Photo: RNZ
Property investors are starting to become more active, new data suggests, but there's a warning they may need to factor in a lower level of capital gains in future than has been seen in the past.
Corelogic has released its latest chart pack, which shows market activity among investors lifted to 24 percent of property purchases in January.
First-home buyers' share dropped back to 25 percent from 26 percent at the end of last year.
Corelogic chief property economist Kelvin Davidson said the conditions were favourable for all buyer types.
"Investors, in particular, have certainly started to return at levels not seen since 2021. Falling mortgage rates have been a key factor, significantly reducing the income top-ups typically required to sustain cashflow on recent rental property purchases," he said.
"They've also benefited from the easing in the LVR rules from July 1 last year, and the looming full reinstatement of interest deductibility from April this year."
He said first-home buyers were still a significant part of the market, particularly in places such as Hamilton and Wellington.
"We expect this group to maintain a strong market presence in 2025, as overall deal volumes rise, even though their share of activity may dip a bit," he said.
New Zealand's residential real estate market is worth a combined $1.61 trillion. The CoreLogic Home Value Index showed property values across New Zealand edged down by another 0.1 percent in January.
Over the year to January, values dipped by 4.3 percent, taking values back to an 18-month low.
The total number of listings on the market in January was 29,301, up 25 percent on the five-year average.
Davidson said the market was generally relatively flat, although some parts of the country were starting to show some signs of growth.
Investors had been less active than normal for some time, he said, and while 24 percent was a larger proportion of the market than the 20 percent to 21 percent they were at their weakest point, it was still low by previous averages.
"When people buy a rental property they generally have to top it up. At a point in the first half of last year and perhaps even a bit further, those top-ups were really high and it was hard for mum and dad investors to get the sums to stack up.
"Now the mortgage rates are lower the top up is still there but it's a lot lower… that's a decisive factor for mortgaged investors."
He said investors' model had not changed. For a long time, it had been common for people to buy properties that had top be "topped up" at the beginning because the rent did not cover the cost of ownership. But over time, investors could pay down debt and rents would increase.
"Eventually it turns cash flow positive and over time there might be capital gains as well. I don't think that model has changed.'
He said the stats showed that people still saw property investment as a viable option.
"One thing to be conscious of is over the longer run things like the debt-to-income ratios and government targeting land supply with possible tax changes in future, and also interest rates not being able to have the long downward trend as in the past, it's possible capital gains in future may be less than they were ...
Potentially people want to think about that, it might change their sums a bit but I don't think it kills property investment. People just need to factor in a slightly lower capital growth rate in future."
