Saturday, April 27th, saw 1news.co.nz lead with an analysis titled “The odds are still stacked against property investors, as market conditions continue to favour first-home buyers.”
A recent CoreLogic report found that first-home buyers have maintained their record market share, equal to that of owner-occupiers looking to move. First-home buyers were particularly strong in major city markets, accounting for 28% of sales in Auckland. Factors such as the ability to tap into KiwiSaver funds, access low deposit loans, and face reduced competition from owner-occupiers and investors are said to be aiding first-home buyers. In contrast, investors are facing challenges such as difficulties in obtaining bank finance, low rent yields, and, until recently, restrictive tax rules. However, with changes in tax rules, investors could potentially see some gains, according to CoreLogic chief property economist Kelvin Davidson. Changes to bank lending rules, debt-to-income ratios, and lower mortgage rates are expected to influence market activity next year, Davidson added.
In other news from the past month, the Government is making changes to the Credit Contracts and Consumer Finance Act (CCCFA) in a bid to make it easier for people to access loans. The removal of 11 pages of affordability regulations, which prescribed minimum steps to assess the affordability of a loan, is a key change. Housing Minister Chris Bishop noted that lenders would still be required to act responsibly. Bishop also highlighted that nearly 7% of people missed out on home loans in 2022 due to these regulations. Auckland mortgage advisor Bruce Patten from Loan Market described these lending changes as a win for mum-and-dad borrowers.
Commerce and Consumer Affairs Minister Andrew Bayly stated that the existing regulations created unnecessary compliance costs, resulted in arduous delays in processing loans, and failed to protect vulnerable people. Responsibility for the CCCFA will shift from the Commerce Commission to the Financial Markets Authority.
As we move forward, there is a sense of tentative optimism that the balance is shifting: Is now the right time to buy a house? Economists suggest that with predicted falls in interest rates and a record number of houses for sale, it’s a buyer’s market. Measures such as loan-to-value and debt-to-income ratios are expected to slow down interest rate rises. Additionally, the price of building materials is projected to continue dropping over the next two to three years following an easing of import restrictions. While some industries express concerns about a potential drop in standards, others dismiss those concerns. The changes are expected to drive down prices, according to Combined Building Supplies Cooperative chairperson Carl Taylor. He also mentioned that the Government changes to legislation were positive for consumers and builders, despite concerns raised by industry groups about standards.
In closing, for those not yet connected with me on LinkedIn (you can find me at https://www.linkedin.com/in/catherinegoodwinrealestate/), I share a link to key proposed changes to the Residential Tenancies Act that have been launched in April 2024: https://www.hud.govt.nz/our-work/proposed-changes-to-the-residential-tenancies-act-1986-termination-of-tenancies/. Draft legislation is being developed by the Ministry of Housing and Urban Development for introduction to Parliament in May 2024. If the Bill passes, it could become an Act in late 2024.
