YIJU’s article of 2 February(click to read) reported that new listings on property website realestate.co.nz have continued to increase: in January, realestate.co.nz received 7912 new listings, just 136 fewer than the 8048 received in January 2021. This puts new listings for January at their second-highest level since 2016. So who exactly are the sellers in the market? Are they overseas or local owners? Property speculators holding homes for the short term, or landlords with multiple rental properties held for the long term? This article explores the answers.
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The latest Mapping the Market report from New Zealand property data company CoreLogic shows that more residential landlords are selling their properties across the country’s 966 suburbs. However, a new survey suggests landlords are unlikely to leave the rental market. In New Zealand Property Investor magazine’s annual survey, nearly 19.9% of the 913 respondents had sold a property in the past year, up from 17.71% the previous year. Readers will remember that after the Government introduced a series of measures unfavourable to investors last year, including tenancy law reforms and tax changes, many industry figures predicted landlords would sell up and leave the property market en masse. So far, however, that has not happened. Of those surveyed, 47.9% said they had never sold a rental property, while 24.1% last sold a property two years ago. Their main reasons for selling were to invest in another market (24.8%), government policy or legislative changes (15.8%), and realising capital gains (15.2%). Only 5.9% said they sold to exit the market.
Meanwhile, the latest Reserve Bank mortgage lending data and CoreLogic buyer classification information show that investors’ appetite for property purchases has declined. The survey found that only a minority were still buying: around 18.5% of respondents said they had bought a property in the past year, down 7.45% from 25.95% the previous year. Most (47.8%) were unsure when they would buy another property, although 22% planned to buy within the next year. Government policy changes were considered the biggest barrier to buying more property by 30.9% of respondents, followed by changes to bank lending policies (20.1%) and tighter criteria for borrowers to obtain loans (17.5%).
Property Investors’ Federation executive officer Sharon Cullwick said the results showed a lack of confidence in the Government’s rental market policies. Rental properties were already in short supply, she said, and fewer properties entering the market would make finding a home harder for tenants by increasing competition and pushing up rents. More than a third (36%) of landlords surveyed said they had raised rents in the past six months, while another 29.2% had raised them in the past year. Nearly 80% (79.5%) expected rents to rise next year, while only 19.7% expected them to stay the same.
Ed McKnight, an economist at the magazine’s publisher, Opes Partners, said the survey showed people remained confident in property as an investment despite uncertainty over government policy. He said the market was changing, as reflected in new-build properties. This was because new builds were exempt from the new tax policy removing interest deductions against rental income and from loan-to-value ratio requirements. These measures were intended to encourage sustainable growth in housing supply. Already, 11.7% had invested in new builds, and another 18.4% planned to buy more. McKnight believed there was a divide between younger investors, who simply changed their investment strategies or continued investing, and older investors, who felt troubled by the policy changes. Opportunities remained for investors: “These include subdividing and adding new buildings on larger sites, which also helps increase housing supply.” Nearly 50% (47.1%) of respondents said the Government’s tax changes made them more likely to consider investing in new builds.
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Having explored the thinking of property owners within New Zealand, let’s turn to the data to see how overseas owners of New Zealand property are behaving. According to the latest figures from Stats NZ, overseas owners bought 174 New Zealand homes in the final quarter of last year but sold 339. Their purchases accounted for just 0.4% of all residential property transfers that quarter, while their sales accounted for 0.8%. In other words, overseas owners of New Zealand property are selling New Zealand homes at roughly twice the rate at which they are buying them.
Overseas owners are people who hold neither New Zealand citizenship nor a resident visa. Since the Overseas Investment Amendment Act took effect in October 2018, their ability to buy homes in New Zealand has been tightly restricted. This has also substantially reduced purchases by foreigners, from 1038 in the final quarter of 2017 to 174 in the final quarter of 2021, a decline of 83%. Notably, sales of New Zealand residential properties by overseas owners fell less over the same period, from 468 in the final quarter of 2017 to 339 in the final quarter of 2021, a decline of 27.6%.
Across the whole of 2021, overseas owners bought 630 New Zealand homes and sold 1482. By comparison, in 2017, overseas buyers purchased 3369 homes and sold 1770. Unfortunately, these Stats NZ figures do not provide a complete picture of overseas property purchases. They exclude purchases made through companies, even where the ultimate owners are neither New Zealand citizens nor residents, as well as purchases made through trusts.