The 2020 General Election is fast approaching and even in normal years elections tend to create some uncertainty in the economy and the property market, with investors often finding themselves staring down the barrel of some kind of new tax or regulatory change. Needless to say, this parliamentary term has seen plenty of these (e.g. extra insulation standards, tenancy law reform, ring-fencing of rental property losses), although at least the scrapping of the proposed capital gains tax has been one positive for property investors.
Of course, this isn’t a normal year. Yet despite the upheaval of the past few months, our Buyer Classification figures show that property investors are still key players in the market. In Q2 as a whole, mortgaged investors had a 25% share of purchases across NZ and a slightly higher 26% in Auckland. Both those figures are higher than a year ago. Cash investors are also continuing to show a decent percentage market share (albeit to some extent simply because the number of purchases by some other groups has fallen), and will potentially retain their presence in the coming months, as ‘bargains’ start to appear against the backdrop of recession and rising unemployment.
In other words, although the government has added extra costs to property investors’ operations in recent years, the appetite is still there. Of course, that’s not entirely surprising, given the low returns available on alternative assets (such as term deposits) and also that financing costs for property have fallen sharply. Even as recently as six months ago, mortgage rates of less than 3% seemed hard to imagine – yet they’re now standard. On top of that, the removal of the LVR speed limits has allowed some investors to buy property with less than the previous 30% deposit.
So as we head towards this election, although there’s always a chance that one of the political parties will throw a curveball out there, the environment for property investors doesn’t look as threatening as it might have done this time three years ago. Housing affordability may well pop up again as an election issue, but for now, it would appear that politicians have other concerns and that the housing market is down their priority lists.