National is back in the game — but are property investors?

Housing Market Written by Tony Alexander, Oct 24 2023
Guest Post by Tony Alexander

Guest Post by Tony Alexander

The NZ residential property is into month five of the upward leg of the house price cycle and such cycles tend to last around 5-6 years. Hence my last column looking at the certainty that prices will regain their late-2021 levels before the credit crunch arrived and slammed the market down 18% on average.

This week I thought it would be useful to mention some of the more interesting results produced by my monthly survey of residential property investors. There have been a few media articles noting increased interest from investors now that National will dominate the new government and we can anticipate the return of interest expense deductibility, drop in the brightline test from ten years back to two years, and restoration of no-fault tenancy terminations.

My survey shows that investors are changing their attitudes and their plans

For instance, whereas for a long time investors have expressed deep concern about the tax changes, now just 13% rate that as their biggest concern as compared with 16% in September. This is the lowest level of concern on record for my survey and it seems safe to assume this concern will decrease further once the schedule for the tax changes is confirmed.

The proportion of investors saying they are mainly concerned about changes in tenant rights has dropped to just 9% from 15% in September and a peak of 23% just over two years ago.

The result of greatest interest for me is the rise in the proportion of investors planning to sell who say they are doing so in order to finance another purchase. This has risen from 18% in September to a record 28% this month. This might reflect the combination of the coming shift in the brightline test encouraging selling, and the other changes encouraging buying.

Do these changes mean that there is now a surge of investor buying underway?

The anecdotes tell us that more are in the market and that this has been happening since the middle of the year. A net 14% of real estate agents in my monthly survey of four weeks ago said that they are seeing more investors (pre-election). The big change was in May when the proportion saying they were seeing fewer investors went from 44% to 18%.

But does my data show existing investors really jumping in?

Not yet. I offset the proportion of existing investors saying they will buy in the next 12 months against the proportion who say they will sell. The outcome this month was a net 6% saying they will sell. This is the same as in August and little changed from September’s 8%.

So, for first home buyers the window of opportunity to make a purchase without a large number of investors (who generally buy in the FHB price range) remains open. I feel young buyers know that the investors will come however as the latest data from CoreLogic show a record 28% of property sales going to first time buyers.

It is not accurate to say that young people cannot buy a house.

What about owner occupiers?

Are they showing much inclination to trade up/down/sideways yet? Not really. The high level of interest rates and concerns about getting credit from a lender alongside still high consumer pessimism and many uncertain factors shocking the economy means most still look likely to stay out of the market for a few months longer.

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