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Blaming landlords not the answer

Data indicating investors’ account for a high share of Auckland property sales doesn’t mean they are to blame for the city’s housing crisis, experts suggest.

Tuesday, June 14th 2016, 2:00PM

by Miriam Bell

Reports of data indicating that investors are responsible for a high proportion of Auckland’s property sales have been fuelling the fire of invective against investors of late.

One widely quoted figure is CoreLogic’s recent estimation that investors accounted for 46% of property sales in Auckland over the last month.

Another, which originates from research by University of Auckland property lecturer Michael Rehm, is that up to 80% of property sales in certain South Auckland suburbs are to investors.

However, those who produced the data have emphasised the situation it indicates is not black and white.

CoreLogic analyst Nick Goodall said the investor share of the market in Auckland has been steadily increasing.

In their most recent data, investors accounted for 43% of sales in the first quarter of this year and preliminary figures suggest that had gone up to around 45% of sales in the second quarter.

But Goodall said CoreLogic prefers to use the term multiple property owner (MPO) rather than investor.

This is because there are different reasons people own and buy multiple properties – it is not just about speculation and trading.

For example, many people own baches, buy properties for their children, or hold inherited properties.

Goodall said that CoreLogic’s biggest grouping of MPOs remains those who own two properties.

“In the first quarter of 2016, 34% of property sales were to MPOs in this category, while around 29% of sales were to MPOs who own three to four properties.”

This runs contrary to the widely held perception that all investors are large scale traders and property flippers.

While CoreLogic’s data does show that MPOs with 10+ properties are increasing, it also indicates that the bulk of MPOs remain small-scale, so-called “Mum and Dad” investors.

Meanwhile, Michael Rehm said his research did show that a significant amount of property sales in certain South Auckland suburbs, like Otara (80%) and Manurewa North (68%), went to investors in 2015.

But it was important to note that a high amount of those sales actually came down to trading – buying and selling - between investors, he said.

“Home ownership is in these areas is traditionally at a pretty low level anyway. It is falling, as it is in Auckland generally but, in these areas, it is falling from a lower base.”

While capital gain was likely to be motivating many investors, many others own rental properties to generate income streams for retirement, he said.

Not only are property investors not a single, homogenous group solely motivated by the promise of fast profits, but many rental property owners are, in fact, accidental investors.

NZ Property Investors Federation executive officer Andrew King said many people end up as landlords unintentionally.

This is because they have inherited a property, have had to move elsewhere due to work commitments and held onto a property, or because they couldn't sell their former home after buying a new one.

“In these instances, circumstances can change quite quickly, meaning rental properties tend to turn over at a faster rate than owner occupied properties.”

In his view, the real number of Auckland sales to investors is likely to be lower than CoreLogic’s 46% figure – although the figure is still not unexpected.

This is because close to 40% of all Auckland properties are rentals, so it is to be expected that around this percentage of sales at any given time would be to investors, King said.

“Lower socio-economic areas tend to have an even higher level of rental properties and therefore a higher number of sales in these areas are to investors.”

Stopping investment in property would not help ease the plight of homeless people - rather more rental properties are needed so they have somewhere to live, he added.

"It is also understandable that people want something done right now to help first home buyers, but making it harder and more expensive for people to provide rental homes for tenants is not the answer.”

Prime Minister John Key also told media yesterday that societal changes which mean more people are wanting to rent is the reason behind falling home ownership rates, as opposed to increased buying by rental property investors.

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Lender Flt 1yr 2yr 3yr
AIA 5.35 4.49 5.25 5.55
ANZ 5.54 5.15 5.85 6.15
ANZ Blueprint to Build 2.78 - - -
ANZ Special - 4.55 5.25 5.55
ASB Bank 5.35 4.49 5.25 5.55
Avanti Finance 5.45 - - -
Basecorp Finance 6.45 - - -
Bluestone 5.29 7.49 7.59 -
BNZ - Classic - 4.55 5.25 5.45
BNZ - Mortgage One 5.55 - - -
BNZ - Rapid Repay 5.55 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 5.55 5.35 5.94 5.99
BNZ - TotalMoney 5.55 - - -
CFML Loans ▲6.45 - - -
China Construction Bank 5.50 5.40 6.14 6.40
China Construction Bank Special - 4.45 5.19 5.45
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 4.70 5.20 -
Heartland Bank - Online 4.00 3.85 4.70 4.84
Heretaunga Building Society 5.95 4.80 5.50 -
HSBC Premier 5.49 4.39 5.15 5.39
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.25 ▲4.29 ▲5.09 ▲5.35
Kainga Ora 5.43 4.57 5.58 5.85
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 5.00 5.55 6.19 6.39
Kiwibank - Offset 5.00 - - -
Kiwibank Special 5.00 4.55 5.19 5.39
Liberty 4.84 - - -
Nelson Building Society 5.95 4.95 5.85 -
Pepper Essential 3.44 - - -
Resimac 4.59 5.60 6.16 6.29
Lender Flt 1yr 2yr 3yr
SBS Bank 5.29 4.69 5.35 5.49
SBS Bank Special - 4.19 4.85 4.99
Select Home Loans 4.09 4.29 4.86 5.09
The Co-operative Bank - First Home Special - ▲4.19 - -
The Co-operative Bank - Owner Occ 5.45 ▲4.29 5.19 5.45
The Co-operative Bank - Standard 5.45 ▲4.79 5.69 5.95
TSB Bank 5.59 ▼5.14 ▼5.79 6.15
TSB Special 4.79 ▼4.34 ▼4.99 5.35
Unity 5.65 4.80 5.50 -
Wairarapa Building Society 5.24 4.55 5.20 -
Westpac 5.54 5.09 5.79 6.09
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.54 - - -
Westpac Special - 4.49 5.19 5.49
Median 5.45 4.55 5.25 5.52

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