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Positive economy not LVRs drives interest in rentals

Positive economy not LVRs drives interest in rental investment

The Bank of New Zealand’s Nine Rewards Consumer Trends Survey indicates that interest in buying residential rental property has almost doubled since the LVRs were introduced. However it is important to note that 553 respondents is not a large sample for a general consumer survey, and the result may be due to a statistical variation rather than to a response to the LVR restrictions.

“Data from our own survey conducted in the last two weeks would point to this being the case,” said Andrew King, Executive Officer of the NZ Property Investors’ Federation (NZPIF).

71% of the NZPIF respondents said that the LVR restrictions have had no effect on their buying decisions. Although 8% said they would probably buy more property because of the LVR restrictions, 13.5% said that these restrictions would cause them to buy fewer rental properties.

“I think this demonstrates that the LVR restrictions will be positive for some investors”, said King. “However it will have a negative affect on a higher number of investors who probably don't have enough equity under the new rules to make further property purchases.”

Assuming that the increased interest in buying rental property is in fact an on going trend, it is more likely to be a response to positive economic reasons rather than the LVR restrictions. For example, there is a shortage in the supply of new properties, more people are migrating to New Zealand, fewer New Zealanders are leaving the country, confidence in the economy is growing, and there are low interest rates plus upward pressure on rental prices.

King says that the combination of these factors is probably the real reason for a higher interest in rental property, rather than LVR restrictions.

ENDS

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