Are we shooting at the wrong target?

5th July

Following QV's monthly housing report released today, the Prime Minister’s advice to further hinder the provision of rental properties in New Zealand is misguided.

Over the past year rental property owners have been stung by higher LVR ratios, particularly high in Auckland, higher risk weighting requirements and the Bright Line Test.

"There comes a point when you have to ask, if all these measures aren't slowing house price growth perhaps we are shooting at the wrong target" says NZ Property Investors’ Federation Executive Officer, Andrew King.

The sale of properties to house tenants has always been high. QV states that 46% of sales in their latest report were to investors, but around 42% of all Auckland properties are rentals, so this is not unexpected.

New Zealand rental properties are mostly owned by accidental investors, who often sell up when circumstances change. For instance they could have transferred for work and rented out their old home before committing to the new location. They may have bought it to provide a home for children attending university or inherited the property and after a while need to sell it. This means that rental properties tend to turn over faster than owner occupied homes and therefore make up a higher percentage of overall sales.

In addition to investors, QV said that house prices are continuing to be driven by low interest rates and strong net migration. The current levels of migration are the highest ever recorded. When combined with a property supply system that is particularly slow and expensive, this is the main reason why prices are going higher.

"With extra costs and restrictions being placed on rental home providers, all we are achieving is higher rental prices which make it harder for first home buyers to save a deposit" says King. "We are seeing people living in cars and in overcrowded conditions. These people need rental homes not rental price increases".

ENDS

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