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First home buyers making hay, investors MIA

A lift in interest amongst first home buyers (FHB) remains a feature of housing activity.

Monday, May 27th 2024, 10:46AM 1 Comment

by Sally Lindsay

The share of new mortgage lending attributed to FHBs has been running at a historically elevated 24% of the total for almost a year.

Investors, by contrast, are less interested. New investor lending diverged noticeably from that of FHBs in 2022 and has tracked down to about 16% of the total. In absolute terms, it has yet to substantively recover from the lows struck around the start of 2023.

BNZ chief economist Mike Jones says any positive impact on investor demand from the new government’s change in investor tax policies, so far, seems to be being offset by the cash flow hit from high interest rates and soaring insurance, rates, and maintenance bills.

“The anecdote points to investors remaining on the sidelines in the short-term. It’s possible we see a lift in investor selling intentions once the brightline test shifts back to two years in July, but we’d expect this impact to be small.”

Excess supply

Jones says ordinarily, the shift upwards in sales activity would be a reliable indicator that house price appreciation is to follow.

“This may come through at some stage, but in the short-term we’re not convinced. That’s because new listings continue to rise even faster than sales. There’s excess supply, in other words. Unsold inventory increased again in April to a fresh seven year high.
On the supportive side, Jones says there is:

  • Booming population growth. In the year to March, the population grew by 131,000 (that’s two Napiers). Buoyant net migration inflows and rent inflation for new tenancies are now slowing, but they remain at levels indicative of heightened pressure on housing resources.
  • High build costs. It’s still much more expensive to build a new home than it is to buy an existing one, at least on the numbers.
  • Housing policies are more supportive. Interest deductibility is now back to 80% and will go to 100% next year, the Reserve Bank has flagged an easing in loan-to-value ratio requirements later this year, and proposed debt-to-income ratios won’t be immediately binding. The winding back of the brightline test to two years from 10 could support investor demand at the margin, but some investors may also be more willing to sell once it is shortened up.

On the negative side Jones says there is a cash flow crunch. Mortgage rates are going to stay high all year, and the process of adjustment to past increases continues; economic sentiment is in the doldrums and probably won’t improve substantively until next year; and labour market conditions are deteriorating. The unemployment rate has risen to 4.3% on its way to a 5.5% forecast next year, reducing job security.

Tags: BNZ

« Sticky market for investors – first home buyers in controlOptions for buyers locked out of scrapped first home loan grant »

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Comments from our readers

On 27 May 2024 at 11:19 pm Penny Darwin said:
I am frightened about what new crazy and unfair policies might be introduced when a change of government eventually happens. So when the time is right I will divest.
While I am confident I am doing a good job as a landlord, the negativity against investors is wearying.
I have peace of mind in believing that there is a rightful place for investors. I used to believe that a capital gains tax only on residential property and not on other business assets would be fair given that houses are people’s homes and as such should not be an investment vehicle. Now I have changed my mind. While I believe it is preferable for society for houses to be lived in by owners not renters, owning and running a property is simply not affordable for many people at different times in their lives. For investors the returns are low. The only way it works is to look at the long term, to buy well, and wait for rents to eventually rise enough to cover outgoings while hoping the house holds its value.
As for the much-touted capital gains, I am not convinced they are any greater than inflation after accounting for maintenance, insurance, and perhaps interest.

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.14 6.79 6.65
ASB Bank 8.64 7.14 6.75 6.39
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.14 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.74 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.89 6.55 6.35
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.65 7.25 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.09 7.59 7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.74 ▼7.09 ▲6.95
SBS Bank Special - 7.14 ▼6.49 ▲6.35
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.84 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.24 6.75 6.39
Median 8.64 7.19 7.17 6.65

Last updated: 19 June 2024 3:59pm

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