Rising rents push New Zealanders to buy

Signs of sharp rental growth acceleration across New Zealand is prompting many people to consider buying.

That’s CoreLogic‘s belief, noting a re-emergence of first home buyers across the country.

In the latest Market Pulse, CoreLogic Chief Property Economist Kelvin Davidson said the recent removal of interest deductibility has had a flow-on effect, with landlords doing their best to recoup losses through increased rents.

“First home buyer market share has picked up strongly, reaching 26.4 per cent in Q3, which is a new record high,” he said.

“Although house prices have risen a lot in the past year or so (from an already high level), many first home buyers are still finding ways to enter the market, such as using KiwiSaver or capitalising on the banks’ low deposit lending allowance.”

But Mr Davidson noted that the allowance would be officially reduced on 1 November, and the banks may already be enforcing it.

Source: Corelogic

Mr Davidson said there are strong financial incentives for people to make the move into homeownership, given that paying a mortgage is often cheaper than renting.

Supply and demand is tight in the rental market, and landlords may well be trying to ‘get ahead’ of looming mortgage rate rises by increasing rents.

The analysis also finds there has been a continued drop in investor activity in recent months.

“The Buyer Classification figures for September confirm for Q3, as a whole, the downwards trend for mortgaged investors’ (multiple property owners) market share simply rolled on,” Mr Davidson said.

“At 24.2 per cent for July-September, the figure was back down at the same levels as Q2 2020, which was just before the removal of the loan to value ratio (LVR) rules really sparked investor demand back to life.”

Movers (existing owner-occupiers who are shifting house) are still relatively quiet around the country.

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Rowan Crosby

Rowan Crosby is a freelance journalist specialising in finance and real estate.