New Zealand should be careful not to relax its lending criteria too far, says the chief executive of RE/Max International.
Vinnie Tracey is in New Zealand this week in the wake of the buyout of the local franchise of the real estate firm.
Tracey said the move was a good one because the US franchise had not been able to move quickly enough on programmes and education for its New Zealand staff.
“When people own things from other countries, it’s hard to react to local conditions. When you run into things, you have to adapt. We were slow to make changes and customise training, which frustrated brokers and associates.”
He said New Zealand’s real estate market was in a better shape than its US counterpart because our banks had been more cautious in their lending.
“You haven’t made the critical mistakes we made in the US… There was a lot of dumb lending, people were able to borrow more than they could pay back.”
He said between 2004 and 2007, US$270 billion was lent in “exotic” loans, with teaser interest rates or no documentation.
This pushed house prices up by as much as 30% year-on-year for five years.
When the financial markets fell apart and unemployment soared, people could not sell their properties for the amount of their mortgage.
He said 30% of US homeowners were still in negative equity this year.
Tracey said he expected the US market to turn around because there was a looming lack of supply.
“What’s holding back the New Zealand housing market is a small inventory of lower-priced homes and consumer confidence.”