Buyers back

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Lower prices, cheaper loans fuel Queenstown market – but will it last?

Lower interest rates and property prices mean a new Queenstown homeowner could save $300 a week on mortgage repayments.

That calculation comes from local mortgage broker Mark Pullar, who says the changes have made his business go “gang-busters” since just before Christmas.

Pullar bases his figure on a reported eight per cent drop in Wakatipu house prices over the past 12 months.

A year ago monthly repayments on a $500,000 house – based on a $400,000 loan at a six-month fixed rate of 9.85 per cent – would have been $3466, he says.

At eight per cent less, that same house would now cost $460,000.

Again allowing for a 20 per cent deposit, monthly repayments on a $368,000 loan, at a six-month fixed rate of only 5.79 per cent, would drop to $2157.

That’s a staggering drop of $1309 per month or $302 per week, Pullar says.

“People are looking at it and going, hey, [home buying] is just so much more affordable now than it was a year ago.

“Where last year a lot of people were getting pre-approved [loans] but were holding off, now they are definitely stepping up to the plate, and if the price is right they’re buying.

“It will be interesting over the next two months to see whether that’s a new trend or is this just a wee bit of a bounce, because interest rates have started to rise again, just a little bit, and there are still some pretty negative things going on in the economy.”

Local husband-and-wife real estate team Vaughn and Sarah Mare – who’ve shifted from Locations Realty to Ray White Real Estate – say four factors make it a buyer’s market.

“Interest rates are at a great level to fix for long term, eg five years, prices have reduced and are levelling out, there’s more property on the market – we have some great mortgagee sales coming up – and vendors are more realistic than last year and have been conditioned by the global crisis.”

The result is more property sales, higher open home attendances, busier auctions and “some multi-offer situations”, they say.

These comments are echoed by local Real Estate Institute spokesman Adrian Snow, who says median house prices have dropped 15 per cent from a high of about $580,000 to the $500,000 mark.

“Prices have dropped back arguably as much as they’re ever going to go, interest rates are coming down as low as we’ve ever seen them, and there are a number of distressed vendors in the marketplace,” Snow says.

Numbers of houses sold haven’t jumped that much – last month there were 44, up from a low of about 38.

But Snow’s still adamant there’s been an uplift in activity since December.

“We’ve definitely seen people who have capital available no longer wishing to keep it as cash in a bank account.

“There’s more and more interest in mortgagee sales – the bargain hunters are now back out there.”

Snow’s also noticed increased inquiry from Otago-Southland sheep farmers, buoyed by good lamb prices.

Yet he adds a note of caution: “[Agents] are very low on stock that’s priced to the market, which I think is an indicator the pendulum’s going to swing just a little bit away from strongly in favour of the purchaser to a little bit more balance.

“Interestingly, there are still a number of vendors who aren’t too interested in meeting today’s market.”