Uptick "speaks to investors' confidence around where values go from there," says one lender
Property trading is picking up in New Zealand.
As the country's official cash rate continues to fall, and investor activity continues to gain traction, property trading, or flipping – the act of buying property, renovating it and then selling for a higher price – is also on the rise.
"We've been seeing a lot of property traders," John Moody, chief financial officer at non-bank lender Basecorp NZ, told New Zealand Adviser.
"We deal with a lot of property traders across New Zealand," Moody said, adding that Basecorp NZ offers a short-term flipping product, of six to 12 months. "It's really encouraging to see them coming back over the last six months. And particularly in the last couple of months we're seeing an increasing number of flips taking place. That's been a really positive story."
Kris Pedersen, founder and adviser at Auckland-based Kris Pedersen Mortgages, also said he's noticed an increased number of property traders since the start of the year.
"A lot of people are trying to tighten the cycle at the moment because interest rates are dropping quickly," Pedersen said. "Probably prices have bottomed out. Now, this might get them into the property market."
On the flip side, Craig Pope, founder and mortgage adviser at Wellington-based Craig Pope Financial, said property traders are more likely to be found in a specific group of borrowers.
"Property traders generally tend to be seasoned property investors, rather than people who buy a house, do it up and flip it," he said. "The seasoned property investors are doing it to add value where they can and improve a property to create more revenue stream.
"The banks are massively into people flipping, in terms of just giving money, willy-nilly, with the market having so many ups and downs," Pope said.
New Zealand's falling property prices have also created caution in the market.
But Moody said the growing number of property flips "speaks to investors' confidence around where values go from there, future values, and their confidence around being able to exit and successfully execute on some of those transactions."
"Property traders are most active when they're looking at an exit time frame of six to 12 months. They're always thinking about what values look like in six to 12 months, and I think they're increasing confidence that the bottom is in with property values — even if you're still seeing those slight declines in overall property prices. And so I think seeing [property traders] back gives a lot of confidence to investors generally that the future direction is up."
What advisers need to know
Whether or not potential investors consider property trading a risk endeavor, there are still many opportunities for advisers to offer their services.
Moody said there are a few things advisers should keep in mind.
"The adviser is dealing directly with the customer and needs to understand what their objectives are around the flip. The advisers do a lot of the hard work, in terms of the details with the customer, the information gathering and looking for a finance solution, from someone like ourselves, to enable those objectives to take place."
