tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Friday, December 6th, 9:36AM

News

rss
Latest Headlines

Property investor comeback not likely for a while

Investors are still finding it tough after the increasing number of hurdles put in front of them.

Friday, February 10th 2023, 3:22PM

by Sally Lindsay

Forty percent deposits - unless buying a new-build - low gross rental yields, higher mortgage rates, not to mention tough serviceability tests, increased compliance costs, removal of interest deductibility, and flattening rents, are key challenges for would-be new investors.

CoreLogic senior property economist Kelvin Davidson says with these challenges, it’s little wonder the CoreLogic Buyer Classification data shows that mortgaged multiple property owners, including investors, are running at about a 21% share of purchases, close to all-time lows.

Getting the numbers for an investment property to stack up is difficult, however, it’s not a total disaster.

Those figures still mean that one in every five deals is going to a mortgaged MPO. Kept in context, it’s within a low overall number of transactions,” Davidson says.

“Clearly some investors are still finding value and new-builds are no doubt one of these opportunities.

“Anecdotally there are relative ‘bargains’ to be picked up, with some developers looking to shift stock so they can crack on with their next project.

“In the weak market, others will simply be doing deals on existing properties at discounted prices.”

Cash remains king

“Meanwhile, cash MPOs are enjoying the weak market conditions too. Their share of purchases has risen to a record high from about 10% in late 2021 to closer to 15% now. In a market where finance is restricted and costly, it stands to reason that ‘cash is king,” says Davidson.

Volume matters

When looking at investor activity by size of portfolio, the drop in market share has tended to be a bit bigger for those with fewer properties – in other words, the ‘mums and dads’ have found the going a bit tougher than bigger landlords.

Again, that makes sense in the current market conditions, given having the resources or banking relationships for a deposit to keep buying is challenging, says Davidson.

Investor crystal balling

If put in the shoes of an investor, what would be worth considering over the coming months and is it a time to buy?

Davidson says the first question, for investors and buyers more broadly, is to ask when property values might bottom out?

“No one knows exactly, but my working assumption is that as mortgage rates finally peak in the next few months - if they haven’t already - we may see sales activity pick up a little in the second half of the year and property values in many parts of the country find a floor.

He says other considerations include whether the National Party wins the October election and reinstates interest deductibility? “This scenario does seem to be getting more likely as the days go by, but it’s probably still prudent to work the numbers on what we know now, and if the rules change, that’s a bonus for investors.”

How lending rules evolve will also have an impact although Davidson is not anticipating any changes to the loan to value ratio rules (LVRs) this year.

“November’s Financial Stability Report might signal a loosening could be on its way next year, which would be when the formal caps on debt-to-income ratios are likely to be introduced. The cap could be set at seven for all borrowers, with a speed limit system and new-build exemption.”

Ultimately Davidson suspects many would-be investors are weighing up the need to top-up a property investment’s cashflow from other income sources over a three- to five-year horizon versus the scope for renewed capital gains over that period, which are uncertain and only ‘on paper’ until realised.

“It’s by no means an easy balancing act, but one factor that will work in favour of investors are signs that net migration is back in the black – a boost for tenant demand and rents this year.”

Tags: investment

« Tenancy Tribunal slices rent increaseHouse sales plummet to lowest ever »

Special Offers

Comments from our readers

No comments yet

Sign In to add your comment

 

print

Printable version  

print

Email to a friend
News Bites
Latest Comments
  • Partners kills its matrix
    “@Backstage, thanks. I agree there is no relationship to CoFI, though, from a service perspective, I have two other providers...”
    2 days ago by JPHale
  • Partners kills its matrix
    “Partners Life has decided to stop using its COM for advisers as it believes the system may breach the CoFI regulations which...”
    3 days ago by Amused
  • Partners kills its matrix
    “Insurance companies should stick to their lane. They are not advisers and even those that employ advisers should not be crossing...”
    3 days ago by Tash
  • [GRTV] The nitty gritty of Smart’s ETFs
    “Advisors should consider all gateways into investment markets including cheaply priced ETFs to provide access to low priced...”
    3 days ago by Pragmatic
  • DRS member or not - client care remains advisers’ responsibility
    “FAPs are members of DRS too. Substitute “adviser” for “FAP” and the story is actually a lot more accurate. If...”
    4 days ago by Aggressively_passive
Subscribe Now

Mortgage Rates Newsletter

Daily Weekly

Previous News
Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 4.94 - - -
AIA - Go Home Loans 7.49 ▼5.79 ▼5.49 ▼5.59
ANZ 7.39 6.39 6.19 6.19
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 5.79 5.59 5.59
ASB Bank 7.39 ▼5.79 ▼5.49 ▼5.59
ASB Better Homes Top Up - - - 1.00
Avanti Finance ▼7.90 - - -
Basecorp Finance ▼8.35 - - -
BNZ - Classic - 5.99 5.69 5.69
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 7.54 - - -
BNZ - Rapid Repay 7.54 - - -
BNZ - Std 7.44 ▼5.79 ▼5.59 5.69
BNZ - TotalMoney 7.54 - - -
CFML 321 Loans 6.20 - - -
CFML Home Loans 6.45 - - -
CFML Prime Loans 8.25 - - -
CFML Standard Loans 9.20 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 5.69 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 6.95 5.79 5.59 5.69
Co-operative Bank - Standard 6.95 6.29 6.09 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - ▼5.99 ▼5.89 -
First Credit Union Standard ▼7.69 ▼6.69 ▼6.39 -
Heartland Bank - Online 6.99 ▼5.49 ▼5.39 ▼5.45
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.60 6.65 6.40 -
ICBC 7.49 ▼5.79 ▼5.59 5.59
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 7.25 6.89 6.59 6.49
Kiwibank - Offset 7.25 - - -
Kiwibank Special 7.25 5.99 5.69 5.69
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 7.94 ▼5.75 ▼5.99 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 7.49 6.95 6.29 6.29
SBS Bank Special - 6.15 5.69 5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 4.94 5.15 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.75 - - -
TSB Bank 8.19 6.49 ▼6.39 ▼6.39
TSB Special 7.39 5.69 ▼5.59 ▼5.59
Unity 7.64 ▼5.79 ▼5.55 -
Unity First Home Buyer special - 5.49 - -
Wairarapa Building Society 8.10 6.05 5.79 -
Westpac 7.39 6.39 6.09 6.19
Westpac Choices Everyday 7.49 - - -
Westpac Offset 7.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 5.79 5.49 5.59
Median 7.49 5.99 5.79 5.69

Last updated: 6 December 2024 9:11am

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox  |  Disclaimer
 
Site by Web Developer and eyelovedesign.com