Property Investors Hesitant Despite Lowered Brightline Test; First-home Buyers Take Control Amid Static NZ Property Market

Date Published: 16 May 2024

Key Facts

• Despite the reintroduction of 80% interest deductibility for landlords and the reduction of the Brightline test, property investors still haven’t returned to the market.
• QV indicates that the potential establishment of debt-to-income restrictions could complicate investors’ capacity to purchase existing property.
• Residential property values have largely stabilized nationwide, while high inflation, increasing unemployment and low business confidence persist.
• A surplus of real estate listings is contributing to price reductions.
• First-home buyers with stable employment and finance appear to be in a strong position.
• Westpac revises its inflation forecasts, expecting it to stabilize slightly above the long-term average and not at 2%.
• Households and businesses are likely to experience discomfort throughout the year according to Westpac’s chief economist.

Article Summary

Property investors are yet to return to New Zealand’s market, unmoved by the reintroduction of 80% interest deductibility and the lowering of the Brightline test. Concerns over potential debt-to-income restrictions may also be hindering their ability to invest in existing properties. This data was part of the latest update by QV, which also highlighted a plateau in residential property values across the country.

The report by QV reveals the pressing economic conditions in the country, with stubbornly high inflation and growing unemployment. In fact, the living costs pressures continue to be significant for many households, resulting in lower saving rates and increasingly uncertain high commitment financial decisions, such as buying a property. Real estate listings are abundant, pushing prices down and creating a flat market predicted to last over the winter.

However, amidst these challenging conditions, first home buyers appear to have the upper hand, assuming they maintain stable employment and manage to secure finance. Furthermore, Westpac has updated its inflation forecasts, predicting that it will exceed the long-term average instead of reaching the 2% midway point put forth by the Reserve Bank of New Zealand. Still, Westpac anticipates that further tightening or delayed easing could occur if inflation hangs around 3% or if demand ramps up sooner or more vigorously.

The rest of the year is set to be uncomfortable for businesses and households, according to Westpac’s chief economist. The labour market will bear much of this burden, as the government starts to consolidate the fiscal policy, which is believed to be a long road to achieving balance. Consistent with this, the central bank is predicted to retain the pressure to curb inflation, despite the sluggish growth.

Source Link: To read the full article, click here.