High prices and interest rates hit first-time buyers particularly hard because they have to come up with at least a 20 per cent deposit on a house. In addition, the largely foreign-owned banks are highly risk averse. It’s typical for a lender to go through people’s finances with a fine-toothed comb to determine if they can afford a mortgage.
To make things worse, homebuying in New Zealand is an opaque and anxiety-inducing process. Listings rarely indicate the asking price and it’s typical for homes to sell for several hundred thousand dollars more than their municipal evaluation amount. A common sales tactic is the tender process, which is essentially a closed silent auction. What’s more, potential buyers have to pay upwards of $3,000 to cover legal fees to make an offer.
Sales have now stagnated, sitting at an all time low for the month of February. But that’s not from a lack of options. The number of active listings are double what they usually are in some areas. But there’s a standoff at play. Sellers are still trying to cash in on the pandemic price jump and buyers are expecting the cheaper Montreal of old to eventually return. Plus, higher interest rates are putting would-be buyers off the market.
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