The truth about investors

NZPIF executive officer Andrew King

Recently released Reserve Bank data shows that, over the last year, the proportion of mortgage lending to investors has gone from 29% to 33%.

In the wake of this, there have been claims that investors dominate the Auckland market and that this has led to rampant speculation and skyrocketing prices.

However, NZ Property Investors Federation executive officer Andrew King warns careful interpretation of the mortgage statistics is required.

He said that, rather than showing there are too many investors' buying property right now, the RBNZ figures show that the level of investor activity is about right.

"Rental properties account for around 35% of all residential properties in New Zealand, so it is not unexpected that they should represent 33% of buyers at any given time.”

For example, the same data shows that the biggest proportion of mortgage lending actually goes to existing home buyers who make up nearly 60% of the market.

King said there is currently a shortage of rental property in many main urban areas around New Zealand - but especially in Auckland.

This means more rental properties are needed, not fewer, and it is investors who provide them.

“It's important to note that rental property buyers want to pay the least they can for a property,” King continued.

“Rental yields are low, so if the asking price goes too high, an investor will probably withdraw, leaving the field open to other buyers.”

Further, rental property owning investors don’t tend to be traders or speculators.

King said many people don’t understand the difference between property investors and traders.

Traders make a living from buying and selling property, while investors provide homes to tenants.

As such, the two groups are taxed according to different tax rules - and it is traders who have the incentive to turn over properties quickly and for as much profit as possible.

King also pointed out that the new RBNZ investor lending restrictions and government tax measures, which are scheduled for October, will impact on investors.

In his view, they will make it harder to provide rental properties and could lead to rent increases.

Targeting property investors - along with overseas buyers - has become a populist cause in recent months, according to another investor advocate.

Property Institute CEO Ashley Church said property investors provide accommodation to people who wouldn’t be housed otherwise.

“And, in Auckland, they are not getting high returns from their properties as compared to what they paid for them.”

He added that most property investors are mum and dad investors who are trying to ensure their retirement is better provided for, rather than relying on the state.