Mega landlord picks house price plunge

Matthew Ryan tells Ged Cann he hasn’t seen such a quick shift in buyers’ attitude since the Global Financial Crisis.

The housing market is on a precipice that could see prices take a sharp turn downwards, claims a veteran property investor.

Mega landlord Matthew Ryan says he hasn’t seen such a sudden shift in buyer sentiment or such a convergence of factors since the Global Financial Crisis.

Ryan says he owns roughly 100 properties, and the Sunday StarTimes has independently identified 68 across Auckland, Wellington, Nelson and Martinborough.

He doesn’t expect a crash like 2008, but believes prices are likely to fall back to where they were a year ago because buyers are less rushed, the fear of missing out has fallen away, and they’re more pessimistic about the market.

That would suggest prices falling 20 per cent or more - something none of the major banks or economists are tipping. While most experts agree the market has peaked, they are tipping the rate of growth to ease gradually.

Ryan says things that will drive house price falls also include rising interest rates, the end of mortgage deductibility, which will increase the tax bill of many investors and may mean more sell, and a building boom that will increase housing supply, he says.

Changes to the Credit Contracts and Consumer Finance Act (CCCFA), which come into force on December 1, will also reinforce responsible lender principles and, Ryan says, likely mean banks’ tighten the purse strings on lending.

Ryan’s predictions are supported by new data from RealEstate.co.nz, which show new house listings soared to their highest levels in seven years. They also reflect CoreLogic data that shows the rate house prices are increasing annually has dropped for the first time in more than a year, while the number of listings are rising.

Ryan says the ‘‘runaway’’ market had to reach this point at some stage, with wages far from keeping pace with house prices. He said estate agents across the country say open day numbers have dwindled and mortgage advisors are telling him their business has gone from manic to flat.

Ryan says the wind-change has already occurred in Wellington, and he estimates house prices have fallen 10 per cent in the past 90 days.

‘‘One of the barometers is going to the auctions. Out of the auctions I have been to in the last three weeks, the number of people attending have probably halved from where they were six months ago.’’

He estimates half of deadline sales and tenders are now closing without an offer in the capital.

Ryan believes Auckland’s market was insulated by the Covid-19 lockdown and there was a lot of pent-up buyer demand. However, he expects the Auckland market to tip soon.

He says the knee-jerk reaction was to think house price falls were a bad thing but getting back to a more ‘‘normalised’’ buyers’ market is healthy, with only one or two buyers competing for each house.

He says the house price rises seen recently aren’t good for the economy, Kiwis, or those trying to get on the ladder, and high rents, housing inequality, and people sleeping in cars was damaging. ‘‘That’s appalling, and it’s not a New Zealand that I think anybody wants to see. We don’t want to see that.’’

Ryan says the first sign of trouble is sale volumes start falling, but the average sale price goes up. That’s because the people who get hit first are those trying to buy and sell cheaper homes.

If first-home buyers can’t buy, then those who are trying to move up to their second home can’t sell and re-buy either. Before long the slump spreads through the whole market.

Ryan says the top 25 per cent most expensive properties are likely to be cushioned, because more returning Kiwis with the end of the MIQ system will bring cash with them to buy into the upper end.