1. The return of Mum and Dad investor
The latest Cotality Buyer Classification data shows that mortgaged multiple property owners, including "Mum and Dad" investors, claimed a 25% share of the market, up from the lulls of 21-22% in the aftermath of the previous government’s tax changes (e.g. mortgage interest non-deductibility).
New-builds remain popular, given they’re exempt from the LVR and DTI rules. There’s also a sense that investors are hunting out some good deals in the current sluggish market, paying a bit less for their purchases this year than last (a median of $760,000 versus $770,000 in 2024), without changing the mix of property types they’re buying.
Clearly, the full reinstatement of mortgage interest deductibility is helping. But the most significant change has been lower interest rates – reducing the cashflow top-ups out of other income that are generally required on a rental property purchase. And just one last thing; first-home buyers are still a strong presence in the market too. This shows it doesn’t have to be one or the other. We can have both investors and FHBs at the same time.
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2. The Reserve Bank opts for shock treatment
Speaking of interest rates, last week the Reserve Bank dropped the OCR 50 basis points to 2.5%, and signalled it’s prepared to cut again on November 26. This is to try and get the economy going again, lower spare capacity amongst businesses, and reduce the risks that inflation undershoots the 1-3% target sometime down the track.
What will happen to mortgage rates? The big banks dropped their rates ahead of Wednesday’s OCR decision, but there’s always scope for further drops in the lead-up to November’s decision.
Cotality chief economist Kelvin Davidson: "Investors are hunting out some good deals in the current sluggish market." Photo / Peter Meecham
3. Net migration might have bottomed out
On Monday this week, Stats NZ will publish August’s migration figures. There have been hints in the past few months that departures are flattening out (albeit at a high level) and arrivals are just starting to lift a little, which is causing the net balance to stop falling. It’s possible we’ll see more of the same in the next dataset. But net migration remains at a low level, which is a key reason why rents are so subdued at the moment.
4. Further economic green shoots?
Also keep an eye out this week for the BNZ-Business NZ measure for services sector activity (Monday) and Stats NZ’s electronic card spending data (Tuesday), both for September. Tentative evidence of a pick-up in these indicators would add to the general sense that the economy might slowly be starting to respond to lower interest rates.
5. But let’s not forget about inflation altogether
Although the Reserve Bank considers inflation to be under control at present, it obviously needs to still be watched closely. On Thursday, we’ll get Stats NZ’s selected price indexes measure for September (45% of the benchmark quarterly CPI), and the RBNZ will certainly be hoping that it doesn’t spike upwards.
