There is no doubt the world is changing, both temporarily and permanently. Commentators are already trying to predict what changes will be permanent:

  • Will Air New Zealand ever be as big as it was?
  • Will we still go to work if we have a cold?
  • Will people just work from home now?
  • Will there be rolling lockdowns for years? 
  • Will professional athletes start performing in television studios?
  • Will legal transactions finally drop physical signatures forever?

During these times of the world transitioning it breaks everyone out of their routines – this can be hugely stressful – but is also a forced opportunity to re-evaluate your choices and life. If you are in the fortunate position of being able to buy property there may well be great opportunities. 

We would like to encourage you not to prey and manipulate stressed out homeowners but absolutely look for good deals – the reality is that as some people are forced to sell a property the best way to help them is to buy it. 

Normal options.

Leverage equity as a deposit

Redacted extract from an article on homes.co.nz written by us ‘Is that equity yours to use’

Your equity is the amount of your house that you own if you sold it – for most of us, it’s the money you have leftover after paying the bank.

Having equity means you can sometimes:

  • Use it as a deposit for another property
  • Negotiate lower interest rates
  • Top up your mortgage for debt consolidation, renovations or other big purchases

To calculate equity the formula is simple: House Value – Mortgage Amount = Equity

But don’t forget the Reserve Bank of New Zealand has some rules that banks have to follow most of the time. The main guidelines are:

  • Your owner-occupied home needs to have 20% equity
  • Your investment properties need to have 30% equity

If you have usable equity or want to know if you do, use the mortgage snapshot to assess how much borrowing power you could access. Note we are currently processing applications – if you are interested in purchasing property soon take action now to ensure you are ready and in the queue. 

Secure usable equity

We expect pre-approvals to be extremely slow given the huge workload banks are under – they will be prioritising hardship claims, topups, normal prefixes and trying to complete applications with live sale and purchase agreements. One technique you can use is to restructure your mortgage adding in a large revolving credit – giving you access to cash to pay a deposit on new purchases. 

Increase borrowing power by going to market

Every bank has different lending criteria – we imagine this is going to be exaggerated during these extremely fluid times. It is important to talk to a mortgage broker or mortgage adviser who has insight into all banks to ensure you are getting the best offering from the entire market rather than the best offer from just one company. 

Look at the yield

Property investment fundamentals still apply! If you get excited to try boost your portfolio and stop looking rationally at the numbers you will place yourself into an extremely risky position. Although many people think they know what will happen – no one does. 

Ensure you are calculating yield to manage your cashflow – don’t forget the basics. 

Download the mortgagehq rental yield calculator here. Note this is a google spreadsheet you will need to have a google/gmail account. The link will prompt you to log in and it will duplicate the spreadsheet so you have your own copy.

Check out our property investing yield blog post for videos and more information.

Temporary Covid-19 options.

Can we still conduct property business during lockdown?

“Real estate is not considered an essential service. The list of essential services is constantly being updated, so please click here to see the full list. Please note, New Zealand is in a different situation to New South Wales (they are not in a lockdown), which is why real estate agents there are still able to hold open homes etc.” 

  • Bindi Norwell (Chief Executive of REINZ)

She published this information with a disclaimer “The… advice we have at this point in time… is not legal advice, but provides a recommended approach in certain situations.”

Our understanding is as real estate is not an essential service you are not permitted to travel or meet with anyone to conduct real estate transactions. If you are able to do it remotely it is all allowed. Several thoughts:

  • Open homes are definitely not allowed, perhaps virtual open homes can enable transactions to keep going. But these would have had to be already filmed – as agents are not allowed to travel to do work. Perhaps over time these restrictions may ease/change. 
  • Auctions: theoretically could take place via phone or websites.
  • Settlements: vendors and purchasers will not be able to shift houses. Auckland District Law Society is recommending all settlements be deferred until after Alert Level 4 is lifted. 
  • Making offers: I understand REINZ has a free flexisign product they are making free to all REINZ members so potentially offers could still be made and accepted – please ensure long settlement dates. 
  • Conditional contracts: can easily still be confirmed as no signatures are required. Although you may not be able to satisfy the conditions – for example builders inspection. 
  • We are waiting to see how this plays out with AML and legal requirements