Homebuyers are shying away from new mortgages, and what happens when you become uninsurable?
The bullet points from this week:
New consents dive
New home construction in New Zealand is experiencing a significant downturn with the number of new dwellings consented down 29% YoY in February, marking the fifth consecutive month of decline.
On an annual basis, new dwelling consents fell 3.3%, ending an 11-year run of increasing residential construction.
A slowdown in non-residential construction is also expected, with the total floor area of non-residential buildings consented down 9% YoY in the 12 months to February. Read the article
Steps to take when buying a new build
The construction industry downturn is making purchasing a new build home riskier. However, there are actions a buyer can take to protect themselves if something goes wrong.
To protect themselves, buyers should do comprehensive due diligence and research the developer's reputation and history.
Buyers should consult a lawyer who is well-versed in the relevant areas of law for new build purchases.
When negotiating the agreement, buyers should ask for their deposit to be held in a solicitor’s account until the build is completed.
Buyers should negotiate payment terms after completion to give themselves more time to settle and haggle interest rates.
Buyers should consider a fixed-price contract option to avoid the risk of construction price increases.
It's critical for buyers to ensure that the sunset clause and the time they have to settle is closely linked to the timeline of their pre-approval and its expiry. Read the article
Landlording: the business that's not treated like a business
The New Zealand Ministry of Business, Innovation and Employment (MBIE) and other regulators classify rental of properties as a business, but some landlords argue they are treated differently and unfairly compared to other types of businesses.
Property Investors Federation Vice President Peter Lewis: Landlords have the legal obligations of being in business but face more rules and regulations, including the recent removal of interest deductibility on rental income, which has pushed rents up as landlords try to recover costs.
Infometrics Chief Executive Brad Olsen: If landlords provide residential properties as a business, then all the other rules of business should apply to them.
Tax expert Terry Baucher: Most landlords, particularly mum and dad investors with one or two properties, are looking for a different type of gain to other businesses, and most investments are for the future.
Human Rights Commission housing inquiry manager Vee Blackwood: Residential properties sit in the middle of the continuum between a purely commercial business and a public good as housing is considered a human right. Read the article
Tenant advocate supports leaving warning notes for prospective tenants
A councillor in Queensland, Australia, has suggested leaving notes or posters in a rental property to warn prospective tenants of any issues with the property, such as damp or rats.
A NZ tenant advocacy group spokesperson has praised the idea as a way to share information about landlords and their properties. However, they cautioned that any claims made on the notes should be true, and tenants should ensure they are comfortable with the potential consequences of leaving such notes for their landlord to find.
Tenancy Services says landlords cannot remove a tenant’s notes during a viewing and tenants should raise any concerns about maintenance with their landlord as soon as possible. Read the article
The disconnect between banks and insurers that poses a risk to homeowners.
The latest instalment of "When the Facts Change," Bernard Hickey discusses with Dr. Michael Naylor, an academic specialising in insurance and banking at Massey University, how homeowners can safeguard their housing insurance in a warming climate. This comes after the aftermath of Cyclone Gabrielle, which prompted insurers to swiftly reassess the flood risk of properties, resulting in a tumultuous landscape for homeowners eager to determine the insurability of their land. Listen to the podcast
Homebuyers are shying away from new mortgages.
Mortgage lending in NZ remained sluggish in February, with the $3.8bn borrowed the lowest figure since records began in 2013, and the seventh lowest of any recorded month.
While there was a rise of $1.1bn in lending from January, new mortgages were 33.1% lower than February last year, with the decline mainly driven by lending to owner-occupiers moving and lending to investors.
The share of new mortgages to first-time buyers fell from the record high of 23.1% in January to 21.3%.
But although the share of mortgages to FHBs fell, as Interest.co.nz notes, first home buyers' share of the housing market has steadily increased from 28% in Feb 2021 to 38% in Feb 2023.
Meanwhile, the average value of new mortgages across all borrower types rose 4.6% to $334,500, a year-on-year fall of 13%. Read the article
The information provided in this article is for general informational purposes only and should not be considered legal advice. We make no representations or warranties about the accuracy, completeness, or suitability of the information, and we do not accept any liability for any loss or damage that may arise from your use of the content. It is essential to consult with a qualified legal professional for advice tailored to your specific situation.
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