Key market drivers have turned, expert says
Property sales volumes have become sluggish in July, following solid increases in May and June – an unsurprising development given that some key market drivers have turned and due to challenges that remain.
This was according to the CoreLogic’s latest Housing Chart Pack, which includes all the latest stats, facts, and figures on the residential property market, such as the combined value of residential real estate, sales and listings, buyer classification, rents, credit conditions and more.
Kelvin Davidson (pictured above), CoreLogic said a really good case in point is mortgage rates.
“Yes, they might have broadly stopped rising,” Davidson said. “But with the official cash rate not set to be cut for some time yet, mortgage rates aren’t likely to fall much anytime soon either.”
Property values, meanwhile, were patchy, indicating that a floor is emerging in some areas though not widespread yet. Parts of Auckland and Wellington, for instance, have experienced value growth in July, but other areas of the country have seen further declines.
In the July quarter, first-home buyers, and cash multiple property owners (MPOs, including investors) continued to be a strong presence, but movers and mortgaged MPOs quieter by their own standards.
“In terms of the groups to watch in the coming months, however, mortgaged MPOs could be intriguing,” Davidson said. “Rental yields remain low and mortgage rates high, meaning that an average new property investment will tend to be cashflow-negative, even if interest deductibility is eventually reinstated by a potential National(-led) government.”
CoreLogic expected, however, that the ability to claim interest deductibility could still drive a mindset shift amongst investors, and bring forward some more purchases again as would any reduction in the Brightline Test – although this might also drive some sales, as more existing investors would then be off the hook for capital gains tax.
“All in all, the floor for the market now seems to have arrived, more or less with migration still high and the labour market strong,” David said. “But a plateau for mortgage rates and potential caps on debt-to-income ratios next year highlight the challenges.”
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