A few days after the Government announced its housing tax policies on March 23, I ran a survey of investors seeking some insights into what they were planning to do. Of the some 4,000 respondents, 74% said they planned to raise their rents more than they had previously planned, and 25% said they intended to sell.
READ MORE: Find out if your suburb is rising or falling
I noted that, based on past expressions of concern when changes were made to the disadvantage of landlords, we should take these results with a grain of salt and put them down substantially to a spitting of the dummy response.
This week I released the results of my first regular monthly survey of investors undertaken with Crockers Property Management. It will take time to build up some baseline numbers telling us what the normal level of intentions are for most things. Nonetheless, there was one particular result relevant to the initial response post-March 23.
Start your property search
I asked investors if they planned selling a property within the next 12 months. A gross 26% said yes. This is consistent with the late-March response. But immediately after that question I asked investors how long they planned keeping their property(s) for. This time I gave a range of time periods including each of 1-5 years, 6-10 years, over 10 years, and having no intention of selling.
Only 6% of respondents opted for one year and 65% said over ten years or indefinitely. I’m prepared to read the 20% difference between the 6% outcome and the 26% in the previous question as representing the dummy spitting quotient – the DSQ if you like.
I also asked how many investors were thinking about buying a property in the next 12 months. A gross 28% said they were. Considering the fact that this response is probably biased downward because of discontent with the government’s policies, it tells us that there remains considerable demand for property from investors. That should dissuade hopeful buyers from thinking that the March 23 announcement is going to produce a decline in prices which will allow them entry into the property market with reduced indebtedness.
Tony Alexander: “If I were a young buyer, I’d be attending auctions for existing townhouses.” Photo / Supplied
I also asked the respondents planning to buy whether they were considering a new build. Forty-five percent said yes. Only time will tell us whether that is high or not – but it does feel quite an elevated percentage considering the size of the existing housing stock at 1.8 million as compared with new house supply which amounts to 30-40,000 units a year.
With regard to the type of new property favoured, 48% of potential buyers said a standalone house, 40% a townhouse, and only 13% an apartment. With regard to size, only 6% wanted a single bedroom or studio unit, 69% a 2–3-bedroom property, and 25% four bedrooms or more.
This information suggests to developers that if they want to capture a good proportion of the investors seeking to buy a new build, perhaps for the tax advantages, they should concentrate on 2–3-bedroom standalone houses and townhouses. Given that most construction underway does seem to fall into that category, developers can probably feel reasonably assured of good demand.
For investors looking to buy an existing house the bedroom number preferences are the same as for new builds. But a large 69% will seek a standalone house and just 19% a townhouse.
So, if I were a young buyer looking to maximise my chances of making a successful purchase, I’d be attending auctions for existing townhouses as these are not hugely favoured by investors.
- Tony Alexander is an economics commentator and former chief economist for BNZ. Additional commentary from him can be found at www.tonyalexander.nz
