Latest RBNZ figures show first home buyers remain active in the market, while the long sleeping investors may just be showing signs of stirring

By David Hargreaves

First home buyers remain active in terms of mortgage borrowing - but is that now a half-open eye that can be seen coming from the direction of the long-sleeping investors?

Latest monthly mortgage data, from the Reserve Bank show that total monthly new mortgage commitments were $5.778 billion in October, up from $5.194 billion in September 2023 and up from $5.582 billion in October 2022.

It's still a long way of the sorts of figures that were being seen a few years ago. In October 2021, for example, $7.717 billion was advanced.

According to the RBNZ's summary of the latest figures, on a seasonally-adjusted basis (IE taking out seasonal market activity patterns) the October 2023 mortgage advances were up 2.2% compared with the figures for September 2023.

First home buyers borrowed $1.369 billion in October, up from $1.253 billion in September 2023 and up from $1.219 billion in October 2022. In terms of the overall share of borrowed monies, the October figures for the FHBs made up 23.7% of the total, down from 24.1% in September. The record share of the monthly borrowings for the FHBs was in July of this year with 24.8%.

The investors have been sitting on the sidelines. If you go back to the 2014-16 period the investor grouping were often out-borrowing the FHBs in terms of market share on a ratio of about three to one.

But not recently.

In fact the last time the investors borrowed more than FHBs in a single month was in March 2022.

In October the investor grouping borrowed $1.021 billion. That's only the second time this year (the previous time was in March 2023) that the investors have borrowed more than a billion dollars and we need to go back to June 2022 for the previous month in which the billion mark was exceeded.

In terms of share of the overall advanced monies, the investor grouping represented 17.7% in October. It is the equal highest share this grouping has recorded this year - and was up from 17.2% in September. In fact, the investors' share of the total has been gradually creeping up ever so slightly every month since June of this year. The all-time low for the investor grouping was in January with 15.4%.

The 17.7% share of the market in October of this year compared with just 16.2% in October 2022 and 16.9% in October 2021.

Back in mid-2016 the investors were enjoying around a 35% share of the the mortgage advances, but this figure was sharply cut back when the RBNZ introduced more stringent loan to value ratio (LVR) rules for this grouping in 2016.

And its notable that the last time there was a big surge in investor interest was when the RBNZ temporarily removed LVRs in 2020, in what was an ill-fated decision that presaged the start of the massive pandemic housing market boom. In October 2020 investors had a 24.2% share of the mortgage monies advanced that month.

The big drop off in investor interest in the market has coincided with the previous government's move to remove interest deductibility for investors.

The incoming Government is now pledging to have 60% deductibility restored for investors in the 2023-24 year.

It is going to be interesting to watch over the next few months to see if we do now see some resurgence in investor interest in the housing market.

This story was originally published on Interest.co.nz and has been republished here with permission.