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RNZ News
4 days ago
- Business
- RNZ News
The return of the property investor - but why?
The rebound is being driven by investors who own up to four properties, says Cotality. Photo: RNZ Investors seem to be returning to the property market - but why? Cotality has released its latest property data, which shows that while first-home buyers remain a strong presence in the market, investor activity is picking up. Mortgaged multiple property owners were responsible for 23 percent of purchases in the second quarter, up from 21 percent in the middle of last year. In Auckland and Christchurch, they were 26 percent of transactions. Cotality chief economist Kelvin Davidson said the rebound was being driven by investors who owned up to four properties including their own home. Their share rose from 12 percent to 14 percent. They seemed to be targeting the more affordable end of the market, he said. Their share of purchases in the bottom 30 percent of properties by price rose from 21 percent last year to 24 percent so far this year. They were also more likely to buy existing properties, compared to last year, which Davidson said was probably driven by the absence of the tax advantage that used to come with buying a new build. But forecasts for capital gains are soft. Infometrics expects house prices to be 20 percent lower than 2021's peak in real terms even next decade . Rents have also been forecast to be subdued well into next year . Migration is weak and there has been a lift in housing supply, which keeps the pressure off prices. "If you're thinking about the future, well, the tax system might not be quite so favourable for property, the Government's pushing pretty hard on land supply," Davidson said. "We've got debt-to-income ratio restrictions now and that long-term downward trend in interest rates can't be repeated so I think there are reasons to be fairly cautious about future capital growth rates. "I speak at a few investor events and investors are certainly concerned about costs such as council rates going up." So what is pulling investors in? Davidson said property was still a "trusted" asset class. "Even if you think capital gains will be lower in the future there will probably still be some capital gains and people have still got their trust factor - they can still see the property, they kind of vaguely know how it works. "That's still a factor as to why people are buying rental properties." He said the changes to the loan-to-value restrictions and brightline test had helped, and the reintroduction of investors' ability to offset their interest costs against their income for tax purposes. "For me the biggest thing is lower interest rates. If you go back to the middle of last year when interest rates were still pretty high, a top up on a standard rental property could have been $400 or $500 a week - that's pretty chunky for your average mum and dad. Come forward to now and it might be $200 a week. It's still there but it's a lot lower than it was. That's a really big factor." He said it would not be a bad thing for investors to focus on the cost and income of a rental property rather than buying purely for the hope of capital gains. Sarina Gibbon, general manager of the Auckland Property Investors Association, said it did seem counterintuitive for investors to be more active. "I reckon it is to do with long-term confidence in the resilience of property as an investment vehicle. The 'headwinds' are very much perceived as short-term turbulence. "Overall, there is still a deeply seated belief among Kiwis that property will hold its value better than most other assets over time. Additionally, the sort of control and leveraging power you get with property, you're just not going to get that with anything else. "There are also some really interesting paradoxical forces at play. It seems like the weaker the economy gets, the more people are convinced about second or alternative income streams. And property still delivers that overall stability and confidence for Kiwis as a way to support and provide for their families. "So what we are seeing isn't a bet on capital gains, it is a hedge against the fading dream of upward mobility. Amongst investors, property is becoming less about wealth creation and more about income replacement. In terms of narrative, we've definitely moved away from the Covid era of FOMO, 2025 property investment is very much Plan B." Infometrics chief forecaster Gareth Kiernan said the growth was coming off a low base. "If you look at the number of investor mortgages over the last year… the total of 32,284 is still lower than at any time between 2015 and February 2022. "I don't see a lot of substance to the pick-up, or the growth being sustained, particularly when you look at how negative the trends are in rents at the moment, the fact that net migration and population growth are still easing, and consent numbers of about 34,000pa are substantially above underlying demand for new housing. "Part of the growth over the last year or so is likely to have been driven by more favourable tax treatment for mortgage interest making the numbers financially a bit more attractive …the reduction in the brightline test to two years meaning people are perhaps more willing to take a shorter-term punt on capital gains. The decline in interest rates will also have led to people looking for better returns thank banks are offering, which might have helped buoy investor demand for property a bit." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
RNZ News
08-07-2025
- Business
- RNZ News
House building costs rise at strongest rate in nearly two years, Cotality index shows
EMBARGOED UNTIL 0001 WEDS JULY 09 House building costs have risen at their strongest rate in nearly two years, according to Cotality's Cordell Construction Cost Index. Photo: RNZ House building costs have risen at their strongest rate in nearly two years, suggesting the slowdown in cost growth has reached the bottom. Cotality's Cordell Construction Cost Index showed a growth rate of 0.6 percent for the three months ended June, for an annual rate of 2.7 percent, the strongest since the third quarter of 2023. Chief property economist Kelvin Davidson said the increase was partly a reflection of the removal of a 1.1 percent fall a year ago and might not signal a return of price pressures. "Although the annual growth rate has nudged higher, it's important to recognise this is more about base effects than any significant reacceleration." Cotality chief property economist Kelvin Davidson. Photo: SUPPLIED At the peak of the pandemic building costs surged 10.4 percent, and the long term average was 4.2 percent, but Davidson said the sector had seen increased spare capacity as the number of houses being built has fallen sharply . "That decline has taken the heat off both wages - which account for around 40 percent of the index - and material costs, which represent roughly 50 percent." The index is based on the cost of building a standard single storey three bedroom house, with two bathrooms in brick and tile. The report showed varying price moves among key materials with weatherboard 6 percent higher but decking timber and ceiling batts 1 percent cheaper. "Cost movements are now being driven by specific supply and demand dynamics rather than broad-based inflation," Davidson said. However, he said building costs remained high even if the growth was contained. "Households can be more confident costs won't run away during a project, but the total cost to build remains a hurdle. With ample existing stock on the market, builders may still face challenges attracting new projects in the short term." Davidson expected a gradual pick up in the construction sector with population growth, easing interest rates and the loan-to-value and debt-to-income lending restrictions favouring new builds. "Cost growth may well have bottomed out, with some renewed upward pressure possible in 2026. But a return to the double-digit growth rates of 2022 seems unlikely." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
Business Times
03-07-2025
- Business
- Business Times
New Zealand house-price recovery remains modest, says consultancy
[WELLINGTON] New Zealand house prices rose for the first time in three months, adding to signs of a modest recovery as interest rates fall. Prices gained 0.2 per cent in June from May, when they dropped 0.1 per cent, property consultancy Cotality said on Thursday (Jul 3). That lifted values back to February levels, while the 0.7 per cent annual decline was the smallest since September. New Zealand's property market lacks any strong momentum even after an aggressive series of rate cuts by the central bank, mainly because of a large overhang of houses for sale that favours buyers and keeps a lid on values. A sluggish economy and rising unemployment are also curbing enthusiasm to borrow. 'The subdued labour market remains an important factor,' said Kelvin Davidson, chief property economist at Cotality in Wellington. 'It's not only the direct job losses that are problematic, but a reduction in security for those who have kept their jobs will also be weighing on the property market.' Filled jobs are down to levels last seen in early 2023 as global uncertainty makes employers cautious about hiring. Economists expect the jobless rate to creep higher this year from 5.1 per cent in the first quarter. The interest rate on a two-year fixed-rate home loan is below 5 per cent at most local banks, the lowest since March 2022, although it is uncertain how much further borrowing costs will decline. A NEWSLETTER FOR YOU Tuesday, 12 pm Property Insights Get an exclusive analysis of real estate and property news in Singapore and beyond. Sign Up Sign Up The Reserve Bank of New Zealand (RBNZ) has cut the Official Cash Rate (OCR) by 225 basis points to 3.25 per cent but in May removed an explicit easing bias, and economists at the four largest local banks expect policymakers will pause at next week's meeting. There is less than a 50 per cent chance of the OCR falling below 3 per cent this year, swaps data show. House prices have risen less than 1 per cent in the six months to June, and Davidson expects no more than a 3 per cent increase for the year to December, less than the 5 per cent he had previously projected. The RBNZ has projected 3.5 per cent. 'For every upwards influence on the housing market at present, you can probably find a downwards factor,' he said. 'In this environment where buyers have the upper hand and economic sentiment remains subdued, it's hard to see these flat market conditions suddenly turning around within a month or two.' BLOOMBERG
1News
03-07-2025
- Business
- 1News
Average NZ property value sees 'modest' uptick in June
Property values in New Zealand have increased by 0.2% in June, according to Cotality NZ's hedonic Value Index – despite low interest rates expecting to boost sales. The average property price is now $815,389, according to the index. This has reversed two minor falls of 0.1% in April and May. Since the January 2022 peak, property values remain down 16.1%. However, Cotality said they have managed to "edge up" by a total of 1.1% since September last year, and by 0.6% in 2025 so far. "Values around the main centres were either flat in June or up slightly," according to the report. In Auckland and Wellington, prices were stable. But property prices rose 0.2% in Dunedin, 0.3% in Hamilton, and 0.6% in both Tauranga and Christchurch. ADVERTISEMENT Cotality NZ chief property economist Kelvin Davidson said the result emphasised the variability of the market. "On one hand, mortgage rates have come down a long way, and that benefits borrowers whether they're in Whangārei or Winton. But the normal upwards influence this would tend to have on sales volumes and property values is being dampened by other forces." Davidson said in particular, the "abundance of listings on the market" means most buyers "aren't in a rush" and can be "quite tough when it comes to price negotiations". "The subdued labour market remains an important factor too. After all, it's not only the direct job losses that are problematic, but a reduction in security for those who have kept their jobs will also be weighing on the property market. "Of course, problems for some are opportunities for others, and a soft market is providing plenty of scope for first home buyers." Davidson added mortgaged multiple property owners also remains on the comeback trail, particularly at the smaller end – those buying their first rental investment, or perhaps their second." Outside of the main centres, property values were "a mixed bag" in June. ADVERTISEMENT Rotorua (-0.7%), Gisborne (-0.2%), Whanganui (-0.1%) and Hastings (-0.1%) were all down in June. However, Whangārei (0.4%), Palmerston North (0.5%), Invercargill (0.4%), and Queenstown (0.6%) all saw modest rises. On the regional results, Davidson said it is "always hard to cast a wide net" over every region to determine the factors impacting the individual housing markets of every region. "At present, for example, lower mortgage rates are obviously a common factor, while some will be faring better than others off the back of a strong dairy sector. "Ultimately, the wider economic uncertainty we're currently seeing and a subdued labour market still seem to be causing property market variability from month to month in a number of regions."
Business Times
02-07-2025
- Business
- Business Times
New Zealand house-price recovery remains modest, Cotality says
[WELLINGTON] New Zealand house prices rose for the first time in three months, adding to signs of a modest recovery as interest rates fall. Prices gained 0.2 per cent in June from May, when they dropped 0.1 per cent, property consultancy Cotality said on Thursday (Jul 3) in Wellington. That lifted values back to February levels, while the 0.7 per cent annual decline was the smallest since September. New Zealand's property market lacks any strong momentum even after an aggressive series of rate cuts by the central bank, mainly because of a large overhang of houses for sale that favours buyers and keeps a lid on values. A sluggish economy and rising unemployment are also curbing enthusiasm to borrow. 'The subdued labour market remains an important factor,' said Kelvin Davidson, chief property economist at Cotality in Wellington. 'It's not only the direct job losses that are problematic, but a reduction in security for those who have kept their jobs will also be weighing on the property market.' Filled jobs are down to levels last seen in early 2023 as global uncertainty makes employers cautious about hiring. Economists expect the jobless rate to creep higher this year from 5.1 per cent in the first quarter. The interest rate on a two-year fixed-rate home loan is below 5 per cent at most local banks, the lowest since March 2022, although it is uncertain how much further borrowing costs will decline. The Reserve Bank of New Zealand (RBNZ) has cut the Official Cash Rate (OCR) by 225 basis points to 3.25 per cent but in May removed an explicit easing bias, and economists at the four largest local banks expect policymakers will pause at next week's meeting. There is less than a 50 per cent chance of the OCR falling below 3 per cent this year, swaps data show. House prices have risen less than 1 per cent in the six months to June, and Davidson expects no more than a 3 per cent increase for the year to December, less than the 5 per cent he had previously projected. The RBNZ has projected 3.5 per cent. 'For every upwards influence on the housing market at present, you can probably find a downwards factor,' he said. 'In this environment where buyers have the upper hand and economic sentiment remains subdued, it's hard to see these flat market conditions suddenly turning around within a month or two.' BLOOMBERG
