Investors causing a rise in prices?

[Viktro]

Hey all, this is one of my first topics in this forum and with all this talk about investing and first home buyers in the media at the moment I thought I'd put this question out there.

Please excuse me if this has been discussed before but my flatmate who isn't a property investor has the view that property investors are one of the causes of inflated property prices that make it difficult for first home buyers. I believe his view is that investors buy all the good low priced properties and sell them out at an inflated price.

What does everyone think?

Victor.

[Dean@Massiveaction]

Victor, investors buy less than 2% of all property bought and sold in NEw Zealand so our influence on the market is very minimal, nil in my opinion. With the possible exception of Tokoroa where investors definitely drove prices down for a while and then the Aussies drove them up!!

[Viktro]

That's what I've heard as well, that investors make up a very small amount of the market. In my opinion I would've thought if there a lot of investors buying low, then the market value would drop like your example of Tokoroa.

The 2% figure seems so small when it appears that there are more and more investors, though the degree at which an investor invests varies. Maybe it's the whole syndrome where when you buy a car you see everyone else driving the same car.

[adambaird]

Maybe it's the whole syndrome where when you buy a car you see everyone else driving the same car.

I agree with this comment! Sometimes I think "Man, everyone seems to be doing this". This remindes me that I am doing well to associate with like-minded people.

I believe the quote
"You are like who you hang out with, plus or minus 10%"

[KevinR]

...The 2% figure seems so small when it appears that there are more and more investors...

My theory is that this happens because investors bid on a large number of properties at once. i.e. if there are 20 suitable homes on the market in one particular week... you can bet that the only five investors in the area will have made an offer on each one. These multiple offers will make it appear that there are a lot of buyers in the market at the same time.

I worry more about competing against like-minded investors than I do genuine buyers! There are some clever and motivated folk out there.

[Dean@Massiveaction]

It is easy to suffer from "I'm competing with millions of other investors" syndrome. In reality there are probably less than a thousand people in teh entire country who own more than 4 or 5 properties. For every freak like Robyn, Ron or myself who might buy a property every week, there will be thousands and thousands of investors who haven't bought a thing for years. It's a small industry with plenty of deals for everyone!!

[FreezingHot]

Thats what I like to hear Dean. A life full of abundance!!.

FH.

[ActionMan]

I agree with Dean.

The previous boom (high prices) was caused by low interest rates (Government reducing it) and immigration (Government relaxing it).

The next boom will be caused not by investors but by the above.

[Monid]

Hey Dean, I was just wondering if you have a reference for that 2% figure?
It seems very low, given that many properties are marketed towards investors rather than home owners. (Why would you waste considerable money marketing to %2 of the market)
It also seems odd given that NZ has about a %60-%70 home ownership rate, who owns the %28 that investors and home owners don't own?

David

[muppet]

Hi Monid

You asked:

who owns the 28% that investors and home owners don't own?

Well.... there are an awful number of State houses.

Then there are large number of councils that own residential property for their employees and also for housing the aged.

A large number of houses are also available for teachers to rent. These being owned by the Ministry of Education in conjunction with the respective schools.

And I am sure that there are a large number of companies that own houses for their employees.

Regards

[JohnL]

I think that investors do help to drive up the prices in the largely rental areas, but its not generally the investors that are on this forum. They are the 'ma & pa' investors who rush into buying rentals during a property boom and stop at 2 or 3 (they run out of servicability as they are generally buying negatively geared). They are the vast majority of 'investors', some of whom then become uneducated landlords and give us some great bargains in a few years time as they bail out of their properties.

John

[Monid]

Well.... there are an awful number of State houses.

Then there are large number of councils that own residential property for their employees and also for housing the aged.

A large number of houses are also available for teachers to rent. These being owned by the Ministry of Education in conjunction with the respective schools.

And I am sure that there are a large number of companies that own houses for their employees.

Regards

Its a good point Muppet, and I believe there is some housing for military as well.
But 28%-38% of the housing stock? This seems pretty unlikely to me. (The variance is because there is some dispute about this at the moment, as was recently discussed on PT)

Anyway its a general point, it would be good to see references for quoted figures, lets us know how much weight we can put on them, remember 78% of statistics are made up on the spot!

David

[Monid]

Okay so now I'm interested and have done a bit of my own research what I've turned up is that there are about 160000 investors in NZ most of whom (%90) who own 1 or 2 properties only. This is sourced from here: http://www.realtor.org/IntUpdt.nsf/P...ts_New_Zealand
Which seems timely and reputable.
And there are according to the provisional results of the 06 census, 860,600 dwellings in NZ. Thus we can tell that investors make up at least 5% of the market and probably more like 10% in terms of ownership. Presuming that this holds vaguely steady and that investors buy and sell as frequently as non-investors then this should also be reflected in the sales data, ie investors should be at least 5%-10% of the market.

This seems more realistic than %2 though it still doesn't explain why many properties are marketed towards them.

David

[spurner]

If there are 160,000 investors owning an average of say 1.5 IP's each, isn't that 28% of the market of 860,600 dwellings? Or am I missing something? Or where did the 5/10% come from?

Also, if there's 860,600 dwellings to accommodate 4.x million people, thats 5 persons per household, which sounds too high, I recall reading the average household has 2.3 people.

Or is their definition of a dwelling different from a household?

Ah statistics... gotta love 'em! Raise more questions than they answer.

Okay so now I'm interested and have done a bit of my own research what I've turned up is that there are about 160000 investors in NZ most of whom (%90) who own 1 or 2 properties only. This is sourced from here: http://www.realtor.org/IntUpdt.nsf/P...ts_New_Zealand
Which seems timely and reputable.
And there are according to the provisional results of the 06 census, 860,600 dwellings in NZ. Thus we can tell that investors make up at least 5% of the market and probably more like 10% in terms of ownership. Presuming that this holds vaguely steady and that investors buy and sell as frequently as non-investors then this should also be reflected in the sales data, ie investors should be at least 5%-10% of the market.

This seems more realistic than %2 though it still doesn't explain why many properties are marketed towards them.

David

[Gatekeeper]

This has me thinking. I too feel 2% is too low, and it should be remembered that if say 65% of New Zealanders own their own home, quite a few of them own the same home (joint ownership) so it doesn't necessarily mean that 65% of the housing stock are PPOR's. The figure bandied about in US markets is 40% of sales in the past boom have been to investors and second home owners.