Property investment is on the rise across New Zealand, with investors taking out almost $2 billion in mortgages during August alone. With the total amount of mortgage lending now sitting at just under $6 billion, investors now represent 33 percent of all new lending. These figures, released by the Reserve Bank, have come out just as new lending restrictions come into effect, with the Reserve Bank looking to target investors by tightening borrowing and taxing capital gains.
Investors accounted for $1.989 billion of mortgage lending in August, up dramatically from just $1.167 billion the previous year. With first home buyers accounting for just $624 million and other owner-occupiers accounting for $3.251 million, investors now have a very large share of the market at roughly one-third. The Auckland market is even more unbalanced according to separate figures from Quotable Value, with more than 40 percent of properties being sold to investors.
According to Labour housing spokesman Phil Twyford, these figures highlight "a speculator's paradise" and represent a significant problem with the New Zealand property market. Finance Minister Bill English strongly disagrees, however, saying it was important to look at increases in the number of first home buyers during the last year. The number of first home buyers increased to nearly 2000 in the month of August, an increase of more than 50 percent when compared to August last year.
New lending restrictions will attempt to cool the market by targeting investors, with the Reserve Bank now requiring a 30 percent deposit for Auckland landlords and a capital gains tax also applied when properties are bought and sold within two years. The existing "speed limit" for high loan-to-value ratio (LVR) borrowing outside Auckland will also increase from 10 percent to 15 percent to reflect more subdued provincial market conditions, with all buyers also needing a New Zealand bank account and IRD number in order to help track overseas purchasers.
While new lending restrictions will attempt to lower demand, supply levels also need to be addressed in order to make a real impact on property prices. According to new data from Realestate.co.nz, there were only 30,988 properties for sale across New Zealand in September, the lowest number since 2006. "Historically, the number of homes for sale tends to be fairly stable, following gradual, long-term trends." said Brendon Skipper, CEO of Realestate.co.nz, adding "In September, inventory nationally dropped to its lowest level since we've started keeping records."
According to Skipper, there was only 16.3 weeks of inventory in September, compared to the long-term average of 35 weeks: "Given that the number of homes for sale when we started keeping records in January 2007 was nearly 43,000, we can safely assume that this is the fewest homes on the market in New Zealand for a much longer time, possibly a decade... In our main centres, the situation is even more extreme. In Auckland, the inventory is only 9.6 weeks and in Wellington 11.1 weeks... The simple truth is that these properties are now spending less time in the market, suggesting that market pressures will remain high while the current rate of turnover continues."
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