Is it perfect market for first homeowners? A look at some real estate stocks

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Is it perfect market for first homeowners? A look at some real estate stocks

 Is it perfect market for first homeowners? A look at some real estate stocks
Image source: HAKINMHAN, Shutterstock.com

Highlights

  • The housing market is cooling off.
  • There are more properties available to choose from.
  • The FOMO factor is being replaced by FOOP (fear of overpayment).

The housing market in NZ is cooling off with a credit squeeze and rising borrowing costs. The house prices are expected to fall as much as 10%, as per estimates. So, it is a good market for first home buyers but not a perfect one.

The definition of first homeowners might differ from country to country, but broadly, first homeowners are the ones who have not owned a residence for three years. If you have owned a home, but your spouse has not, then you can buy a house together as first-time homebuyers. Last year was tough for the buyers as they faced escalating house prices, high mortgage rates and new Credit Contract and Consumer Finance Act (CCCFA) lending rules.

Now more aspiring homeowners can enter the market as slowing prices and increasing supply makes the idea of buying seem more attainable. However, despite tweaking the CCCFA, and mortgage rates remaining relatively low, the LVR requirement of a 20% deposit is going to remain a hurdle for them.

Against this backdrop, let’s examine 2 NZX-listed real estate stocks.

 Source: © 2022 Kalkine Media®

Goodman Property Trust (NZX:GMT)  

GMT is a prominent real estate company in NZ. It expanded its portfolio with the acquisition of the Sky Television campus recently at a price of NZ$56 million. John Dakin, Chief Executive Officer of Goodman, commenting on this purchase said that that was complementary to the existing portfolio. And this site would be developed into a logistics estate that would maximise the value of central Auckland locations.

The company also rewarded its shareholders with a Q3 dividend of 1.375000 cps with 0.251616 cps as imputation credits.

GMT performed well in 1HFY22, and the pandemic had no impact on customer demand.

Also read: Goodman (NZX:GMT) obtains a development contract with NZ Post

On 23 March, the stock was unchanged at NZ$2.38, at the time of writing.

Precinct Property New Zealand Limited(NZX:PCT)

PCT is a developer of premium properties across New Zealand. It reported an increase in net operating income by 6.3% over pcp at NZ$45.5 million. PCT has shown resilience during challenging times related to the pandemic and it has around NZ$1billion projects underway. The company has been rewarding shareholders with good dividends and the latest dividend of 1.67 cps will be paid on 25 March.

On 23 March, the stock was trading down by 1.27% at NZ$1.55, at the time of writing.

Bottom Line: Even though it is a good market for first-time buyers, it is still not a perfect market as certain bottlenecks remain in terms of LVR conditions which require a 20% deposit by the buyers.  However, with CCCFA lending norms tweaked, mortgage rates may now become more affordable. 

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