Migration Surges; House Building Slows
But in a changing market finding good tenants has become far easier, investors reveal in the latest Tony Alexander/Crockers Property Management Investor Insights survey.
29 August 2023
A record 22 per cent of property investors are finding it easier, compared with 8 per cent saying it was hard in December last year. The higher figure is up from 17 per cent in June.
Alexander says the rental market has shifted substantially this year, reflecting strong population growth from the migration boom and the shifting of some properties back to servicing tourists and foreign students.
However, migration can be a double-edged sword. While it provides more workers, skills and capital to the economy, it can put pressure on housing and infrastructure. These can boost inflation, which is at 6 per cent and only slowly falling.
Net immigration flows have increased spectacularly since the beginning of the year as permanent and long-term arrivals surged into the country.
In the year to June, migration from all countries rose to 86,200 – made up of a net gain of 121,000 non-New Zealand citizens and a net migration loss of 34,800 New Zealand citizens. It was the biggest net migration loss since the year to April 2013.
While there have been figures bandied about of 100,000 migrant arrivals this year, ASB expects
immigration inflows to cool to 30,000 by mid-2026.
ASB chief economist Nick Tuffley says net immigration is a major swing variable in the economy. “Typically, sizeable increases in immigration boosts domestic demand and the housing market.”
People come in and they need somewhere to live immediately. Even if they are not buying, they’re renting. It’s adding demand to the housing stock.”
According to some economists, the housing response is never strong enough – just as a big population surge is happening, building consents are dropping and building companies are pulling out of projects because of rising construction costs, high interest rates and lack of sales.
For example, Auckland’s apartment market was booming two years ago, but real estate agency CBRE’s latest report on the sector shows there were just four new saleable complexes launched between June last year and August this year, all for owners at the high-end of the market.
This is a noticeable turnaround from the beginning of this year, when three complexes were launched at the bottom end of the market, where investors/landlords usually buy.
Just over 1,615 apartments have been completed so far this year and a further 1,854 are expected to be finished by the end of the year, but off-the-plan sales have plummeted to 55 for the latest quarter. CBRE says the gap is widening between unsold stock and presold stock, with more unsold units than presold units.
In the much-touted build-to-rent sector, new projects have not been enough to offset recent completions, which has reduced the pipeline.
Meanwhile, the final roof slab has been poured for Kiwi Property’s 295 apartments in its $200 million build-to-rent complex across three separate buildings, up to 12 levels at Sylvia Park, Mt Wellington.
“Our survey this month has revealed a slight rise in the proportion of existing investment property owners, indicating they are thinking of another purchase in the coming year – to 21 per cent from 18 per cent last month. This arrests a recent string of declines but cannot be considered an upward trend yet.”
“But we have also observed a small decline in the gross proportion of investors looking at selling – to 28 per cent from 30 per cent. Putting the two measures together we can calculate net buying intentions, and this can give an indication as to whether price pressures are upward or downward from the people who already own residential property investments.”
The net proportion of investors looking to buy remains negative at 6 per cent this month from 13 per cent last month. This is an improvement, but the key point to note is that purchase intentions remain negative. Investors are not a factor behind the recent recovery in real estate sales and prices.
There is a broad upward trend in preference for an existing property and downward trend preference for purchasing new. Thoughts of undertaking an own development remain low.
“But it is notable that these shifts over the past two years have not been all that large. It would not be accurate to say that there is a particularly strong aversion to new builds, and it is likely that as the housing market tightens up again and listings fall, a shift back towards favouring new construction will occur.
“For those looking at buying new, 43 per cent prefer a standalone house, 41 per cent a townhouse, and 16 per cent an apartment. Recently, there has been a strong lift in apartment preference. Perhaps the return of foreign students helps account for this. The lift in apartment preference (still low at 16 per cent) has been about evenly at the cost of standalone houses and townhouses.”
However, this is a decline from 67 per cent last month. Preference for an existing apartment has lifted sharply to 18 per cent from 10 per cent of those looking to buy an existing property. Preference for an existing townhouse shows no recent trend up or down (actually, you can see both up and down in the past few months).
Selling to buy a different property has recovered in importance slightly over the past two months, but there has been an unusually large drop in the proportion of investors saying they will sell because of the tax rule change of March 2021. This might reflect shifts in political opinion polls and hopes of a policy change.