Data shows there has been a shift towards smaller investors who only own one property beyond the home they live in. Photo: 123rf
New property investors are dipping their toes in the market, Corelogic says.
Its data shows that although mortgaged property investors' share of the market has remained flat at about 21 percent or 22 percent, within that there had been a shift towards smaller investors who only own one property beyond their owner-occupier home.
"People who have bought their first rental," said chief property economist Kelvin Davidson. "The cliched 'mum and dad investors'."
He said conditions were still not overly favourable for property investors but with mortgage rates dropping, and term deposit rates also falling, people with money in the bank might be tempted to look at investing in property.
That could pick up pace as interest rates fell further, he said.
"Generally as a new investor, whenever you bought your first rental property you were topping up [the mortgage payments]," he said.
"That's always part of the model, you get rental growth, pay down debt, get capital gain after a period of time. At the moment the top-up is just so large it's hard to make the sums work.
"[But] a typical mortgage rate of 5.5 percent seems to be the sort of point where what investors would be topping up is potentially a number that seems more manageable."
He said, if official cash rate predictions were right, those sorts of rates could be available in the middle of next year if not before.
First-home buyers have had a record market share in recent times and Davidson said he expected their activity to broadly hold up.
"First-home buyers have a lot of things in their favour - KiwiSaver, LVRs, lower prices and still reduced competition from other buyer groups. First-home buyers have always got that emotional side of it, as well, the non-financial - they might be prepared to stump up a bit more to get the house they really want."
At 5.5 percent mortgage rates, that could also be the point that debt-to-income ratios started to bind for investors, he said.
But investors were already the biggest purchasing group for new-build properties, which are exempt from debt-to-income and loan-to-value rules.
Davidson said there was also evidence that there was pent-up demand from people moving from one property to another.
He said "life happens" and the lack of activity in recent years from this group suggested a degree of people holding back, waiting for the right time to move. "The need to sell before you buy lately has probably held some people where they are," he said.
"People are pretty keen to upsize and there's reasonable evidence that a softer market is not a bad time to do it. You might not sell your own house for what you thought but you could get a bargain on the next one up the ladder."
With so many listings on the market, people who were buying now would either get a cheaper price or a better house than they might otherwise, Davidson said.