“…people remain confident in property over the long-term, particularly compared to other asset classes, because there is still the ability to leverage, you have greater control over your asset, and it is possible to add value.”
“Landlords might not be super-confident at the moment, but most are not going to rush out and dump all their properties, especially with migration numbers and rental demand now up.”
Auckland Property Investors Association general manager Sarina Gibbon
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By Miriam Bell
Record numbers of landlords are considering selling properties over the next year, but history suggests it does not mean they will exit the market in huge numbers, experts say.
Thirty percent of the 433 respondents to the latest Crockers/Tony Alexander Investor Insight report said they were thinking about selling a property in the next year.
That was up from 25.3% last month, and above the survey’s average of 23.7%.
Alexander said the rise probably reflected the further 25% decrease in the proportion of mortgage interest investors could offset against rental income that came with the new financial year.
Pressure from higher interest rates was likely to be a factor too, and the combination was probably leading more landlords to think about selling, he said.
“But it pays to be cautious about these claims. Right after the Government announced the tax changes in March 2021, a very high proportion of respondents said they were definitely going to sell, but they didn’t.
“There is a tendency for some to spit the dummy when something negative happens, and then to sit back and consider the long-term profitability of their property, alongside other investment options, and hold fire on selling.”
The election outcome would definitely influence some investor decisions on selling or holding, he said.
That was because National has said it will reinstate mortgage interest deductibility, and reduce the bright-line test from between five and 10 years to two, if elected.
But whatever the outcome of the election, there were currently some positive market indicators for landlords, Alexander said.
“Interest rates look to be peaking, we have booming net migration which boosts demand for rental accommodation, and there is talk of house prices rising over the next year.
“My view is that we won’t see a wave of selling by property investors that will disrupt the market, but we will see more investors moving into new builds.”
Alexander’s survey also showed the primary motivation for landlords looking to sell remained retirement, at around 45%, although interest deductibility changes were the second most cited reason at about 33%.
Earlier this year a Property Investors Federation survey reported the percentage of respondents who said they would sell, or were likely to sell, their properties was up to 35%, from 21% in 2021.
The loss of interest deductibility was cited as the main driver behind the increase.
But recent sales figures did not suggest lots of landlords were selling up, CoreLogic head of research Nick Goodall said, when presenting the company’s latest quarterly market update.
Sales volumes might have lifted slightly recently, but they remained at record lows, and the flow of new listings onto the market was also really weak, he said.
“It shows there is no significant lift in people having to get out of the market, or that property investors are selling up en masse. The data simply does not back it up.”
Buyer classification figures did show mortgaged investors were not buying as much, but they still accounted for 20%, or one in five, of purchases, he said. Cashed up investors accounted for another 16%.
Auckland Property Investors Association general manager Sarina Gibbon said having an open-mind about selling did not mean a landlord would actually sell.
There were many factors, such as market conditions, rental demand and likely sale price, to consider before listing a property, she said.
“Many of our members are taking a careful look at which of their properties are performing well, and which are not, and thinking about what will be the best way to approach their portfolios, in the future.”
There was a feeling among members that they were being squeezed by tighter Government regulations, and higher interest rates, and that was creating a negative short-term outlook, she said.
“But people remain confident in property over the long-term, particularly compared to other asset classes, because there is still the ability to leverage, you have greater control over your asset, and it is possible to add value.”
History showed that talk of selling in survey responses following policy or interest rates changes in the past had not translated to mass sell-offs, Gibbon said.
“Landlords might not be super-confident at the moment, but most are not going to rush out and dump all their properties, especially with migration numbers and rental demand now up.
“But I do think people are in a bit of a holding pattern, waiting to see what happens with the election.”
