In December 2021 and January of this year, NZ Property Investors’ Federation, in association with the NZ Property Investor, surveyed members throughout the country to understand how the changes in the housing market are affecting members. Of the 913 investors who answered the survey, 65% were male and 35% female, with 50% of respondents over the age of 50 years. The majority of respondents buy standalone houses and have favoured the buy and hold investment strategy.
Approximately half of those surveyed owned between 2 and 5 investment properties with 58% having purchased a property in the last 2 years. There is no sign of any reduction in purchasing an investment property since the announcement of the removal of mortgage interest tax deductibility. Over 80% of investors have either positively or neutrally geared portfolios.
48% of respondents have no plans to buy another rental property and 49% have never sold an investment property. Of those that have sold, 25% did so to invest in another market, and 16% due to Government legislation. A further 6% of respondents sold to exit the market. Most respondents expect house prices to remain the same in the next 6 months.
Low interest rates have had little to do with people’s investment decisions. 34% have decided to pay off debt and 28% have increased the size of their portfolios. 85% of people have stayed with the same lender for the last 12 months, with 62% using a mortgage broker to help with the process. The 1–2-year fixed rate interest rate is favoured slightly more than the 3-year rate.
Most respondents said the important driver for them is the long-term capital gain of a property, followed by immediate cash flow creation of a new purchase.
As you would expect in a rising housing market, immediate equity creation and immediate cash flow creation were the least important factors. It was noticeable that the number of investors, who buy to renovate and resell (traders or flippers), had reduced significantly compared to previous surveys with only 1.8% of investors favouring this strategy. However, 48% of respondents have added value in their properties.
Due to recent changes in Government legislation 77% will continue, or start to buy new build properties.
79% of respondents have increased rents in the last year, with 14% applying these increases to new tenancies. Rent increases for 90% of respondents were between 1-10%. With 80% predicting that rents will continue to increase in the next 12 months, and 20% predicting they will remain the same. 59% have had no vacancy in the past 12 months, with another 28% having 1-2 weeks’ vacancy.
A high proportion, 38%, have used the Tenancy Tribunal and in 17 cases the adjudicator has given name suppression to the tenant, even though the landlord has won the case. 1.5% have had a situation where a tenant has had to leave a property due to a family violence situation.
The majority have their lending with one bank but 63% are finding finance is harder to get, with 75% of these turning to second tier lenders as a source of borrowing in the future. This is expected to increase due to changes in Government legislation. These Government policy changes and availability of finance are the two factors of most concern to investors in the next year. These were also stated as the biggest barrier to people increasing their portfolios.
When making changes to their portfolio by buying/selling/restructuring, many respondents were inclined to seek advice from other investors followed by their accountants and financial adviser.
There has been a significant change compared to earlier surveys regarding the number of self-managing landlords. There are 61% of respondents now employing the services of a property manager to oversee the management of their properties. (From 49% to 61%).