Tony Alexander: The tax hit on property investors has zero effect
Survey results show that fewer property investors are selling compared to two months ago.
Over the past 14 months I have started up five monthly surveys which provide up-to-theminute insights into what is happening with plans by you and I to spend on things like home renovations, issues facing average small to medium-sized businesses, and developments in the residential real estate market.
This new universe of information provides insight into developing trends before they eventually become apparent in the likes of monthly reports from REINZ.
It also allows us to challenge or support some of the theories people have regarding the impact of developments such as the March 23 tax policy announcement.
Specifically, we can start answering this question. Will the March 23 changes cause a decline in investor participation in the housing market sufficient to stop prices rising as Treasury and the Reserve Bank have predicted?
Three months down the track we can with 95% certainty deliver this answer. No.
The first solid indication of this came in my Spending Plans Survey.
Whereas early in April a net 11% of respondents said they planned cutting spending on investment properties, this eased to 9% in May then just 2% in early-June. The next update is due in a week.
The next indication came in my monthly survey of mortgage advisors undertaken with the people at mortgages.co.nz.
This showed that whereas in April a very high net 78% of advisors said they were seeing fewer investors seeking advice, come May this was 67% then in June 53%. Still negative, but less so.
But the best insights have just come in my monthly survey of real estate agents all around New Zealand undertaken with REINZ.
Results which I have just released this week show improvements in almost all indicators.
Back in late-May a gross
49% of agents said that they were seeing FOMO (fear of missing out) on the part of buyers.
In previous months this reading had usually been above
80%. Last month the proportion was 51%, and now it stands at
60%. FOMO is returning. Two months ago a net 30% of agents said that they felt prices were rising in their location. One month ago this improved to a net 32%, and now the gauge stands at a net 53%.
Two months ago I wrote about FOOP – fear of overpaying. Back then a gross 37% of agents reported that the biggest fear of buyers was that prices would fall soon after they had made a purchase. This proportion eased to 29% last month and now it stands at 25%.
One reason these measures will be changing is that there is no flood of properties being placed on the market by investors.
A gross 82% of agents have just rated shortage of listings as the biggest concern of buyers, up from 68% one month back and 66% two months ago.
And finally, whereas two months ago a net 12% of agents said that they were seeing more investors selling, this eased to
6% last month, and now a net
3% say they are seeing fewer investors selling.
There is certainly very strong anecdotal evidence of investors selling. But this was happening well before March 23. I recall being quoted in media early this year saying that investors were selling their “crap” in a buoyant market. It’s what the skilled ones always do when prices seem most unrealistically ballistic.
That process has been enhanced by the tax changes, and many people who were thinking of selling within the next five years have brought those plans forward.
Overall, the market is not ceasing to rise as the policymakers hoped, and in fact in this week’s Tony’s View where I update my 11-level layer cake of factors pushing prices up since lockdown, things add up to being stronger than just one month ago.
“Overall, the market is not ceasing to rise as the policymakers hoped.”