Investors starting to return

In my column last month I noted that despite the return of first home buyers to the market in high numbers from the start of this year, investors had yet to show much interest. But over just the past four weeks we have started to see increasing interest being expressed by investors and I can tell this in a number of ways.

First, I have seen a slight lift in requests for talks from people involved in the residential real estate sector, including those providing people with advice on property investment.

Second, my monthly survey of mortgage advisers with shows that a net 24% of brokers are seeing more investors coming forward for advice. This is below the net 51% seeing more first home buyers but is the highest result since the end of 2020. A month ago a net 13% of brokers were receiving fewer enquiries from investors.

Third, my monthly survey of real estate agents has revealed that for the first time since February 2021 just as many agents say they are seeing more investors as say they are seeing fewer. As recently as April a net 44% of agents were still reporting seeing fewer investors in the housing market.

Why are investors starting to return? It can’t be because interest rates are falling as they have continued to creep up since the start of the year. Instead we can cite as one reason the increasing ease with which landlords are finding good tenants courtesy of record net migration inflows which have now hit 96,000 extra people in the year to July.

We can also note that prices are rising in the housing market according to REINZ data and in Auckland average sale prices have recovered 3.1% since May, Wellington 3.5%, and Canterbury about 3%. Momentum in the market is building and increasingly I suspect people accept this is happening and expect it continue. Which brings me to a third reason for rising interest from investors.

The political opinion polls are now firmly suggesting that the National Party will be able to form a government after the October 14 general election. That means the eventual return of full interest expense deductibility for investors by mid-2026, plus the immediate return of the brightline test to two years from ten years. 

I can tell from my monthly surveys that the change in tax treatment of interest expenses from March 2021 caused an immediate withdrawal of investors as buyers. Therefore it is reasonable to expect that progressive restoration of deductibility will bring more and more investors back into the market. In fact with high net migration expected to continue, falling interest rates through 2024 and 2025, and prices rising at an accelerating pace over the same period, come a year from now the market is likely to be firmly shifting away from being dominated by young buyers to investors playing a much greater role.

By then the owner-occupiers are likely to be engaged once more in selling then buying or vice versa. Plus, based on some conversations I have had with people who still think house prices are falling and will do so for another year, this time next year some catch-up buying by these people realising they were wrong is also highly likely.

Basically, the housing market has turned upward over the past three months, listings are falling, prices are rising along with sales, and once the election is out of the way and we are firmly into the traditionally busy Spring/Summer period, much stronger activity is likely. 

Tony Alexander is an independent economist and produces a free weekly publication with a housing focus called “Tony’s View”, available for signup at