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Investors expect road ahead to be tougher

Most investors believe that conditions will get harder for property investors over the next year but not just because of the Covid-19 crisis, a new survey by NZ Property Investor has found.

Friday, May 8th 2020, 12:51PM

by Miriam Bell

There’s no doubt the Covid-19 crisis will impact on the property market and that’s prompted a range of predictions on the future of the market from economists and commentators.

But at NZ Property Investor we wanted to know how the situation has affected investors on the frontline, both during lockdown and going forward.

So we ran a survey to find out where investors see the market going over the next 12 months and what they did over the lockdown period – and it turned up some interesting insights.

An overwhelming percentage of respondents (72.22%) stated that they think conditions will become harder for property investors over the next 12 months.

But, at the same time, 50% of respondents were not looking to change their plans for their investment properties due to Covid-19.

In fact, 33.84% said they will be looking for opportunities to buy and just 13.13% thought they might have to sell some properties.

This suggests that, despite the potential problems ahead (which could include falls in prices and rents), most investors are committed to playing the long game.

That’s possible to say because the survey also included a comments section, which generated a big response.

Comments indicated that many saw Covid-19 as the type of problem that hits the investment sector from time to time and, although difficult and concerning, one that can be worked through.

Those comments also make it very clear that it’s not actually the impact of the Covid-19 pandemic which is the biggest concern for investors. 

Rather it seems the Government’s proposed changes to the Residential Tenancies Act - particularly the removal of the “no cause” notice and the requirement that fixed-term rentals roll over to a periodic tenancy when agreements end – are of more concern to many respondents.

The following comments, which are just a tiny sample of those received, are indicative of the general sentiment expressed by respondents:

“Not enough support for landlords against antisocial destructive tenants. No ability to claim massive loses from tenant damage. Too risky for us. If the government doesn’t give us some protection more people will sell and the housing shortage will get worse.”

“Going to become much, MUCH harder for property investors thanks to the war on landlords. There will be tons more tenants needing homes as a result of tons of investors wanting to sell now, but so many are shocking tenants. Tenant selection is going to be so difficult.”

“The Government is going ahead with tenancy reform under level three. This is worrying as people might be distracted and investors will be unable to have their say in the same way. Many of the tenancy reforms put forward are extreme and unworkable, will make for inefficiency and poor social and economic outcomes, and they impinge on property rights.”

Outside of their views about the road ahead for investors, many survey respondents thought the Covid-19 crisis would lead to a fall in both prices and rents.

Half (50.0%) of respondents believe prices will go down over the next 12 months although, of the other half, 38.89% say prices will level out and 11.11% think prices will go up.

When it comes to rental prices, 55.56% believe rents will level out over the next 12 months, while 26.77% think rents will go down and 17.68% are picking rents will rise.

The survey results also showed that 31.82% of respondents have lowered rent for struggling tenants and that a mere 6.57% of them were planning to take a “mortgage holiday” for their investment properties.

They also revealed that 18.25% of investors with short-term rental properties were planning to look for long-term tenants, while 5.11% were looking to sell them.

But 7.30% were planning to hold on to their properties till borders open again and 5.84% were planning to keep them as short-term rentals and hoping to attract domestic tourists.

One final result worth noting is that quite a number of respondents’ comments suggested that the Covid-19 crisis is likely to be tougher for commercial landlords than for residential landlords.

Meanwhile, a recent CoreLogic survey of Auckland Property Investors Association (APIA) members and contacts also turned in results which suggest many investors are unfazed by the Covid-19 situation.

A majority of their respondents (65%) said they were staying the course they were already on, including a total of 21% of respondents who were looking to buy prior to lock-down, and were sticking to that plan “on the other side”.

Almost the same number of respondents (18%) had put off the decision to purchase while a small amount (2%) had decided to sell now. Further, 6% of respondents were previously going to do nothing but were now looking at potential buying opportunities.

CoreLogic head of research Nick Goodall says the key insight is that they’re not expecting a large proportion of experienced investors to reduce their portfolio, despite a negative outlook in the short term.

“Only 7% of the survey participants are looking to sell a property, while 27% are looking to buy. That’s a pretty clear sign of confidence.”

Overall, the survey – which also looked at rent expectations and lending plans - suggests experienced investors are in a relatively positive position, Goodall says.

“They know not to act at the whim of uncertainty, but to focus on the fundamentals and ensure their finance is consistently well structured. This ensures they’re not acting around the margins of profitability and are able to withstand a period of reduced income (or potentially increased costs).”

Tags: APIA average price CoreLogic coronavirus Covid-19 demand house prices housing market investment landlords Lending property investment property management rental market rents sales activity tenancy reform tenants

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Lender Flt 1yr 2yr 3yr
AIA 5.95 4.85 5.35 5.65
ANZ 5.94 5.95 6.40 6.59
ANZ Blueprint to Build - - - -
ANZ Special - 5.35 5.80 5.99
ASB Bank 5.85 ▲5.35 ▲5.80 ▲5.99
Avanti Finance 5.95 - - -
Basecorp Finance 6.95 - - -
Bluestone 5.89 7.49 8.09 8.19
BNZ - Classic - 5.35 5.69 5.99
BNZ - Mortgage One 5.94 - - -
BNZ - Rapid Repay 5.94 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 5.94 5.95 6.29 6.59
BNZ - TotalMoney 5.94 - - -
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
Co-operative Bank - First Home Special - 4.75 - -
Co-operative Bank - Owner Occ 5.85 4.85 5.35 5.65
Co-operative Bank - Standard 5.85 5.35 5.85 6.15
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 ▲5.35 ▲5.85 -
Heartland Bank - Online 4.10 ▲4.90 ▲5.29 ▲5.59
Lender Flt 1yr 2yr 3yr
Heretaunga Building Society 6.10 ▲5.35 ▲5.80 -
HSBC Premier 5.89 4.39 5.15 5.39
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.25 4.39 5.09 5.45
Kainga Ora 5.43 4.57 5.58 5.85
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 5.50 ▲6.19 ▲6.69 ▲6.79
Kiwibank - Offset 5.50 - - -
Kiwibank Special 5.00 ▲5.19 ▲5.69 ▲5.89
Liberty 4.84 - - -
Lender Flt 1yr 2yr 3yr
Nelson Building Society 6.45 5.55 6.15 -
Pepper Money 4.49 - - -
Resimac 6.19 5.60 6.16 6.29
SBS Bank 5.79 5.05 5.69 5.89
SBS Bank Special - 4.55 5.19 5.39
Select Home Loans 4.09 4.29 4.86 5.09
TSB Bank ▲6.30 ▲5.65 5.79 ▲6.45
TSB Special ▲5.50 ▲4.85 4.99 ▲5.65
Unity 5.65 4.95 5.55 -
Wairarapa Building Society 5.74 4.95 5.75 -
Westpac 5.94 ▲5.95 ▲6.29 ▲6.59
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.94 - - -
Westpac Special - ▲5.35 ▲5.69 ▲5.99
Median 5.87 5.35 5.72 5.99

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