which was a factor that drove the median price down around 10% through the rest of 2008. Median prices rebounded through mid-2009 to near record levels, encouraging some sellers back onto the market now.

The government has ruled out a land tax and a comprehensive capital gains tax in the budget, but has suggested it could ringfence losses on residential property, remove the ability to claim depreciation on buildings and create a ‘bright line’ test to force property traders to pay tax on capital gains.

This has reduced the appeal of residential property investing for many investors who are receiving yields of less than 5% from properties in major centres where prices have doubled since 2002, but rents are up around 30%.

Interest.co.nz counts the number of house and apartment listings for sale on both websites every week and the surge in listings for sale can be seen in this interactive chart. The slump in listings for rent can be seen in this interactive chart . There is a seasonal aspect to these moves as universities resume, but the size of the surge in sale listings and the fall in rental listings is clearly well beyond the move seen in early 2009 and closer to the shift seen in early 2008.

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Home loan approvals worth NZ$710.5 million were granted by banks in the week to February 19, which was down 25% from the equivalent week a year ago, Reserve Bank data shows.

Approvals in the 13 weeks to February 19 were down 12.6% from the same period a year ago, which was an acceleration in the fall from the 8.7% decline seen for the 13 weeks to February 12, the data shows.

This data suggests banks are being more cautious about lending to home buyers and/or home buyers are being more cautious about buying. The Mexican Standoff in the housing market is solidly in place as listings rise sharply while sales volumes are down sharply.

Banks face growing international regulatory restrictions on their ability to leverage shareholder capital and a tightening of Reserve Bank rules on their ability to find cheap short term funds offshore.

New Zealand home loan affordability improved slightly in January after a fall in median house prices more than offset a small increase in fixed mortgage rates, Interest.co.nz’s home loan affordability report shows.

Affordability improved most in Wellington and in the region around Queenstown as median prices slid the most there. However, Queenstown is still the most expensive housing market in New Zealand relative to incomes, but is now only slightly worse than Auckland.

Affordability is only just better than its worst levels since early 2007 near the peak of the housing boom, the monthly measure calculated by Interest.co.nz found.

“The sharp drop in house sales volumes and the fall in the median house price in January has helped affordability as home buyers held back because of uncertainty around tax reform,” said Interest.co.nz Editor Bernard Hickey.

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