wealth inequality

Mega Landlords: Over 22,100 homes owned by small group of very large investors

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Mega Landlords is a Stuff series about the country’s largest property owners, how successive governments allowed investors to gain astonishing wealth while leaving everyday Kiwis behind, and how little is known about who really owns New Zealand. Ged Cann reports.

Over 22,100​ homes are owned by an elite class of large investors who each own more than 20​ properties, new analysis by property data company Valocity reveals.

That’s the equivalent of Invercargill or Nelson, owned by 906​ people or private companies, whose portfolios continue to grow.

The analysis, conducted for this Stuff series, appears to quash the long-held belief the market is predominantly made up of mum and dad investors, and reveals the vast majority of Kiwis own no investment property.

It is the most comprehensive study to date of who actually owns New Zealand.

Help first home buyers has failed

Valocity’s head of valuation James Wilson says the biggest takeaway is that all Government attempts to even the playing field for first home buyers have failed.

The data shows first home buyers’ share of the market has fallen, with 11,603 fewer homes owned by this group compared to 2015 – a market share fall of 4 per cent.

During the same period, 82,121 more homes have entered investors’ portfolios, increasing their market share by 1.7 per cent.

“It actually goes to show how little policy levers will impact on the actual fundamental nature of who owns our housing stock,” Wilson says.

The impact of the Government’s largest changes to housing policy, announced in March, may not have appeared yet, however.

Stuff has sent photographers around the country to profile mega landlord’s portfolios

RYAN ANDERSON/Stuff

Stuff has sent photographers around the country to profile mega landlord’s portfolios

Wilson puts the fall in home ownership down to first home buyers being unable to keep up with house price increases, and competition from existing owners, who can capitalise on the increased valuation of their own properties to buy more.

ANZ economist Finn Robinson says when you look at the numbers, the continued demise of first home buyers isn’t surprising. Since 2010, house price increases averaged 8.2 percent annually, but average hourly earnings growth only averaged 2.9 per cent – which was swallowed up immediately by rents, which increased 3 per cent annually.

‘Mum and dad’ investment market called into question

James Wilson, head of valuation for Valocity, says the Government needs to understand the market before they start setting policy.

Abigail Dougherty/Stuff

James Wilson, head of valuation for Valocity, says the Government needs to understand the market before they start setting policy.

The Valocity study also calls into question a claim that had been the mantra of investor groups for years – that the market is overwhelmingly made up of mum and dad investors, who own one or two properties.

The analysis, which cross-referenced names on roughly 1.7 million publicly available property titles, shows investors with up to two properties only own just over a third of investment properties.

Investors with three to five properties own over 41,000 more homes than those with one or two.

Infometrics principal economist Brad Olsen says Valocity’s findings present “huge challenges” to the mum and dad narrative, with over 20 per cent of investor stock – or over 118,000 homes – owned by people with six or more properties.

“Again and again we make those refrains, but we also know there’s a lot of property here being held by an increasingly concentrated group,” Olsen says.

Olsen says a conversation is needed about the growing professionalisation of owners, because the services they provide affects a considerable number of people.

He says large landlords are not bound by the same level of legal and reporting standards as other large businesses, which was evidenced by rentals typically being colder, damper, and more poorly maintained than owner-occupied homes.

Olsen says the Government’s new Healthy Homes standards will go some way to requiring landlords to do better.

Infometrics principal economist Brad Olsen says Valocity’s analysis should prompt a new conversation about the professionalisation of landlords.

supplied

Infometrics principal economist Brad Olsen says Valocity’s analysis should prompt a new conversation about the professionalisation of landlords.

Data reveals “wealth inequality that pervades New Zealand”

Robinson says with 29 per cent of homes owned by investors with one to five properties, small investors remain a key part of the market, but the data revealed the “wealth inequality that pervades New Zealand”.

He points to the 2018 Census, which shows home ownership rates at their lowest since 1951, and the Māori Economy Report 2018 that found Māori home ownership rate was just 48 per cent in 2018 – much lower than average.

ANZ economist Finn Robinson says small investors remain a key part of the market, but new data reveals a pervasive wealth inequality

ANZ/Stuff

ANZ economist Finn Robinson says small investors remain a key part of the market, but new data reveals a pervasive wealth inequality

“But this new data shows that there are also over half a million Kiwis who own more than one property, and around a quarter million who own between 3 and 20 properties,” Robinson says.

Wilson describes the size of the holdings of investors with three to five properties as “a bit of an eye-opener”.

“In the last 10 years the growth in asset values, particularly house prices, has allowed those mums and dads to now, as you can see in relatively large numbers, to actually pick up a third or fourth or in some cases a fifth property,” he says.

Wilson says most of those with three to five properties still consider themselves mum and dad investors, despite house price rises now meaning they own multi-million dollar portfolios.

Because of this self-perception, he says smaller investors are happy to continue buying and will not give much thought to how they are removing the ability for first home buyers to get on the ladder, societal impacts, or the need to make their properties healthier or more environmentally sustainable.

Majority of Kiwis have no investment property

The analysis found the 605,722​ investment properties in the country are owned by a little over 533,000​ people and private businesses. Compared to the adult population of New Zealand, this would equate to roughly 14 per cent or 22 per cent of over-40s.

That would suggest the vast majority of Kiwi adults have no investment property, and are disadvantaged by skyrocketing prices because they will buy and sell in the same market, having to take on more debt to move up the ladder.

Investors now biggest ownership group

Investors are shown to now own more properties than either first home buyers or single homeowners.

Although the difference is slight – a difference of 15,638 homes – it’s a reversal of 2015 when first home buyers owned 78,086 more properties than investors.

This suggests an increasing wealthy property investor class is developing. When combined, first home buyers and single homeowners still hold the largest share of the market, with roughly 63 per cent.

Mega Landlords still growing portfolios

The data also shows that since 2015, when the then-National Government first tried to introduce a two-year bright-line test – a rule that could see sellers pays tax on money they earned from a property sale – the number of homes owned by mega landlords with over 20 properties has increased by just over 3,600 properties.

In the context of a market of roughly 1.7 million properties, this increase is modest, but reflects the holdings of the country’s largest investors are not going down.

Over 16,000 more dwellings meanwhile entered the portfolios of landlords with six to 20 properties, to bring this group’s total to 96,000 homes.

Many Kiwis will be surprised so much is owned by so few, but Wilson says the sum is actually low compared to other countries.

Data essential to solving the housing crisis

Wilson says finding out who really owns New Zealand’s homes is crucial to the Government being able to create effective, targetted policy.

“We’re often surprised at the lack of visibility that’s afforded to government,” Wilson says.

Wilson believes the current demonisation of investors is unhelpful, and might put off those at the smaller and medium…

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