The industry expects further government and regulator intervention
Property investor demand has surged back to 27% market share in the final quarter of 2020, the same level as in 2016 – prompting speculation that further government and regulator intervention might be necessary to rebalance buyer activity, according to CoreLogic NZ.
The growth coincided with a 6.1% increase in property values in the quarter, an increase not seen since the three months to February 2004 at 6.6%.
The report also showed that first-home buyers (FHBs) made up 23% of purchases in Q4, with their continued presence likely to keep pressure on the supply and demand balance in the market.
“Looking at movers (including upgraders and downsizers), their share of purchases dipped to just 26% in Q4, a historically low level. In some cases, existing owner-occupiers are choosing to stay where they are due to already high debt levels and the extra costs associated with moving,” said CoreLogic senior property economist Kelvin Davidson.
“But in other cases, people aren’t moving because they simply can’t find the ideal next property, given the tight supply of available listings. In turn, that is feeding back into an even tighter listings picture.”
He added that a 40% deposit requirement for investors might be officially mandated later in the year.
“The last time that mortgaged investors had a market share near this high was 28% back in Q3 2016 when the Reserve Bank imposed a 40% deposit requirement,” he continued.
“While we’ve already seen the Reserve Bank move to reinstate LVR speed limits at 30% from March 01, the question is, will this be the end point? We think a move to 40% is possible if investor participation continues to push higher.”
Davidson highlighted that heightened regulation could be the market’s key feature in 2021 as property politics heat up and affordability pressures emerge, noting the possibility of extending the current five-year hold period for the Bright-line test.
“Supply (or lack thereof) is also a critical issue affecting the market and igniting much of the heat. This is both a shortage of available listings on the market but also a simple lack of newly constructed residential properties too,” he continued.
