Report also highlights investors' mortgage plans
A few months on from the government introducing its new housing package, it seems many property investors have decided to keep their assets rather than sell them – with the latest data from Crockers Property Management (Crockers) and economist Tony Alexander showing a decrease in investors planning to sell their property.
Early this year, the New Zealand government introduced new rules, including tax policies, to cool down the housing market.
In August 2021, a joint survey by Crockers and Alexander found only 22% of investors saying they intend to sell in the coming year.
The reduction in selling intentions may not be particularly large, but Crockers and Alexander pointed out that, from the point of view of a government hoping to move many investors out of the housing market, the latest figure suggests policy changes are not having a significant impact.
Moreover, for the second month in a row, Crockers and Alexander found a rise in the number of investors saying they intend to hold on to their properties for at least 10 years, jumping to 70% in August 2021, from 68% in July, and 65% in June. Meanwhile, those planning to sell within a year remained at 5% this month, an increase from 4% last month and 6% in June.
By contrast, the survey showed a slight increase in the number of investors saying they intend to buy a property over the coming year, up 29% in August 2021, from 26% in July, and 28% in June.
Read more: CoreLogic delivers the latest on NZ property investment market
If their mortgage rate is coming up for renewal soon, 27% of property investors said they would refix for a one-year term, a drop from 37% two months ago. In addition, investor preference for the two-year term rose from 21% to 25%, while preference for three years increased from 18% to 28%. Meanwhile, only 8% of the respondents favoured the five-year term to fix.
Regarding paying a mortgage, 13% of investors admitted that they do not have a mortgage, 54% reported paying principal and interest, and 33% were on an interest-only payment schedule. For those on interest-only facilities, only 16% plan shifting to paying down principal, a drop from 19% two months ago.
“So, expectations of rising interest rates have not yet elicited a rise in the desire of those on interest-only mortgages to start reducing their principal,” the report said.
For 43% of investors, rising interest rates will not make them sell either because they are already selling, or they have no mortgage, or it is so small it does not matter. A 3% rise would make only 8% sell.
“Given expectations that the extent of interest-rate rises this cycle will be close to 2%, only 3% of investors are likely to find themselves having to sell in the coming two to three years. This is very small and illustrates that prospective buyers should not hold an expectation that rising interest rates will cause a flood of property to come onto the market,” the report added.
