This Pulse takes a break from COVID-related analysis and looks at the CoreLogic Buyer Classification data relating to property type. In particular, the figures show that investors continue to dominate the markets for existing apartments in both Auckland and Wellington, with a combined share of purchases across cash and mortgaged buyers greater than 50%. But when it comes to new apartments in Auckland, first home buyers have become more prominent lately.
We’ve been looking at the impact of COVID-19 on the property market pretty steadily for about four months now, so this week it’s a chance to take a step back and instead look at some other interesting data for its own sake. We’ve recently had a request for insight on buyer activity for Auckland apartments split by new versus existing/second-hand, and thought the data was worth sharing more widely in a Pulse article.
To set the scene, across all property types, first home buyers (FHBs) and mortgaged multiple property owners (MPOs, or investors) have been the key buyer groups in Auckland for the past 12-18 months, as the first chart shows. In 2020 to date, mortgaged investors’ share of purchases has just edged ahead of FHBs, but the gap is small.
So what about apartments? The second chart shows market share for existing/second-hand properties in Auckland, and you can see that investors dominate – the share in 2020 to date for cash investors has been 29% and mortgaged 25%. But perhaps the more interesting pattern has been the continued rise in market share for FHBs, now accounting for 15% of purchases of existing Auckland apartments, up from 10% 2-3 years ago. Some of that has come at the expense of the ‘new to market’ category, which includes foreign buyers. Of course, that’s not entirely surprising, given the ban that was introduced in October 2018.
Switching to new apartments* in Auckland, the market share figures have historically been more volatile than for existing properties (which is a bigger segment), but it’s still interesting that 2019’s rise for FHBs has continued so far in 2020 (see the third chart), while at the same time cash investors’ share of purchases has continued to wane. The exemption from the loan to value ratio (LVR) speed limits that applied until 1st May this year could be one reason why FHBs have been targeting new apartments in Auckland in the past few years. Similarly, the introduction of LVRs back in 2013 may have hindered other buyers and allowed mortgaged investors to dominate Auckland’s new apartment segment.
What about outside Auckland? One of our other (few) main apartment markets is Wellington and for existing properties, mortgaged investors have kept their #1 rank in the past few years, while cash investors have stayed #2 (see the fourth chart). This flips Auckland’s rankings, where cash investors are the bigger group in the market for existing apartments. This might reflect the higher purchase price in Auckland versus Wellington and potentially the ability of cash investors to stretch that bit further.
Overall, we can’t ignore the effects of COVID-19 altogether here – it has clearly resulted in lower property volumes than normal, which is the caveat when looking at market share percentages. Even so, these figures reconfirm that certainly for second-hand/existing apartments, investors remain the dominant players. That will reflect many factors, but one is likely to be that gross yields tend to be better on apartments than standalone houses.
* New apartments are defined here as those where the building age is in the same year as transfer/purchase. The rest are second-hand or existing properties.