Property market slowdown: Some may 'come unstuck' - Property News AU/NZ | propertynoise.co.nz & propertynoise.com.au

PHOTO: Photo: RNZ / Nate McKinnon

Small-time developers or builders trying to make a buck will most likely be the ones left in the lurch as house prices look to be cooling.

Data from CoreLogic shows while year-on-year growth remains strong at 23.4 percent, prices are slowing and in some cities contracting month-on-month.

Last month saw house price growth at its lowest point in 19 months, with prices compared to February in some cities including Wellington, Hamilton and Dunedin, in reverse.

Mortgage broker Bruce Patten said anyone who bought in the last couple of years with the hopes of flipping for profit might be in for a rude awakening.

“A lot of those ones, unfortunately, will end up being your small developers or your builder that gets together with his brother and parents and think they can be developers and buy some land and do some stuff.

“I think it’s those people that are going to come unstuck.”

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He said this group differed from people who bought with the intention of living in the home, who might see they overpaid but had no intention of selling any time soon anyway.

“The only people that lose money in this current market are people that have to sell. If you don’t have to sell and you can ride out whatever the next one to two years brings… because what we always get off the back of a slow or declining market is another boom.”

However, he said while recent buyers were stress-tested to make home loan repayments on higher interest rates there was no doubt the next few years would be tough for some.

“There’s genuinely going to be people that bought and paid, certainly in the last 12 months, at 2.5 percent interest and now they’re going to be going at 5 percent… so if you’ve borrowed $1 million your interest cost was $25,000 a year, it’s now going to be $50,000. That’s genuinely going to hurt some people.

“Young people I’m not so worried about because they’re at the beginning of their work life and they genuinely tend to have income increases on a regular basis. It’s probably anybody that’s highly geared and they’re on a fixed income, and the prospects of of income going up are limited, they will be the ones that will be struggling.”