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Optimistic: Roost Mortgage Brokers' Mark Pullar

You could excuse Wakatipu home owners with big mortgages on high-priced properties being pretty nervous at the minute, given the Covid-19-induced implosion of this area’s main industry, tourism.  However, Arrowtown-based Roost Mortgage Brokers principal Mark Pullar tells Mountain Scene there are buffers in place that should help property owners ride out the storm.

What is your advice to home owners with a hefty mortgage who are losing income, for example, through job losses, rental reductions or Airbnb bookings drying up?

“My advice is not to panic, but to take advice from your mortgage adviser and then act quickly and decisively.

“The good news is that, unlike during the global financial crisis (GFC), the coordinated response from the government and the banks means there are a number of quick and straightforward actions that can be taken to reduce or eliminate mortgage stress for at least six months, including restructuring of the lending, an interest-only period or a home loan deferral.

“The right option depends on individual circumstances.

“The banks and the Reserve Bank have essentially priced in this crisis over the last decade with strict lending policy changes, so the environment is far more accommodating and supportive for home loan holders.”

So bank policies are helping?

“Prior to the GFC, banks were doing loans at over 100 per cent of the purchase price.

“Lending criteria were far less stringent, so it was far easier back then to get a loan that might easily become unaffordable due to change in circumstances rates were between nine and 10 per cent.

“These days, we have had a sustained period of loan-to-value ratio (LVR) restrictions and increasingly tight,

“This has meant it has become very difficult to obtain a loan that might become unaffordable in the future.

“Add to this a far lower interest rate, so there is a greater buffer for adversity.”

Will last week’s removal of LVR restrictions help?

“Anything that makes it easier to raise finance in this environment will help, but one would expect banks to remain conservative with high LVR lending in a market where some softening of values is to be expected for a time.

“However, the removal of LVR restrictions has made it possible for banks to provide home loan deferrals that push the LVR over 80 per cent.”

Are you seeing buyers thinking this’ll be a good time to buy?

“It’s early days yet, but those fortunate enough to be able to purchase in the new market will likely find a market that’s moved more towards the buyer.

“We expect to see an uplift in expat enquiry and also the Australian market when we can get that border open.”

Banks are predicting New Zealand house price drops of up to 15 per cent. What’s your prediction for Queenstown?

“It’s important to remember we are coming from a period of sustained under-supply which has pushed property prices and rents to sky-high levels.

“With the likelihood of reduced capital and cash returns, some investors, particularly those enticed by high Airbnb returns, may choose to exit the market.

“This may temporarily increase the supply of properties and see the market become more balanced.

“The home loan deferrals have bought those investors time, though, so we may not see immediate or sudden changes.

“Those who have owned for some time are likely to have a good equity buffer and, due to the LVR restrictions, the majority of those who have purchased recently have done so with a decent equity buffer so can sustain a modest value reduction for a period of time.

“Queenstown remains the best place in the world to live, work and play, and it is important to remember this has not changed, and will always underpin demand and values.”

Where will the market be by the end of this year/early next year?

“My guess is we will see a market where the balance has tipped in favour of the buyer, but this is Queenstown, and it won’t stop being a great place to own property.”

scoop@scene.co.nz