Investors' market share on the rise

Thursday 20 August 2020

Concerns about the rising costs of being a landlord aren’t deterring investors with new data showing that mortgaged investors’ share of purchases surged to a four year high in July.

By Miriam Bell

There’s no doubt that mortgaged investors are a rising presence in the market, with CoreLogic’s latest Buyer Classification data showing they accounted for 27% of purchases in July.

That share of the market is their highest since the third quarter of 2016 – when the Reserve Bank imposed a 40% deposit requirement* on investors.

While mortgaged investors share of property purchases increased, existing owner-occupiers share of purchases dropped to 24% in July.

First home buyers (FHBs) share of purchases also held up, edging higher to 24% in July.

CoreLogic senior property economist Kelvin Davidson says the data shows investors’ appetite remains pretty strong - despite government policy measures which have raised the costs of being a landlord.

“Provided that the current move to alert levels three and two is short-lived, there’s little reason to expect these buyer patterns to change in the near term.”

Those national patterns were replicated in Auckland, with existing owner-occupiers’ market share dropping lately, but the figures for mortgaged investors and FHBs continuing to improve.

Dunedin is another clear example of the continued appetite of mortgaged investors, Davidson says.

“Indeed, they got off to a very fast start in the third quarter, accounting for 36% of purchases in July, as well as a higher number than a year ago.

“This is a pretty notable result, especially given some signs of weaker property prices (which might ordinarily make investors cautious) as well as still-restrained lending policies at the banks.”

Investors may have issues with recent policy and legislative changes, but Davidson says that if you look at the investment alternatives, property still seems like a good option.

“It seems that many property investors might just opt to leave their money in property and wear the extra costs.”

When it comes to a broader outlook, Davidson says New Zealand’s housing market has clearly been through some significant disruption in recent months and, unfortunately, there’s more to come.

“Sales volumes in June and July had rebounded strongly from the earlier collapse, but we’re now likely to see activity drop off again on the back of the latest move up the alert levels.”

Looking ahead, after a period where optimism had returned, there will now be a new phase of uncertainty and downside risks to property market activity, if not prices too, he adds.

“That said, the two-week extension of the wage subsidy (to 15th September) and the same for the mortgage payment deferral scheme (to 31st March next year) should both help to soften the blow.”

* In the wake of Covid-19, the Reserve Bank has temporarily removed the LVR restrictions until at least May next year.

Comments from our readers

On 21 August 2020 at 11:09 am davidho said:
So much for the scaremongering regarding the new Tenancies Act. Its about time we saw less of a vested interest commentary from the various landlord groups. By the way I have several residential rental properties and I am happy to have them compliant with excellent client relationships.For those that find it too tough, sell and try getting a 80% bank loan to buy a parcel of shares and achieve tax free capital gains that of course get little mention.
On 21 August 2020 at 6:49 pm Property Leader said:
I do laugh and scoff at predictions of Property prices Doing this and that. Being in the market is everything. The bigger the portfolio the easier it is to buy more rentals. The government laws and tax moves are all playing into my hand.

Sign In / Register to add your comment

House Prices

High demand keeps pushing prices up

Treasury might be expecting house prices to fall - but market data suggests otherwise, with Trade Me Property’s August data the latest to show rising prices and high demand.

Commercial

Augusta Capital takeover bid now unconditional

ASX-listed Centuria Capital has declared that its takeover of New Zealand property funds manager Augusta Capital is now unconditional, as it has secured nearly 66% of Augusta’s shares.

Mortgages

What the Reserve Bank's latest move means for housing

The Reserve Bank’s programme to lend directly to retail banks could be ready soon. If it is, that’s likely to mean lower interest rates on loans – and more support for the housing market.

Site by PHP Developer