Strong market attracting investors

Economist Tony Alexander

While all the measures of demand and price pressure rose over October, the report highlights the key change as being a firm lift in the proportion of agents noticing more investors in the market.

A net 59% of agents have reported that they are seeing more investors this month.

That’s up from 38% in October and 16% in June – and it reveals a pattern of a slow rise, followed by a jump in investor demand.

At the same time, a net 15% of agents said that they are seeing fewer investors looking to sell their properties.

The results for this measure have been negative since the question was first asked in the June survey, which suggests that investors are not flooding the market with properties in a bid to cash in on price rises.

REINZ and Alexander say the survey shows investors are becoming increasingly driven by low interest rates (covering both low mortgage rates and low term deposit rates).

Nearly 85% of agents reported that interest rate levels are a factor motivating investor demand.

In contrast, back in June when they first asked agents what the factors were motivating investor demand, 60% reported that the investors had hopes of finding a bargain.

“Only 27% report that investors are motivated by expectations that prices will keep rising – though this result is well up from just 6% in June,” REINZ and Alexander say.

The pattern of increasing investor demand is different to that for first home buyers which has been evident from the first survey in June.

REINZ and Alexander say that immediately after lockdown ended, first home buyers surged on to the market, encouraged by hopes of increased listings, mortgage interest rate reductions, and the removal of the LVRs.

In this month’s survey, a net 64% of agents report that they are seeing more first home buyers in the market.

While that’s the highest proportion reported to date, the figure has been sitting around the 60% mark since July. Over that time, it has been above that for investors every month.

Overall, the survey shows conditions remain very strong across the housing market nationwide, with all measures of demand and price pressure up.

It puts buyer interest at high levels, with 47% of agents reporting more people are attending auctions and 59% reporting more people attending open homes.

REINZ and Alexander say that, unsurprisingly, with buyer interest so strong, a net 97% of agents report prices are rising while a net 88% say buyers are gripped by FOMO (fear of missing out).

“Is there hope for the increasing number of frustrated buyers? A net 32% of agents report they are receiving more requests for property appraisals with a view to selling. So new listings numbers look like they will continue to rise.

“Of relevance for the market’s ability to keep rising is the continuing decline in reports of job worries. Only 16% of agents report that buyers are concerned about their job and income prospects, as compared to June when the figure was 48%.”

The survey results give no reason for believing that the current strong conditions around the country will be easing in the near future, Alexander adds.