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Investors under fire

Rising house prices and the minimum rental standards debate have left investors under heavy fire – and all eyes on the Reserve Bank’s upcoming Financial Stability Review (FSR).

Monday, May 9th 2016, 1:00PM

by Miriam Bell

The past week has been a rough one for investors who have been blamed for both surging house prices nationwide and tenant health problems due to substandard rental properties.

While the wait for the release of data which should indicate the extent of investment on the part of overseas buyers continues, domestic investors have taken centre stage again.

Westpac chief economist Dominick Stephens said house prices are rising in locations with diverse population growth rates and no evidence of accommodation shortages.

“Talk of supply shortages and recalcitrant councils must now take a back seat in the house price debate.”

Instead attention is turning to sources of housing demand, he said.

“The finger is being pointed directly at investors, who are experiencing low borrowing costs and/or low returns on other investment options, due to low interest rates.”

There can be little doubt investors are very active in the current market, including in Auckland.

According to CoreLogic, the most active group of property buyers, particularly in Auckland, are those who own multiple properties - mostly investors.

CoreLogic’s most recent buyer classification data show that this buyer group’s share of sales increased from 35% in 2013 to a peak of 40% in the second half of 2015.

However, popular perceptions of exactly who investors are and what they do seem exaggerated.

It appears many hold the view that investors are either slum landlords who make huge profits from their rental properties or dedicated property flippers who are not taxed on their gains.

Yet this is not usually the case.

For example, Auckland Property Investors Association vice-president Peter Lewis told media over the weekend there is a misconception that landlording is a big business.

He said they have done studies and found that over 73% of New Zealand landlords own either one or two houses.

“Only 500 landlords in New Zealand own more than 10 rental properties, so you are dealing with a ‘ma and pa’ business.”

Meanwhile, as landlords.co.nz has reported, those who buy property with the intent to sell are taxed on any profit they make.

None the less, speculation is growing that the Reserve Bank will announce further macro-prudential policy, in another bid to calm the housing market, as part of the FSR on Wednesday.

Westpac expects the Reserve Bank will discuss its macro-prudential options in the FSR, Stephens said.

Such options include requiring banks to hold more capital, strengthening the current LVR restrictions on mortgage lending, or introducing new restrictions on mortgage lending like a maximum debt-servicing-to-income ratio.

“We would be mildly surprised if the Reserve Bank committed to any of those options as early as next week,” he said.

“However, we do expect them to announce some form of macro-prudential tightening before the year is out.”

ASB senior economist Jane Turner said the Reserve Bank may opt to continue to watch and wait at this point as it can tweak the rules anytime, not just at a FSR.

“But renewed tensions between monetary policy and financial stability suggest the odds are growing of further tightening in Auckland investor restrictions and potentially a broadening to nationwide investor restrictions.”

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Lender Flt 1yr 2yr 3yr
AIA 4.55 3.55 3.89 3.99
AIA Special - 3.05 3.39 3.69
ANZ 4.44 ▼3.29 ▼3.45 ▼3.85
ANZ Special - ▼2.79 ▼2.95 ▼3.35
ASB Bank 4.45 ▼3.35 ▼3.19 ▼3.85
ASB Bank Special - ▼2.85 ▼2.69 ▼3.35
Bluestone 4.44 4.44 4.29 4.34
BNZ - Classic - ▼2.79 2.99 ▼2.99
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.75 3.99 4.39
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 2.80 3.15 3.19
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union North 6.45 - - -
Credit Union South 5.65 4.75 4.75 -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Lender Flt 1yr 2yr 3yr
Heretaunga Building Society 4.99 4.35 4.45 -
HSBC Premier 4.49 ▼2.80 ▼2.89 3.50
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC ▼4.40 ▼2.95 ▼2.95 ▲3.69
Kainga Ora 4.43 3.55 3.85 4.14
Kiwibank 4.40 3.74 4.14 4.40
Kiwibank - Capped - - - -
Kiwibank - Offset 4.40 - - -
Kiwibank Special - ▼2.65 ▼2.79 ▼3.25
Liberty 5.69 - - -
Lender Flt 1yr 2yr 3yr
Napier Building Society - - - -
Nelson Building Society 4.95 3.75 3.99 -
Pepper Essential 5.18 - 4.98 4.98
Resimac 3.49 3.45 3.39 3.69
RESIMAC Special - - - -
SBS Bank 4.54 4.85 5.05 5.49
SBS Bank Special - ▼2.99 ▼3.05 3.69
The Co-operative Bank - Owner Occ 4.40 3.09 3.35 3.69
The Co-operative Bank - Standard 4.40 3.59 3.85 4.19
TSB Bank 5.34 ▼3.59 ▼3.79 ▼4.19
TSB Special 4.54 ▼2.79 ▼2.99 ▼3.39
Lender Flt 1yr 2yr 3yr
Wairarapa Building Society 4.99 3.95 3.99 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - ▼2.79 ▼2.79 3.39
Median 4.55 3.50 3.79 3.69

Last updated: 25 May 2020 5:00am

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