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New Zealand’s mortgaged investors see fall in share of property purchases

Over the past three months, New Zealand‘s mortgaged investors have seen their share of property purchases fall, while the number of first-home buyers (FHBs) bought at increased rates.

CoreLogic New Zealand (NZ) Chief Property Economist Kelvin Davidson said these patterns were more due to the 40 per cent deposit mortgaged investors need, rather than the March tax changes.

The June Buyer Classification figures show that the decline for NZ mortgaged investors’ (multiple property owner) market share is now well and truly underway.

Their share of purchases in June was 24.2 per cent, which was the lowest monthly total since June last year.

For the April to June quarter, mortgaged investors’ bought 25 per cent of all properties sold.

“The number of purchases made by mortgaged investors in quarter two was still pretty strong, in fact the highest for a June quarter since 2016,” Mr Davidson said.

“But at least from the government’s perspective of ’tilting the market’ away from investors, these shifts in the market share figures will be what they’re wanting to see.”

Source: CoreLogic NZ

Mr Davidson added it was debatable whether the March tax changes correlate with the decline in mortgaged investors’ market share.

“The tightening of deposit levels is likely to have been the dominant factor,” he said.

“The evolution of mortgaged investors’ market share this time around has been pretty similar to what it was when investors last required 40 per cent equity at the end of 2016.

“If anything, however, the figure may dip lower in this cycle, given the extra focus from the government in terms of the extension of the bright-line test and phased removal of interest deductibility.”

Mr Davidson also noted it was interesting falls in mortgaged investors’ market share in the past three months came from the small smaller end of the spectrum. This included buyers who have two properties after their latest purchase, such as their own home and a rental property.

Source: CoreLogic NZ

“These smaller investors are potentially affected most by the tighter financing requirements and also perhaps take the more cautious path as they wait to assess what the final rules might actually be,” Mr Davidson said.

Meanwhile, after a peak of 25 per cent in last year’s third quarter, the FHB’s market share dropped to 21 per cent through the following two quarters.

It has now risen back to 24 per cent in quarter two of 2021. In June, it reached 25.1 per cent.

Mr Davidson believes FHBs are still looking for ways to access the market. He stated four-fifths of all lending done at less than a 20 per cent deposit in May was to FHBs.

“The patterns for market share are moving along as would be expected in response to rule changes over the past six months or so, and the outlook is for mortgaged investors’ figures to keep declining,” Mr Davidson said.

“We also expect price growth to slow, but more due to general affordability pressures and mortgage rate rises, rather than a reduced investor presence.”

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