At face value, it’s still a testing market in terms of ‘Mums and Dads’ being able to translate improved sentiment about property investment into actual purchases. After all, with rental yields still fairly low and mortgage rates stubbornly high (given our lingering inflation problem), a typical rental purchase today still requires a pretty substantial weekly top-up of perhaps $300-$400, or more.
At the same time, restrictions on debt-to-income (DTI) ratios are set to be introduced soon, which will probably limit total debt to investors to a 7x income multiple, albeit with a 20% allowance to lend outside the DTI rules – new build properties are set to be exempted too. High mortgage rates might mean DTIs don’t actually bind straightaway, but over the longer term, the expansion of a property portfolio will be tend to slower than in the past, relying on a person’s income to grow sufficiently.
However, there is light at the end of the tunnel too. Certainly, based on attendance at a number of property market presentations I’ve delivered in recent weeks, the appetite to buy and invest in the market remains as strong as ever. In addition, it’s not as if property investors have abandoned the market altogether either. Indeed, the CoreLogic Buyer Classification data shows that mortgaged multiple property owners are still accounting for 20-21% of purchases nationally, down from previous peaks, but not a disaster either. In Auckland, that figure is 23%, Wellington 25%, and Christchurch 23%, although Dunedin is below the national average, at 18%.
That’s not all the changes in the investment landscape either. Some other important factors that I’d highlight are:
- The looming reduction in deposit requirements from 35% to 30%, with new-builds remaining exempt from the LVR rules anyway
- Mortgage interest deductibility is back...
