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More investors, fewer mortgage free properties

New Zealand’s hot property market has led to a decline in the number of mortgage-free properties, according to new data from myvalocity.co.nz.

Monday, November 14th 2016, 12:00AM

by Miriam Bell

The property valuation website has released research showing the number of mortgage-free properties nationwide has dropped from 39% to 35% in the last decade.

All regions have seen a decline apart from the Far North, Coromandel and Kawerau - which have remained relatively stable.

Myvalocity CEO Carmen Vicelich said this trend doesn’t make much sense on its own - given current market conditions and the growing aging population who traditionally pay off their mortgage and downsize before retirement.

However, it seems that increasing numbers of those older Kiwis with equity in their pocket leveraging up to buy more property instead of paying down their mortgage.

Myvalocity’s data also shows at least 10,000 new investors* have entered the market in the last five years.

This group has collectively bought more than 26,000 residential properties between them, with an even spread of new investors located across the country.

The number of new investors buying in Auckland and/or other regions has increased although new investors buying solely in the regions has declined slightly.

Vicelich said the new LVR restrictions may have slowed the number of active investors in the market, low interest rates and Kiwis’ love of property are changing the dynamics of the market.

“By default, many of the baby boomer generation have owned their own property for a long time.

“They have the tenure and have also made good capital gains to be in a position to discharge their mortgage before retirement as previous generations have done.

“But what we are seeing is a new global trend emerging where people are choosing to stay in the market longer.

“Rather than discharge their mortgage, they’re taking advantage of the low interest rates to leverage their increased equity and buy more property.”

The days of paying off mortgages before retirement are waning for many, Squirrel Mortgages CEO John Bolton agreed.

Higher house prices mean people are taking longer to pay off their mortgage and many people cashing out of Auckland and moving to the regions still don’t have enough equity to buy freehold elsewhere, he said.

“The most common way people pay off their mortgage is downsizing – which is typically when retiring or the kids have left home.  People are working longer and tend to upgrade when they downsize so they simply aren’t getting debt-free.”

Bolton said many of the baby boomer generation have invested wisely in property in the last 15 years as their equity and disposable income has increased. 

“While that has meant many of them are working longer and still hold mortgages, in the long term they will be able to sell down some of their properties so their remaining investments generate positive cash-flow income for retirement.”

However, investing in property when close to retirement and at this point in the market does have some risks.

The indications are that interest rates are more likely to go up than down, which may place undue pressure on investors who bought at historically low rates.

At the same time, many people are said to have unrealistic expectations of future house price growth.

Last week, BNZ acting director of retail and marketing David Bullock warned against planning for the financial future based on the type of price expectations many seem to hold.

*New investors are classified as those owning more than two properties.

« Record low in buyer sentimentFree Investment Property Showcase Events: Auckland, Wellington and Christchurch »

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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

Last updated: 19 May 2022 10:42am

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