Interest grows as yields rise
CoreLogic’s October Housing Chart Pack revealed a gradual resurgence of investor interest in the New Zealand property market.
In September, mortgaged multiple property owners (MPOs) accounted for 22.6% of property purchases, a jump from the 20.4% record low seen a year earlier and the highest share since mid-2022.
Kelvin Davidson (pictured above), CoreLogic NZ’s chief property economist, noted that while investor activity remains below historical averages, signs of recovery are emerging.
“That’s likely to reflect lower mortgage rates... and also the reinstatement of mortgage interest deductibility and reduced deposit requirements under the LVR rules,” Davidson said.
Rental yields slowly climb
With property values weakening and rents rising, gross rental yields have edged up to 3.9%, the highest level since early 2016.
Auckland and Wellington are hovering between 3-3.5%, while cities like Hamilton and Tauranga are closer to 4%. Christchurch and Dunedin lead with yields above 4%.
Davidson acknowledged that despite these gains, some investors are holding off, waiting for more favourable interest rates.
“On individual deals, clearly some savvy investors will already be able to secure yields that exceed the market averages,” he said.
Interest rate cuts could boost investment in 2025
Looking ahead, Davidson predicted that a typical mortgage rate of 5.5% could attract more investors back into the market.
However, tighter lending restrictions, including debt-to-income (DTI) limits, may balance the impact of falling interest rates.
“Exemptions from DTI rules for new builds could keep these properties attractive for investors, even as credit restrictions tighten,” Davidson said.
Housing market trends: Declining values and slowing growth
CoreLogic’s report highlighted several key market trends:
- Residential real estate is valued at $1.61 trillion.
- Property values fell 0.5% in September, marking the seventh consecutive month of decline, with Auckland and Wellington dropping over 3% since June.
- Median values dipped by 2.4% over the three months to September, contributing to an 18% national decline from market peaks.
- National rental growth slowed to 1.2% over the year to September, well below the long-term average of 3.2%.
Mortgage market: Fixed rates set to reprice
Approximately 66% of existing mortgages by value are locked into fixed rates but will be repriced over the next 12 months. This shift may influence investor behavior as new mortgage rates come into effect.
To stay informed on market shifts, download the CoreLogic Housing Chart Pack from CoreLogic’s website.
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