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21-04-2011

Survey points to property investment market pick-up

Landlords.co.nz

More investors are in the market looking for properties, though their numbers lag behind first time buyers who are finding a warmer welcome at the banks, according to the inaugural BNZ-REINZ real estate survey.

The survey of real estate agents found 32% of respondents believe there are more investors looking for properties than a month ago.

"Perhaps if anything the results suggest that in spite of the tax changes on April 1 investors remain interested in purchasing," the report said.

The survey also found 50% say the number of first home buyers has increased, with the report saying reduced interest rates and changes to bank lending criteria may be behind the increase.

"We suspect the cut in interest rates and recent easing of bank lending criteria could be playing a role here - more so than for investors who are probably not being as willingly welcomed as yet by banks as first home buyers are. Hence the 50% net response for first home buyers versus a 32% net positive result for the investors question."

BNZ economist Tony Alexander said banks remain more risk averse in the wake of the global financial crisis, and that has tempered their willingness to lend to investors.

"You lose more money lending into the investment properties side than you ever lose with lending to first time buyers, that's simply the nature of the beast," he said.

"People investing in properties is basically a business sort of venture and businesses have a greater tendency to fail than individuals who are generally supporting their mortgages, usually very well with their wage income. With an investment property you're relying not only on your wage income going through but of course the tenancy as well and maintenance of the building and vulnerability to insurance issues, so it's a higher risk activity for a bank to be lending on the investment property side than it is for individual home ownership."

Despite a lending boas towards first time buyers, Alexander said he believed the survey clearly showed the investment market is more active.

"In the survey on the investment side 32% are saying they're seeing more investors around so definitely the market's picking up out there."

BNZ and REINZ launched the survey as "there are occasions when the official data and media commentary are lagging behind what is really happening in the residential real estate market around the country."

The aim is to survey real estate agents on a monthly basis "to capture changes in what agents themselves have identified as the earliest indicators of what is happening in the residential real estate market."

The survey also found fewer sales are falling through with 49% saying the proporton of written sales going unconditional in increasing, and 37% reported seeing auction clearance rates rising.

On prices the survey failed to detect an inflationary surge and reported 4% of respondents saying prices appear to be falling.

A net 21% reported seeing more motivation from vendors than buyers, and further questions as to what might be holding buyers back found 33% cited buyer belief prices will fall further, 19% with worries over securing finance, 19% cited poor quality listings and 18% said they were not confident they could sell their house.

Source: Landlords.co.nz

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