Housing investors took their biggest slice of the monthly mortgage advances for three years in April, according to the Reserve Bank (RBNZ).
The RBNZ's latest monthly mortgage lending by borrower type figures showed that the investors took 19.9% of the $5.927 billion borrowed in April 2024. That's up from a share of just 17.9% the previous month and is the highest share seen for the investor grouping since March 2021, when the investors had a 21.8% share of the mortgage monies.
This increased share for the investors comes during a time when the National-led coalition is rolling back a number of changes made by the previous government that were seen as disadvantageous for housing investment. Already we've seen the start (from April 1) of interest deductibility, while the so-called bright-line test period goes back to its original two years as of July 1 and there's also changes to rental rules in the pipeline, including the reintroduction of 'no cause' terminations of periodic tenancies.
Investors also stand to be assisted by the forthcoming (July 1) relaxation of Reserve Bank's loan to value ratio (LVR) rules - although there is of course the offsetting introduction of debt to income ratio restrictions.
The latest monthly mortgage figures by no means indicate a flood of investors back into what is still a very subdued housing market, but they do indicate a definite stirring of interest from a grouping (the investors) that has been very much sitting on the sidelines in recent times.
If we go back to December 2023 the investors had just a 16.9% share of the mortgage monies advanced in that month. The low point reached for investors in terms of share was 15.4% in January of last year, but the investor grouping has been bouncing around in a narrow, 15-18% range since early 2021. Three years on the sidelines.
Percentages of course, are not necessarily that meaningful on their own, so, let's bring some hard cash into the calculations.
The $1.182 billion borrowed by investors in April was the largest monthly total for this grouping since March 2022. In terms of numbers of mortgages taken out the 2,169 investor mortgages in April was beaten by the total in the post-election month of November 2023, but otherwise was the highest total since May 2022.
Compared with April 2023, the amount borrowed by the investors was up by $464 million, or 64.6%.
As of the end of April 2024 we were a third of the way through the year. It's worth looking at overall totals thus far for some comparisons.
The total amount borrowed by all groupings in the first four months of the year was $20.29 billion, which is some 19.5% up on the amount borrowed in same four months of 2023, but down on the $23.366 billion borrowed in the first four months of 2022 and the spectacular $32.934 billion borrowed in the first four months of 2021.
So, back to the investors. For the first four months of the year they borrowed $3.72 billion, which is up 31% on the amount borrowed by this grouping in the first four months of 2023.
Going back to share of the overall mortgage monies, earlier this year I had a bit of dive into the figures going back to the start of this data series in 2014. These figures showed that having enjoyed an average 32% share of the mortgage money through 2015, the investors had seen this share plummet to 17% for both 2022 and 2023.
However, for the first four months of this year the percentage has risen to 18.3%.
So, what then of the first home buyers (FHBs), while all this is going on? That aforementioned dive into the past figures that I did earlier this year showed that the FHBs had seen their average share of the monthly mortgage spoils rise from just 10.5% in 2015 to 23.6% in 2023.
The FHB's share hit its monthly high water mark in December last year, with 25.2%. I suspected at the time that might prove to be the peak, and it's starting to look as though it may have been.
Since then the monthly FHB share of total mortgage monies has been 24.1% in January 2024, 22.6% in February, 22.2% in March and now 21.3% in April. For the first four months of the year the average share is 22.4%, down from that 23.6% figure for the whole of 2023.
Is this to be the start of a new trend? It will be worth keeping an eye on these figures in coming months.
The housing market seems very unlikely to take off again while it continues to be dampened by high interest rates. And with the Reserve Bank once again pouring cold water last week on imminent interest rate cuts, it may be some time before we do see real stirrings.
But the fact the investors do appear to be, quietly, getting more involved, suggests that once interest rates do start to go down there is the potential for the NZ housing market to once again start doing what the NZ housing market tends to do. The investors will be the key.
22 Comments
You mean restoration of standard accounting treatment? I suppose the removal of punitive rules is a gift of sorts but that's an odd framing...
Sidenote: I'm a little surprised that we didn't see any sensationalist claims of 'imposition of sharia law' during the time interest wasn't deductible as arguably, treating debt this way is more consistent with sharia law than it is with global norms...
Standard accounting treatment... Lol.
Like most other "standards", is adjusted regularly to suit the standards of a few.
Side note: Former CA.
Side side note: Sharia/Islam, Christianity, Jewish all forbade usury. Even the Greeks (where much of our knowledge and "logic" stems from) understood it to be detrimental. Why do we have it now? Ideally global/cultural norms learn from errors and progress with positive outcomes for humanity...
DTI restrictions favour investors over OO, it would almost seem like the RBNZ wants less OO and more investors instead,
Homeownership peaked in the 1990s, at 73.8 percent of households, but by 2018, homeownership had fallen to 64.5 percent of households.
won't be too many decades before if falls through the 50% mark
Homeownership peaked in the 1990s, at 73.8 percent of households, but by 2018, homeownership had fallen to 64.5 percent of households.
Is that an adverse side effect of capitalism/society and neoliberal economics, that government is ideally required to enact checks and balances? Is it - a feature of the system or a virus we've never contained - and simply neofeudalism, whereby, it's only the title of owners and masters that's changed?
It's the consequence of everyone shifting from being serfs of a rural lord, to moving to a city to become the serf of a different set of lords. You can't funnel the bulk of your population into small confined areas and not have the land consolidate.
Hence we have instances where housing in Rome or Tokyo is relatively unaffordable, but almost free if you go hundreds of kilometers away from them.
A DTI of 7 means banks will only be able to lend att 14.28% (1/7 ) on the rental income
This means significantly less can be borrowed.
Those investors who have lending capacity will be getting in quick to get some of the better yielding properties before the door slams shut on investors.
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