Changes to the LVR and government’s targeting of property investors in the last four months have yet to be felt in the market, new figures suggest.
James Wilson, head of valuation for OneRoof’s data partner Valocity, says that mortgage figures for the past three months show investors are as active as they ever were.
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“Investors with three or more properties accounted for 17.33% of new mortgages this quarter, almost no change from their first quarter share of 17.63%.
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“However, what we are seeing is a bit of a surge in people buying their second property – the mum-and-dad investors now making a purchase to capitalise on what the market has done for the value of their family home.”
Wilson says this quarter has also seen a marked increase in existing homeowners re-financing, locking in longer terms at lower interest rates before the increases flagged by the Reserve Bank kick in.
“That means that there’s been a small decline in first-home buyers, down to 27% from 29% last quarter.”
24 bidders competed for this unit in Seccombes Road, in Epsom, Auckland, which sold to an investor for $1.4m. Photo / Supplied
On the ground in Auckland, agents are reporting vigorous competition for good investment properties.
A two-bedroom unit in original condition on Owens Road, in Mount Eden, marketed by Barfoot & Thompson agent Sara Knight had 45 groups through the open homes, a pre-auction offer after only six days and six bidders. It sold under the hammer for $1.638m.
“That’s a massive price, huge. The pre-auction offer was $1.35m. It’s in double grammar zone, [and] the buyer is an investor who can probably get $700 a week rent for it.”
Another double grammar zone two-bedroom she marketed in Seccombes Road, in Epsom, had even more interest. The nicely renovated property had 105 groups through and 24 bidders.
A two-bedroom unit on Onslow Road, in Mount Eden, Aucckland, sold for $1.325m. Photo / Supplied
“It was on the market at $1.05m and sold for $1.4m. It’s close to Newmarket, some people were looking at putting two kids in one bedroom to be in grammar zone. It’ll rent for $700 a week. It was bought by an investor who settled just before the March 27 announcement.”
Other Mount Eden investment units she marketed in Onslow and Brightside Roads had 60 groups and 11 bidders for one, 30 groups and two bidders for the other, and sold for $1.35m and $1.33m respectively to investors.
“These are people who are cashed-up, using the massive equity on their own homes, as banks are really, really tough at the moment and not lending.”
And after a post-Covid slump in foreign student numbers in Auckland city, apartment sales at auction have begun to pick up.
Investors paid $245,000 for an apartment in Victoria Street, in central Auckland. Photo / Supplied
“It’s been building for the last couple of weeks, this week we had nine, a big week,” says Daniel Horrobin, director of Ray White City Realty Group.
He says there has been really good competition for city investment stock as investors snapped up a two-bedroom apartment on Victoria Street for $245,000, a one-bedroom on Scotia Place sold for $396,000 and another one-bedroom apartment on Airedale Street sold for $480,000. Even a studio apartment with remedials in Waterloo Quadrant fetched $176,000.
“For investors generally the smaller and cheaper, the traditional ‘shoebox’, the higher the yield. They’ll get over $350 rent for a one-bed, looking for 5 to 8% net return," he says.
“There’s still a lot of negotiation on the auction floor, but you’re starting to see confidence come back in the investor market. The vacancy rate has settled down, there are local students coming back. There's great energy in the room, it’s really encouraging.”
An apartment in Scotia Place sold to an investor for $396,000. Photo / Supplied
Horrobin says that there was a quiet period for about six weeks after the government announcement, but investors are back in now, taking the new tax rules into consideration.
“It’s balanced out now by more competition. At those yields, investing still makes more sense than money in the bank earning 1½%."
First-home buyers also won in the more expensive apartment price points at the Ray White auction this week.
A two-bedroom apartment in Rendall Place and a three-bedroom apartment in Vogel Lane sold for $810,000 each while a one-bedroom apartment with a car park on New North Road sold for $445,000 and two-bedroom apartment with car park on Queen Street fetched $417,000.
Sharon Cullwick, executive officer of the Property Investors Federation, is not sure yet that members around the country have done the math on their new tax position.
“When I ask people at meetings, not many people know how to work out how it will affect them. And others have money come out of term deposits and think ‘where else do I put my money’ so they’re still in.”
While she always advises members to think of capital gains as a bonus for their investment not a certainty, she says a 4% yield on a property is better than less than 1% for a bank deposit.
“I don’t think people have realised how it affects them, there’s a lot of wait-and-see until October when more details come out. But I don’t think it will affect investors,” she says.
