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Investors’ Buying Power Drops

Investors’ Buying Power Drops

Low yields, high mortgage rates and high deposits make it harder to make the sums work.

By: Sally Lindsay

28 June 2023

Wellington values were down 20.8 per cent from their peak making it the weakest of the main centres.

Investors’ market share of new purchases has slumped to a new low of 19.9 per cent.

Low yields, high mortgage rates, high deposits and interest deductibility changes are deterring mortgaged multiple property owners (investors) from buying, CoreLogic’s Buyer Classification data shows.

While mortgaged investors’ market share drops, the share of first home buyers and cashed-up investors is running at record highs.

CoreLogic chief property economist Kelvin Davidson says the record low is slightly below the previous mark of 20 per cent in September last year.

He says market conditions are particularly tough for mortgaged investors. “The 40 per cent deposit requirement has also been a hurdle. However, the prospect of that loosening to 35 per cent from June 1 should provide some slight relief, but not significantly.

“We’re not seeing existing investors sell off to any great degree; it’s just that it’s become much harder to make the sums work on a new investment purchase, or growing an existing portfolio.”

Stock Levels

While the total stock of listings available on the market nationally is at a multi-year high, there are tentative signs that total stock levels have just started to fall a little, with Auckland an example.

“Sales activity, although still low, is tending to outweigh new listings flows – which are really weak,” Davidson says. It still seems likely the downturn is on its last legs, albeit not quite finished yet.

“Whether people regard this as good or bad, of course, depends on their perspective, but it’s worth noting that an immediate or strong upturn is this environment doesn’t seem likely either.”

Chart Pack Highlights:

• Residential real estate is worth $1.57 trillion.

• House sales in the 12 months to April 2023 are down 30.5 per cent on last year.

• Over the four weeks ending May 7, there were 6,778 new listings, 23 per cent down on the same period last year.

• Total listings on the market are starting to decline, but remain 15 per cent higher than the five-year average.

• The upper quartile of the market is leading the downturn, with values down 13.1 per cent from the peak, while the lower quartile has fallen a smaller 8.5 per cent.

• Wellington is the weakest of the main centres, with values down 20.8 per cent from the peak, while Christchurch is only 6.2 per cent down.

• Rental growth remains more subdued than this time last year, running at 3-4 per cent nationally over the past 12 months.

• Of the main centres Tauranga had the largest annual change in rent (9 per cent), making it the most expensive main centre to rent ($614).

• Gross rental yields nationally have reached 3 per cent for the first time since March 2021, mainly due to the continued fall in property values.