Housing headwinds hit mortgaged investors as market share slumps to historic low

CoreLogic NZ’s Buyer Classification data released as part of May’s Monthly Housing Chart Pack shows mortgaged MPOs market share declining, while first home buyers (FHBs) and cash MPOs are running at record highs.

CoreLogic NZ Chief Property Economist Kelvin Davidson said the record low is ever so slightly below the previous mark of 20.0% from September last year.

“Mortgaged MPOs still have a higher market share than cash MPOs, but when measured against their own past they are now relatively weak while cash MPOs and FHBs are taking a larger than usual share,” said Mr Davidson.

“The current market conditions are particularly tough for mortgaged MPOs, most notably low rental yields, high mortgage rates and the removal of interest deductibility as a tax write off.

“The 40% deposit requirement has also been a hurdle, however the prospect of that loosening to 35% from 1 June should provide some slight relief, but not significantly. We’re not seeing existing MPOs 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.”

Sales and new listings low, as buyers retain power

Sales volumes remained low in April, with buyers still taking their time and few vendors finding themselves in a forced selling position. The flow of new listings coming onto the market each week has also remained sluggish, and Mr Davidson said it remains a ‘buyer’s market’.

However, 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.

“The total stock of listings available on the market are continuing to drop, as sales activity, although still low, is tending to outweigh new listings flows – which are really weak,” said Mr Davidson.

“Winter is expected to remain sluggish per the seasonal norm, so spring will really be the key period to watch for the property market. It still seems likely that this downturn is on its last legs, albeit not quite finished yet. Whether you regard this as good or bad of course depends on your perspective, but it’s also worth noting that an immediate or strong upturn is this environment doesn’t seem likely either.”

May Housing Chart Pack highlights:

• Residential real estate is worth $1.57 trillion.
• House sales in the 12 months to April 2023 are down -30.5% on last year,
• Over the four weeks ending 7 May 2023, there were 6,778 new listings, -23% down on the same period last year.
• Total listings on the market is starting to decline, but remains 15% higher than the five-year average. Nelson / Tasman has the highest volume of total listings compared to the same time last year, and Gisborne has the lowest.
• Property values fell -2.6% in the past three months, and -10.3% over the year.
• The upper quartile of the market is leading the downturn, with values down -13.1% from the peak, while the lower quartile has fallen a smaller -8.5%.
• Wellington is the weakest of the main centres, with values down 20.8% from the peak, while Christchurch is only 6.2% down.
• Mortgaged investors share of property purchases sunk to a new record low of 19.9% in April, while cash investors (16.1%) and FHBs (25.3%) are at record highs for these types of buyers.
• Rental growth remains more subdued than this time last year, running at 3-4% nationally over the past 12 months, although it’s a mixed bag around the main centres.
• Of the main centres, Tauranga had the largest annual change in rent (9.0%) making it the most expensive main centre to rent ($614).
• Gross rental yields nationally have reached 3% for the first time since March 2021, mainly due to the continued falls in property values. This is still relatively low by past standards, and is less than the income returns on some other asset classes (e.g. term deposits).

Download the Monthly Housing Chart Pack

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