With September’s data now to hand we have the full set of Q3 results for the CoreLogic Buyer Classification series, and it confirms that mortgaged multiple property owners (MPOs, or investors) have made a noticeable comeback to the market over the past three months – returning their market share to the highest level since the third round of LVR changes in October 2016 (which required investors to have a 40% deposit). In terms of the other main categories, first home buyers (FHBs) are holding their ground, while movers are relatively quiet at present.
Focusing in on those mortgaged investors, the first chart shows a 25% share of purchases in Q3, a three-year high. The rise in % market share is not just a case of mortgaged investors ‘holding on’ better than other groups in a soft market either – indeed, the number of purchases by mortgaged investors over the past three months is about 400 higher than a year ago.
The upturn in mortgaged investors’ presence has been pretty widespread, including in Auckland, Tauranga (a little), around the Wellington region (mostly Wellington City and Lower Hutt), and Christchurch. Amongst the main centres, the rise has been even sharper in Hamilton, with the % share of purchases made by mortgaged investors in Q3 at 33%, up from 29% a year ago (see the second chart). At around 3.5%, gross rental yields in Hamilton are about 1%-point higher Auckland, and are also starting to look appealing against other assets (e.g. term deposits), with these factors potential explanations for the rise in investor activity.
Dunedin has also seen a rise in mortgaged investors’ presence, with the share of purchases in Q3 at 24%, up from the trough of 19% back at the start of 2018 (the number of purchases has also risen over that period). However, there was also a notable rise in market share for cash investors in Dunedin in Q3, with the figure of 13% a two-year high (see the third chart). That has come at the expense of FHBs. Now admittedly, these may not always be genuine cash purchases, because in some cases the investor could have rejigged the debt on other properties in a portfolio to free up the capital for the latest purchase.
Even so, it’s still an appreciable rise for investors, and again is likely to reflect higher yields (4.0%), worsening returns on other assets – and in Dunedin’s case, still-strong capital gains. As another breakdown of the data shows (fourth chart), again it’s the smaller players that have boosted the investor market share in Dunedin, i.e. MPOs with two properties (their own house and a rental), or the ‘mums and dads’ as they’re often labelled.
Overall, there have been signs in the past few months that we may now be witnessing the end of the purple patch for FHBs (at least in terms of market share), with investors stepping up again. This is not say that FHBs are suddenly about to abandon the market; just that they are now facing a bit stronger competition to secure a purchase.