Amongst other things, the CoreLogic Buyer Classification data for January shows that mortgaged multiple property owners (MPOs, i.e. investors) continued their return to the market, now accounting for 25% of purchases – up from the LVR III-induced trough of 22% in late 2017. That’s despite the government looking at extra regulations and costs for landlords, with the next key move being the rental loss tax ring-fence due in April. January’s Buyer Classification data also showed early evidence that the effects of the foreign buyer ban may be starting to kick in.
CoreLogic property economist Kelvin Davidson writes:
At face value, you might expect that over January investors (who don’t necessarily need to buy) would normally enjoy their holiday and take a step back from the market but first home buyers (FHBs) stay active, trying to take advantage of the absence of other buyer groups. This January, however, that theory was wrong – in fact, mortgaged multiple property owners (MPOs, i.e. investors) were still active, despite again the looming tax ring-fence for rental property losses and the uncertainty around future capital gains tax.
As the first chart shows, the share of purchases made by mortgaged MPOs in January was 25%, the highest figure since late 2016, when their share of the market was already on the downward slope after the introduction of LVR III in October that year (requiring investors to have a 40% deposit). This undermines market speculation that extra government regulation (e.g. insulation requirements, tax changes) would cause investors to completely shut up shop.
On the flipside, it’s actually FHBs that have paused for a breath a little in recent months, with their share of purchases having eased down from 24% in Q3 2018 to 23% in January. That’s still an impressive figure by past standards, but suggests that FHBs may now be testing the limits of how much they can afford and/or how much they’re willing to compromise on the location or type of property.
It’s surprising, however, that this doesn’t seem to apply in Auckland. As the second chart shows, despite a typical property costing $1.05m in our biggest city, FHBs accounted for 27% of activity in January, providing stiff competition for mortgaged MPOs as the biggest individual buyer group. As an interesting contrast, in NZ’s other high-priced market, Queenstown ($1.20m), FHBs only had a minimal 7% of purchases in January (see the third chart).
Another interesting aspect to January’s Buyer Classification data is that the ‘new to market’ category saw a drop (admittedly small) to 5% of activity across NZ, with most of the main centres following that pattern. New to market covers a range of different buyers, but part of it will be foreign buyers (i.e. without citizenship or a residency visa).
This is indicative evidence that October 22nd’s ban on foreign buyers for standalone properties in NZ is taking hold; evidence which wasn’t really shown by last Friday’s figures from Statistics NZ (see the fourth chart). That’s because the Stats NZ figures were for Q4 as a whole and there was a three-week window at the start of the quarter where it would seem that a large number of agreements were rushed through, just with a final settlement/transfer date (which is what Stats NZ reports on) at a later time in the quarter.