Mega landlord who predicted downturn will 'sell-up and leave NZ' if Labour wins

Sunday, 10 September 2023

Matthew Ryan predicted the property market downturn before it even began.

In 2021 he predicted it could fall up to 20%.

House prices are currently 17% below their peak, according to the Real Estate Institute (REINZ).

Ryan, who owns over 100 properties, now sees two very different future visions for house prices, depending on who wins the October election.

If the result is a National win, or a National-ACT coalition, he predicted the return of tax advantages to investors and greater confidence among landlords would contribute to a 5% to 10% price rise.

If the outcome were a Labour-Green, or even a Labour-Green-Te Pāti Māori coalition, Ryan predicted prices could fall another 10-15%.

If the latter happened: “I will sell everything up that I own in New Zealand, and I’ll go and live somewhere else. You can literally quote that, because that’s what I will do.”

He said a lot of investors were “hanging on by their fingertips”, not wanting to sell during a down market, and hoping for the more investor-friendly environment a National-led government would bring.

He said the removal of a key tax advantage that allowed investors to deduct mortgage interest payments from their rental income was crucial to many indebted landlords to make their investments work.

“As long as National make good on their undertaking and promise, which they probably will do with ACT, and reverse that policy, I think we will see people start to reemerge back into the investment market.”

House prices remain $179,000 above where they were pre-Covid despite recent declines, according to CoreLogic data.

Asked what he would say to a first home buyer who pointed out homes remained substantially less affordable than three years ago, and why investors and the economy could not afford further falls, he said investing in property was such a pillar of the country’s economy and safe method of creating wealth, shattering that idea could have serious consequences.

“For generations now New Zealanders have been able to rely on property as being a good consistent asset class that is not perfect, because it does go down as people have seen in the last 18 months, but generally it's proven to be a very reliable, sustainable investment for generations to come.

“I think if we saw a situation where the market retrenched another 10% or 15% because of the Government, you start to get into a situation like Argentina has got, where a lot of wealth is being wiped off, and suddenly you have hyperinflation and people lose confidence, and once they lose confidence that’s really difficult to get back.”

The ‘wealth effect’ created by rising house prices, which led to homeowners and investors spending money because they felt rich as their asset increasing in price, was also very real, Ryan said.

If a reverse ‘poverty effect’ from falling house prices persisted for too long, the knock-on effect of less spending would hurt the likes of retailers, hospitality businesses, and ultimately the economy, he said.

“I think there’s going to be the Marc Ellises of this world that are leaving to go and live in Europe and a bunch of other Kiwis. A lot of New Zealanders seem to be looking to go to Australia at the moment.

“There will be people like me who go, ‘I am just not prepared to continue to live in a society where it’s going to be so unjust and unfair’, and we’ve got the Greens looking to throw their weight around and try and tax the wealthy.”

Ryan had not decided where he would go, but Australia was a likely option.

REINZ recorded the peak median house price came in November 2021, when it sat at $925,000. In July, the median house price was $770,000 – a drop of $155,000 or almost 17%.

If the peak price were adjusted for inflation, the drop was more like 24.1%, an REINZ spokesperson said.

Ryan said the bottom had so fallen out of the investor market, valuers were often unable to accurately value common investment property types, because so few had been bought and sold in the last year.

”The investment market has been absolutely decimated,” he said.

Ryan believed, as many commentators and economists do, that the market had reached its bottom.

That could change if China’s deflation and housing market issues had impacts here, or there were some other global shock, but Ryan did not expect that to happen.

He expected the recovery to be slow and contained.

In his hometown of Wellington, there was evidence of green shoots, with auctions often having three or four competing buyers, rather than one or two.

Labour allowed investors to continue deducting mortgage interest payments on investment properties, provided that property were a new-build. This was intended to encourage investors to direct their money towards growing the housing stock, rather than buying existing properties.

CoreLogic data suggested the move worked to a certain degree, with the percentage of new-builds going to multi-property owners rising from a base of 26% to as high as 33% post-change.

Despite the incentive, Ryan continued to buy existing properties.

“We have always like buying properties we can add value to. You can’t add much value to a property that’s brand new,” he said.

He said new-builds were generally built as family homes, which made it difficult for investors to make the numbers work, when weighing price against potential rental earnings.

Ryan may not have to leave the country, however, because he believed the chance of a Labour-led government were “infinitesimally small”.

“If they can pull an iron out of the fire in this situation, that will be a bigger comeback than America beating Team New Zealand when we were 8-1 against them in the Americas Cup.”