Property

Investors immune so far to credit crunch

CoreLogic’s Buyer Classification data for January shows the Credit Contracts and Consumer Finance changes from the end of last year are having little impact on investors.

Sunday, February 20th 2022

Mortgaged investors’ share of buying is steady at about 24%, which CoreLogic senior property economist Kelvin Davidson says is where it’s been since the middle of last year, down from close to 30% in early 2021.

“Tight LVR rules and the phased removal of interest deductibility, as well as the delicate mix of low gross yields versus rising running costs such as mortgage rates are seemingly subduing investor demand,” says Mr Davidson.

Cash investors are also relatively quiet at 12% share, but Davidson says they could play a more prominent role this year, as reduced competition for a larger selection of listings plays into their hands, along with relocating owner occupiers.

“We’ve been expecting relocating owner-occupiers or ‘movers’ to also increase their market share this year, as the rise in listings starts to give them more choice.

“Recently they’ve been renovating not relocating because low stock on market meant they couldn’t find their ideal next property. This was a feature of January’s data, with movers’ market share rising from 27% late last year to 30% in January,” says Davidson.

The credit changes have impacted first home buyers (FHBs) the most with their share of the market dipping from 26% in late 2021 to 24% in January.

Davidson says banks’ reduction of lending from 20% to 10% for low deposit borrowers across all mortgages from November last year coupled with the CCCFA changes a month later are taking their toll.

“It’s difficult to disentangle the two influences, but what is clear is that new buyers are being hampered by tighter credit policies,” says Davidson.

“FHBs were always likely to be knocked by the halving in the LVR speed limit, given they were the dominant users of the previously higher allowance. And that has now been compounded by the CCCFA changes which don’t allow lenders to make the assumption that a borrower will tighten their spending after they’ve been given a loan in order to meet their repayments,” he says.

Buyer Classification data show under the national figure there is some diversity amongst the main centres. Auckland, Wellington, and Christchurch all saw FHBs’ market share drop in January, with Hamilton steady, while Dunedin and Tauranga actually had increases.

“A single month of data doesn’t necessarily mark a definite new trend, and the reduction in the raw numbers of sales is also a reason for caution when analysing market share figures.

“However, the balance of probability still suggests that we’re at a turning point for the property market and the buyer mixes will be different this year,” says Davidson.

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