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Landlords taking time to think

Data is starting to show property investors are pulling back from buying existing houses.

Wednesday, May 5th 2021, 1:06PM 2 Comments

For the third month in a row independent economist Tony Alexander’s survey of mortgage brokers has revealed they are seeing fewer investors in the market.

Alexander says this is exactly what the Government wants – to stop investors from buying more properties through its continuing string of policy changes aimed explicitly at “dampening” demand for existing properties.

Of the 68 respondents in the survey only one reported seeing more investors, 54 said fewer, 12 said nothing had changed, and one had no view. In February the outcome was -5%, March -46%.

A general step back

While mortgage advisers say fewer landlords are asking about finance, first-home buyers – expected to fill the landlords' gap – are not doing that.

“There has been a further reduction in the presence of investors in the market, but first-home buyers have also stepped back,” Alexander says.

A net 13% of mortgage advisers say they are seeing less business coming through the door from first-home buyers. This result is the weakest on record, but it is also a continuation of the easing trend which was underway from February – before the policy changes to the bright-line test and mortgage interest deductibility.

“The negative result suggests that the question of whether first-home buyers are responding to the increasing crackdown on investors by moving in to take advantage of the situation can start to be answered.

“Not as yet, especially as a trend over recent years has been for first home buyers to ‘rentvest’ – buy an investment property to rent out in anticipation of a capital gain which will deliver a good deposit for an eventual home to live in themselves.”

Alexander says young buyers have had this path all but denied to them now by the rule changes. And, in fact, they may be more negatively affected by the extension of the bright-line test to 10 years than any other grouping of investors.

“One thing I have learnt over the years is that when there is a generalised cooling in the New Zealand housing market and access to property becomes easier for those still looking to buy, first home buyers tend not to retain the same or greater presence.”

Refinancing

Inquiries about refinancing can be driven by a desire to lock in long-term fixed interest rates before they rise, break fixed rates because of market rate falls, or sometimes draw down equity to finance another property.

In that regard there are two pressures moving in opposite direction to each other at the moment. Some people will be looking to lock in a longer-term fixed rate, others will be shelving plans to raise debt to invest in another property.

We expected in a climate of rising concerns about interest rate increases, more people would be asking about refinancing. This month there has been a fall in the net proportion of mortgage advisers seeing such inquiries to a net 4% positive from 10% in March and 17% in February.

This suggests people who were thinking about making another purchase are stepping back – and that result would be consistent with the net 78% of advisers seeing fewer investors looking for assistance.

Tags: property investment Tony Alexander

« Interest rate rises scary for property investorsInvestors – up and down »

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Comments from our readers

On 5 May 2021 at 11:12 pm Ross Thurston said:
Why are people continuing to use the words 'bright line test' when it should be correctly called a "Capital Gains Tax".
On 6 May 2021 at 1:04 am Steve Baron said:
I have certainly seen a good number of investment properties hitting the local real estate market here in Whanganui since the announcement.

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Lender Flt 1yr 2yr 3yr
AIA 4.55 ▲2.85 ▲3.25 3.55
ANZ 4.44 ▲3.20 ▲3.59 ▲4.00
ANZ Blueprint to Build 1.68 - - -
ANZ Special - ▲2.60 ▲2.99 ▲3.40
ASB Back My Build 1.79 - - -
ASB Bank 4.45 ▲2.85 ▲3.25 3.55
Basecorp Finance 5.49 - - -
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - ▲2.85 ▲3.25 ▲3.55
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 4.55 ▲3.45 ▲3.85 ▲4.15
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 2.25 1.85 2.35 2.65
Heretaunga Building Society 4.99 3.80 3.90 -
Lender Flt 1yr 2yr 3yr
HSBC Premier 4.49 2.19 2.45 2.69
HSBC Premier LVR > 80% - - - -
HSBC Special - 2.25 - -
ICBC 3.69 2.35 2.75 3.05
Kainga Ora 4.43 2.88 3.28 3.59
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.75 3.50 3.74 4.34
Kiwibank - Offset 3.75 - - -
Kiwibank Special 3.75 2.65 2.89 3.49
Liberty 5.69 - - -
Nelson Building Society 4.95 2.99 3.24 -
Lender Flt 1yr 2yr 3yr
Pepper Essential 4.79 - - -
Resimac 3.39 2.98 2.79 3.29
SBS Bank 4.54 2.99 3.39 3.59
SBS Bank Special - 2.49 2.89 3.09
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - 2.35 - -
The Co-operative Bank - Owner Occ 4.40 2.55 2.95 3.39
The Co-operative Bank - Standard 4.40 3.05 3.45 3.89
TSB Bank 5.34 3.35 ▲3.75 ▲4.05
TSB Special 4.54 2.55 ▲2.95 ▲3.25
Wairarapa Building Society 4.99 3.55 3.49 -
Lender Flt 1yr 2yr 3yr
Westpac 4.59 ▲3.45 ▲3.85 4.09
Westpac - Offset 4.59 - - -
Westpac Special - ▲2.85 ▲3.25 3.49
Median 4.54 2.92 3.25 3.49

Last updated: 20 September 2021 8:55am

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