The Governments changes to th CCCFA (Cedit Contracts and Consumer Finance Act) has wrought havoc in the real estate market.
What was a booming "Vendors Market" market, with buyers queuing up to purchase property, has turned around with stunning rapidity, into a buyers market.
So what happened?
The changes to the CCCFA basically put the frightners on the banks, with massive back end fines for lending institutions that lend irresponsibly to borrowers.
This change to the legislation was austensiby aimed at non banking lenders who had garnered a reputation for irresponsible lending.
Unfortunately, the banks have been caught up in this scatter gun legislation and have reacted by becoming ultra cautious in their lending.
You may have read the articles where banks have been questioning borrowers frequent visits to fast food outlets, and penalising them for their current spending habits.
Even those canny prospective buyers who saved regular amounts from their earnings each payday have been penalised. Their regular savings having been classified as expenses.
Yes! this is crazy, but that's what is happening.
The government to their credit, have been trying to correct this rushed legistative cock-up. But it takes time and in the meantime, property prices have plummeted, devaluing house prices and putting recent purchasers in the jeopardy of falling into negative equity.
So, the question remains - Is this a good time to sell or buy?
Well, it's a great time to buy. And a great time to sell if you are immediately re-buying.
If you are a buyer with approved finance, then you are likely to snag a bargain, at least compared wth last years prices.
If you are selling to move up or down market, it's also a great time. It's hard to lose if you are buying and selling on the same market.
Increasing Interest Rates
At the same time that borrowing has become more treacherous, Interest rates have started to climb, in order to combat the highest inflation rates in more than 30 years.
These twins of borrowing nightmares, have added to the downward pressure on house prices.
IS THERE HOPE?
What we do know, is that there are heaps of prospective purchasers who are unable to get finance enough to prchase a home under current conditions.
We also know that there are not enough houses to satisfy demand.
This is where the law of Supply and Demand comes into play.
Once Inflation is under control, and the government has removes its foot from the mortgage finance hosepipe, the buyers will be, once again, queuing up to purchase.
So this artificial "Credit Crunch" will come to an end and normal market conditions will once again prevail.
How long will this take? My guess is next year with an election coming, this government will move heaven and earth, not be seen as the "First Home Buyer" grinch.
Have a great week - Peter Ware AREINZ