Cotality data shows large-scale property investors pulling back sharply from home purchases
New Zealand's largest property investors are retreating from the housing market, with new Cotality data, as reported by Stuff, showing owners of 10 or more mortgaged properties accounted for just 2.3% of home sales in the April to June quarter. That's down from a peak of 4.1% in the final quarter of 2023, and the lowest share of purchases this group has recorded in seven years.
Cotality head of research Nick Goodall (pictured left) said rising holding costs were squeezing the economics of large portfolios.
"Certainly from a cash flow perspective, the more properties you own, the tougher it could well be because you're getting more costs coming in the door like insurance, rates and interest, and not being able to pass that through in rental growth," Goodall said.
Investors overall pulling back, not just the biggest players
Property investors as a whole bought just under 5,000 homes in the quarter, representing 22.5% of all purchases, down from around 7,000 homes in the same period of 2021.
Goodall said changing economics appeared to be reshaping how investors approach their portfolios.
"So, I think the squeeze is certainly on investors now, they are not out there growing their portfolio, and in some cases, might be even looking to reduce their portfolios," he said.
NZ Property Investors Federation advocacy manager Matt Ball cautioned against reading too much into the shift, noting smaller rental providers now make up a larger share of purchases relative to larger landlords. Ball said the data "challenges the idea that large-scale landlords are dominating the investor segment of the market."
The trend is echoed at the coalface by mortgage advisers. Recent survey by mortgages.co.nz and economist Tony Alexander, found overall financing demand remains subdued, tracking with REINZ data showing national sales fell 11% in June compared with May.
Election uncertainty adds to the caution
Independent economist Cameron Bagrie (pictured right) said long-term capital gains expectations have shifted.
"I think probably the bigger end of town has sort of worked out well the capital gains for the next 10 years and are not going to be like the capital gains of the past 30 years," Bagrie said.
Goodall also pointed to political uncertainty ahead of November's election, with Labour campaigning on a 28% capital gains tax and potential changes to mortgage interest deductibility for investors.
"They're also getting a bit nervous about what that could look like from a tax perspective," he said.
Stay informed with the latest housing market trends and mortgage insights — subscribe to our free daily newsletter.
