Fewer mortgage-free homes as baby boomers borrow to buy investment properties

Property

Baby boomers leveraging off capital gains to buy investment properties rather than paying off the mortgage as they head towards retirement

14th Nov 16, 4:50pm by Greg Ninness

Large numbers of baby boomers are borrowing against their homes to buy investment properties as they head towards retirement rather than paying off their mortgages, according to property valuation company Myvalocity.

Research by Myvalocity shows that at least 10,000 first time property investors have entered the residential property market over the last five years and between them they have purchased 26,000 properties, which have been spread fairly evenly throughout the country.

That has seen the number of homes that are owned without a mortgage drop from 39% to 35% over the last decade.

Myvalocity CEO Carmen Vicelich said many baby boomers had owned their home for a long time and would be in a position to be mortgage free if they wanted to.

However the substantial price gains that had occurred over the last few years would have increased their equity significantly, and many we choosing to leverage off that to buy investment properties, she said.

The currently low interest rate environment had also encouraged some property owners to become investors, she said.

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22 Comments

by Alter Ego | 14th Nov 16, 5:44pm 1479098645

I still cannot understand why the Interest Rates were forced down, when the banks own all the mortgaged houses anyway. Plus the Landlords in-debt home as well. The best circumstances for the banks would be to lift the rates, thereby the returns would last a lot longer.

If all those mortgage houses fall in price, it would be very foolish of the Banks to call in the loans as the rent will cover all the mortgages going.

Otherwise they would not have lent them the free money in the first place. Surely?.

Or does logic escape me.?

Plus, I think you are blowing things out of all proportions, because there are only 10,000 with skin in the game.

by Uninterested | 15th Nov 16, 7:12am 1479147151

Yes 10,000 seems fairly low.
2.6 houses each is fairly high though. Not sure if that is 2.6 more houses or whether that includes their original home.

by dictator | 15th Nov 16, 8:07am 1479150448

You see the theory goes that if interest rates are lowered spending goes up and inflation goes up. Except that the way the money enters circulation is via housing. Of course you mix people who don't need any more consumer goods because they are older, and those that need a retirement income because they having saved enough to maintain your lifestyle, then you end up with no benefit from the lower OCR.

We're heading into an era of slightly higher interest rates and more inflation. There's most likely a credit crunch a few years away as well so I'm not sure how things will work out for new property investors.

by keyo_ | 15th Nov 16, 12:34pm 1479166457

I really hope the Boomers die off soon. I'm tired of paying for their capital gains, superannuation and healthcare. Just bugger off and let the hard working people get on with it.

by moa man | 15th Nov 16, 1:10pm 1479168657

Not going to happen.
Stop complaining.
Get on with with it.

by middleman1 | 15th Nov 16, 1:57pm 1479171476

But we boomers are creating history Keyo. We are the golden age conquistadors, laden with bullion looted from following generations.
Think how much more miserable you'd be without having our glorious story forming part of the nations dystopian future. Sort of Cambodia without Angkor wat.

by Zachary Smith | 15th Nov 16, 2:03pm 1479171832

When giants walked the Earth.

by keyo_ | 15th Nov 16, 2:38pm 1479173888

I'll take the bait. I've got twice the productivity of the average boomer yet about half the purchasing power. Thanks to them selling the country to China the young locals will never be a voting bloc. They've also bought my generation up to be a bunch of wet noodles. Thanks to the Boomer's greed the people I work with (of equal skill and intellect) have been split into two camps; haves (inheritance) and the have nots. Gone are the days of working your way into wealth via productivity being rewarded. Frankly if all the boomers died tomorrow I'll be popping my $8.59 Lindauer.

Try getting on with anything in NZ... Can't build that kitset house there - covenants. Single story house - better put up a fence, scaffolding, safety nets and harnesses. Can't import that branz does not approve.

by middleman1 | 15th Nov 16, 7:55pm 1479192923

Sounds familiar. I remember thinking the very same thing about lazy old farts sitting on their backsides pontificating while we young turks worked like galley slaves. And the envy at those inheriting as well. Chateau cardboard instead of lindauer but essentially the story hasn't changed much by the sound of it.

by moa man | 15th Nov 16, 8:03pm 1479193409

Try Moet.
Does lots of good things.

by Alter Ego | 15th Nov 16, 8:18pm 1479194332

I say..The Moet, the merrier" Stop whining....enjoy life...whilst ye can.

Try moving to France, cheap houses, much cheaper wine and cheese to live for...not die penniless ..for. I would avoid Calais...they have enough migrants...as it is.

by cut.it.out | 16th Nov 16, 10:22am 1479244936

i hope the bait has something in it, "I've got twice the productivity of the average boomer yet about half the purchasing power".... so whats that tell you keyo, ill tell you because you obviously don't know "you're not smart enough" and wanting people to die to enhance yourself shows disgusting traits you have. Best to go and ask the people you envy how they did/are doing it...and for the sake of NZ cheer up...

by KH | 15th Nov 16, 3:32pm 1479177142

Your turn will come keyo. Just wait a couple of decades and you will find yourself right there. With some dopey young person taking pot shots at you with the shotgun.
But if we accept your approach then I suggest you shoot a few school children instead. For safer as a policy for you, as you won't be progressing back to being one of them

by OpenPensionResolutn | 15th Nov 16, 4:48pm 1479181699

Millennials can't afford to have kids, thus ensuring that we become a super-cohort.

Simply genius.

by muntijaqi | 15th Nov 16, 1:07pm 1479168431

Good. It wouldn't be fair if only first home buyers get stressed after the bubble burst.

by unaha-closp | 15th Nov 16, 2:13pm 1479172415

As we get LVR and possible DTI restrictions and any other method the RBNZ can conjure to choke the life out of demand (and also crush Auckland's already pitiful new supply) investment in rental properties should become more profitable - for those who can afford it.

Rents are going to go up - for everybody else.

Or at least that is what happens until we decide to leave.

by two otherguys | 15th Nov 16, 4:56pm 1479182192

Nonsense

What's really happening is the boomers are hocking their homes to help their adult children buy a home

by OpenPensionResolutn | 15th Nov 16, 4:55pm 1479182131

Some are investing in their children and grandchildren, yes. Plenty of others are investing in rental properties, luxury holidays, grand renovations, new cars and copious quantities of magic beans.

by middleman1 | 15th Nov 16, 8:00pm 1479193212

Ah yes, a fabulous time of life. Toiled and saved, made smart investment decisions and now the big sit back and indulge oneself.

by Stephen Hulme | 15th Nov 16, 8:15pm 1479194156

The currently low interest rate environment had also encouraged some property owners to become investors, she said.

Yes, indeed

A monetary policy regime narrowly focused on controlling near-term inflation removes the need to tighten policy when financial booms take hold against the backdrop of low and stable inflation. And major positive supply side developments, such as those associated with the globalisation of the real side of the economy, provide plenty of fuel for financial booms: they raise growth potential and hence the scope for credit and asset price booms while at the same time putting downward pressure on inflation, thereby constraining the room for monetary policy tightening. Borio page 12 of 38.

Were RBNZ academics navel gazing from their sinecure of incompetence, while better others profiled their downfall?

by Joe Public | 15th Nov 16, 11:05pm 1479204319

Who wouldn't want to be included in the party when they are making 100k a house tax free

Zero stamp duty
Zero Capital Gains tax
No debt to income restrictions
Possible increase in Interest Rates coming as seen in the Bond Market

Recipe for disaster

by Joe Public | 15th Nov 16, 11:07pm 1479204470

"Tonight, Helen Clark should look in the bathroom mirror and ask: "What have I done for housing affordability in the past eight years?" She'll have answered before she's squeezed out the toothpaste. Nothing.

2007
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10455931