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Buyers and investors leave market

Buyers and investors leave market

REINZ's latest housing statistics for February showed that sales for properties under $400,000 fell 17.7% compared with February 2013. Some commentators believed that LVR restrictions would force out first home buyers and allow investors to swoop in and buy up bargains. However the REINZ information shows that property investors as well as first home buyers have left the market.

This evidence is supported by data from a recent NZ Property Investors’ Federation (NZPIF) survey of members of the 20 Associations affiliated to the Federation. The NZPIF survey asked these members “has the introduction of LVR restrictions changed your thoughts on buying rental property?” 71% said these restrictions had not had any effect. Only 7.87% said they would probably buy more property because of the LVR restrictions, but 13.48% said that these restrictions would cause them to buy fewer rental properties.

Executive Officer of the NZPIF, Andrew King, said “This contradicts the perception that property investors are benefiting from the effects on the market of the Reserve Bank’s LVR policy. The number of Association members have been restricted in making property purchases by the LVR restrictions is higher than the number who stand to benefit from them. ”

An additional factor influencing first home buyers is the cost of renting.

Results of a NZPIF study in December 2013 comparing the cost of buying or renting a home found that it was $138pw cheaper to rent than to own the average New Zealand home.

"Many potential first home buyers will look at the numbers and make the decision to continue renting" says King. "The expected rise in mortgage interest rates will make renting even more advantageous. “

From 1 September 2013 to 28 February the medium rental for a three bedroom house throughout the country was $350 a week. Principal economist of the NZIER, Shamubeel Eaqub, confirmed in November that although there had been strong growth in house prices, not much growth had occurred in the level of rents. This means that, in general, landlords are not taking advantage of the current pressure on rental property.

ENDS

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