Flood of new investors unlikely even if Government changes

While a National-led Government may result in house prices rising more than otherwise might have been the case, the impact might be relatively muted, Kelvin Davidson, CoreLogic’s chief property economist says.

He says housing market confidence seems to have turned a corner, supported by a rough peak for mortgage rates, high net migration flows, a still-solid labour market, and an easing in credit conditions. “A growing expectation that National may lead the next government, with more property friendly policies, may well be playing a role as well, but he says it is unlikely to lead to a flood of new investors in the market.

“For example, the potential phased reinstatement of mortgage interest deductibility will tend to add some demand to the market, but a smaller tax bill won’t change the fact that rental yields are still low and mortgage rates high, requiring a new property investor to put a significant cash top-up into the property to keep it going.” This is not likely to appeal to investors, particularly those chasing cash flow. 

CoreLogic’s latest lasted House Price Index shows property values across the country flat-lined last month, dropping by a rounded $20, most likely ending the 17-month slump.