Tony Alexander: If investors win at the polls, expect FOMO to ramp up

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A survey of mortgage brokers reveals a strong presence of first home buyers in the housing market, indicating their continued influence despite higher mortgage rates. However, investor participation remains limited as they await election outcomes and potential tax rule changes. Real estate agents also report rising prices and increased attendance at open homes and auctions, suggesting an upward trend in New Zealand's housing market driven by first home buyers.

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The article discusses the findings of a survey conducted among mortgage brokers to gain insights into the current state of the housing market. The survey focused on understanding the trends related to first home buyers and investors. Here are the key points:

  1. More First Home Buyers: The survey reveals that there has been an increase in the number of first home buyers entering the market. Despite higher mortgage rates, young buyers continue to be a significant driving force behind the growth in the housing market.
  2. Limited Investor Participation: In contrast, there has been only a slight increase in investor activity. Many investors are adopting a cautious approach and waiting for the election results and potential changes in tax rules before making investment decisions.
  3. Investor Reluctance: Interestingly, while some investors are showing interest in seeking advice, they seem less determined to make actual property purchases at present. They prefer to wait until after the election and any changes in tax regulations before committing, as they find it challenging to make profitable investments given current financial considerations.
  4. Rental Accommodation Challenges: This hesitation among investors poses a growing problem in Australia, where high financing costs have prompted some investors to sell their properties. However, due to record net migration inflows, there is an increasing demand for rental accommodation, exacerbating this issue.
  5. Favorable Conditions for Landlords: In New Zealand, record net immigration has made it easier for landlords to find good tenants for their rental properties. This factor may be contributing to young people’s motivation to enter homeownership earlier than anticipated since they see favorable conditions in terms of finding tenants if they decide to rent out their properties later.
  6. Interest Rate Preferences: The survey also asked about borrowers’ preferences regarding fixed interest rates when securing mortgages. The majority of respondents indicated a preference for shorter-term fixes such as 18 months or two years rather than longer-term options like three years or more.
  7. Housing Market Upturn: These preferences align with borrowers’ expectations that interest rates may decrease in the future as we are potentially near or at the peak of the rates cycle currently.
  8. Real Estate Agents’ Insights: Additionally, another monthly survey conducted among real estate agents revealed similar trends with increased participation from first home buyers and modest growth from investors observed across various regions within New Zealand’s housing market.
  9. Price Increases: Real estate agents reported rising prices across many areas where they operate, indicating an upward trend in New Zealand’s house price cycle that began shifting back towards demand growth over supply growth since February (led by first home buyers).
  10. The Policy Environment: As mentioned earlier, once a new government is formed after elections take place (at which point this article was written), there will be more clarity regarding policies affecting homeowners and potential buyers alike.
  11. Potential Impact on Young Buyers: If any rule changes occur that reinstate interest expense deductibility for investors, it could trigger further FOMO (fear of missing out) among young buyers who might feel compelled to enter into home-ownership before increased investor activity drives up prices.

In summary, the article highlights an increase in first home buyer activity driving housing market growth while investor participation remains relatively low due to uncertainties surrounding elections and tax regulations.Australian property investment is affected by high financing costs while rental demand rises.New Zealand’s favorable conditions encourage landlords but pose challenges.House price increases prompt borrowers’ preference for shorter-term fixed-rate mortgages.Real estate agents confirm rising prices.Next government formation will shed light on policy impact,and rule changes could intensify FOMO among young buyers

Source from Oneroof: Tony Alexander is an independent economics commentator. Additional commentary from him can be found at www.tonyalexander.nz

The opinions and research contained in this article are provided for information purposes only, are intended to be general in nature, and do not take into account your financial situation or goals.

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