NEWS

Where are all the investors?

Wednesday 7 August 2019, 10:38AM
By Zebra Loans
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Where are the investors?

It’s the middle of 2019 and the property market seems to be slowing up. Both the high value houses and the lower have ground to a halt. This isn’t confined to Auckland either. According to the REINZ the total volume of residential property sales were down 8.5% compared to the first half of last year country wide. 

The monthly sales figures from the REINZ show that in the first half of this year A closer look at the figures shows that much of the decline was caused by lower sales of properties at the top end of the market, those selling for $1,000,000 plus.

We find it more surprising thought that there was an even bigger drop in the number of sales at the bottom of the market. Generally this has been a hot market to operate in if you’re catering to first home buyers. However, properties selling for  $500,000 have taken a tumble in sales, whilst percurlarity those in the middle, priced between $500,000 and $1 million were almost unchanged.

Now this is solely based on the data, so it’s hard to extrapolate why this. For example, it could be argued that first home buyers are purchasing more homes over $500,000 therefore, pushing up the sales statistics of that whole band. It’s hard to speculate. However, In the first half of this year, 4806 properties sold for $1,000,000 or more, which was 734 less -13.2% than were sold in the first half of last year.

Is this an Auckland phenomenon?

RENIZ have published that most of the decline was in Auckland, however this accounts for more than two thirds of all residential property sales in the 1mil plus bracket. The REINZ estimates that sales in this price range are down as much as 17.3% this year compared to the same time last year. In the below 500k bracket, the REINZ estimates that the slow down has caused a 16% drop in sales since this time last year. This is potentially good news for investors. With sales figures dropping it is perhaps now a good time to sniff out a bargain. With interest rates at an all time low, if you can leverage your existing equity, you could end up making a capital growth windfall over the next 5 years. 

But what about sales in the middle?

These are more or less the same as last year. In the first half of this year 11,254 properties were sold in the middle  price bracket, down just four compared to a year earlier, which pushed up that price segment’s share of total market sales from 28.4% to 31.0%.

In the 750k to 1mil price bracket, there were 5775 sales in the first half of this year which is  up just 2.3% compared to the same period of last year.

So what we can assume is that sales in the middle price brackets were more or less unchanged from the same period of last year.

Is is getting harder to get a mortgage?

Worryingly for investors, yes, it does appear to be getting hard to borrow. The Reserve Bank of NZ figures show that there has been a sharp decline in lending to residential property investors and a strong growth in ledning to both existing home owners and first home buyers. In fact the figures show a 20% drop in investor lending from the same time last year. Our pick is that with the new bank capital regulations, banks are more reluctant to place money back into the market thus making it harder for investors to get their hands on cash. This is why we’d recommend you come have a quick chat with us if you’re considering investing. As the capital taps are so tight at the moment, it pays for us to have a look over your assets to structure it in a more favourable light for the banks. Bear in mind that they won’t do this for you. For the last 8 months they have shown a general reluctance to lend at all, other than to first home buyers. 

Summary:

Investors are much less active than they were a year ago, and anecdotal evidence suggests some are concentrating on reducing their debt levels rather than expanding their portfolios. This seems counterintuitive given that the interest rates are at historic lows and going lower, however the banks reluctance to lend is likely the culprit here,

Growth in first home buyer activity isn’t enough to make up for the loss of investors, leading to a net loss of buyers and an overall reduction in sales activity at the bottom of the market.

Increasing numbers of first home buyers are taking advantage of low interest rates and the absence of investors to take the leap and buy a home of their own. Whether this is a positive thing or not is yet to be seen. If you have been considering taking advantage of these market conditions, then contact us today for a free chat at Zebra Mortgages