Market share is gradually increasing across all investor purchases with “mum and dad” buyers the biggest group, according to CoreLogic’s latest buyer classification analysis published in July.
The investor (or multiple property owner) share of the market in the second quarter of 2019 was 37%, with those owning two properties (after their latest purchase) comprising the biggest individual group, with an 11% share. They are followed by investors with three to four properties who have a 9% share.
CoreLogic senior property economist Kelvin Davidson said it was these smaller investors whose market share was hit hardest when the third round of LVRs imposed a minimum 40% deposit in October 2016. “And they then seem to have got knocked again as Labour’s election victory in late 2017 and tabling of capital gains tax hit confidence through 2018,” said Davidson.
But following the scrapping of the capital gains tax, smaller “mum and dad” investors had started to make a comeback, most noticeably in wider Wellington (City, Upper/Lower Hutt, Porirua) and, to a lesser extent, in Christchurch.
In contrast, the market share of purchases by bigger investors with 10 plus properties had generally eased slightly in the main centres, most likely because they are often classed as business/commercial borrowers for whom credit has become much harder to secure.
In Hamilton however, investors with 10 plus properties had increased their market share from 9% a year ago to 11%, with the rise due to locals rather than big Auckland investors.
Meanwhile, CoreLogic believes the top 10 factors to look out for over the remainder of 2019 are:
1. Sales volumes to stay pretty flat, with various downward drivers, and an annual total in the range of 85,000-90,000 sales for 2019 as a whole. That is about in line with the average for the past decade.
2. Average property values still rising but in a restrained fashion, with the more affordable towns and cities in “regional New Zealand” likely to record the largest increases. By contrast, further weakness in Auckland wouldn’t surprise as buyers bide their time.
3. Further loosening of the LVR rules in November with possible options including lowering the owner-occupier deposit requirement from 20% to 15% and/or raising the investor limit for high LVR lending from 5% to 10%.
4. Imposition of extra capital requirements on the banks by the end of November with a phased approach, potentially over five years.
5. Banking sector competition to remain intense and “rate wars” continuing, regardless of further cuts to the official cash rate.
6. Foreign buyer ban to remain a contributing factor to softness in the Central Auckland and Queenstown property markets.
7. More homeowners taking advantage of a subdued market, especially in Auckland, to upgrade to bigger or newer properties, or move to a better location where their borrowing capacity permits.
8. In welcome news for investors, rental yields to continue to rise by about 5% annually, and above the growth in average property values.
9. Residential building consents to flatten off as capacity constraints around labour and materials bite.
10. Building insurance to come into starker focus, especially given the issues already occurring in Wellington with changes to pricing methods and big increases in premiums. This will have implications for property values, especially apartments, and not just in Wellington.
