Investors and first-home buyers 'more cautious after housing policy changes'

Wednesday, 31 March 2021

Property investors have been vocal in their opposition to new housing policy announced by the government, and say rent hikes are an inevitable consequence. (First published March 31, 2021)

Investors and first-home buyers are backing away from the market due to greater uncertainty about the fall out from last week's housing policy changes, a survey of mortgage advisers suggests.

Last week the Government announced what it dubbed the “most significant investment in housing since the 1970s” with measures including a $3.8 billion to boost the number of houses being built, an extension of the bright-line test and increases of the caps on First Home Grants to make buying a first home easier.

But results from a survey of 71 mortgage advisers by economist Tony Alexander found only 3 per cent of advisers had seen more first-home buyers enquiring since the housing announcements.

There had been a downward trend since January when a third of the respondents said they were seeing more first-home buyers looking for advice, and in February, 19 per cent.

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The house price cap has increased from $550,000 to $650,000 in Wellington.

Mortgage advisor Glen McLeod felt the policy changes were rushed and not properly thought through.

He said the slight increases of the first-home buyer purchase cap had made next to no difference.

“The reality is those changes are out of step with what’s real in the market. A client in Huntly can now go up to $420,000 but the houses are more like $475,000 which means the houses don’t come under Kainga Ora. It’s not easy to get above 80 per cent lending for any of the banks,” McLeod said.

On April 1, the price caps for new homes will rise to $700,000 in Auckland; $650,000 in Wellington; $600,000 in Nelson, Tauranga, Western Bay of Plenty, Hamilton, Waipa, Hastings and Napier; and $550,000 in Dunedin and Waikato.

NZ Property Investors Federation president Andrew King says making business harder for investors will have a negative flow-on effect on tenants.

The price caps will remain unchanged at $650,000 in Queenstown, $550,000 in Christchurch and at $500,000 throughout most of the rest of New Zealand.

McLeod called the policy changes a “jealousy tax”.

“It’s different if you’re targeting investors with hundreds of properties. Most people have one investment property.”

Almost half of the mortgage advisers in the survey said they had fewer inquiries from property investors.

This was the second month in a row of declining interest from investors likely due to the Reserve Bank’s February LVR announcement regarding 40 per cent minimum deposits for investors.

NZ Property Investors Federation president Andrew King said investors were angry they were being labelled “tax-dodging speculators”.

King said the move to make it harder for investors would have a negative flow-on effect on tenants.

“People can either sell or put up rental prices. Neither option is good for tenants. If rents increase it will make it harder for tenants to save up for their first home,” King said.

“Totally understandable for tenants to seek a rental cap, and if that were to come in it would show how bad this policy was. You shouldn’t be creating policy to correct mistakes in previous polices.”