Auckland and Wellington city are hovering at about the three per cent mark, with Hamilton and Tauranga closer to four per cent, and Christchurch and Dunedin a bit above four per cent.

CoreLogic’s chief property economist, Kelvin Davidson, says even though rental yields have trended higher, they’re still quite low compared to mortgage rates. “No doubt some would-be property investors are watching and waiting for interest rates to start falling to a more favourable level.”

This could start happening next month. “Economic activity remains sluggish, and inflation pressures continue to ease. As such, another official cash rate cut seems all-but certain on October 9, helping mortgage rates to fall further,” he says.

“Although property values may not fall much further, a fresh boom seems unlikely when affordability remains stretched, listings are abundant, and the labour market is weakening.”

Rental growth

Rental growth has now settled into a more subdued phase; it was only 1.4 per cent in the year to August on the Stats NZ flow/new tenancy measure, CoreLogic’s latest Housing Chart Pack shows. That’s comfortably below the long-term average of 3.2 per cent.

Rents are high in relation to household incomes, so a slowdown was always likely at some stage, Davidson says.

“But subdued rental demand (from slowing net migration) and more available listings on the market are also adding to the slowdown.”

Although the share of purchases going to mortgaged multiple property owners, including investors, remains low by past standards, there have been hints in the past three to four months this group is just starting to return.

This is consistent with falling mortgage rates, the easing in the LVR rules from July 1, and interest deductibility back at 80 per cent this tax year.

However, buyers for existing properties without the required deposit are still finding it tough to get around the loan-to-value (LVR) ratio rules, with banks keeping a buffer between actual high LVR lending and the maximum allowance.

Interest-only lending remains relatively low, although there has been tentative evidence of an upwards trend again for owner-occupiers, Davidson says.

Mortgages

About 65 per cent of existing mortgages by value are currently fixed but due to reprice onto a new mortgage rate over the next 12 months.

For the past two to three years these repricing events have generally meant a higher mortgage rate, but in the coming months more borrowers are going to start seeing their rates fall.

“It may not necessarily be a dramatic or fast process, but any fall in rates will be welcomed by cash-strapped borrowers,” he says.

Sales

While property sales rose 1.6 per cent last month compared to the same month a year ago, which was the fifteenth rise in the past 16 months, volumes remain well below normal levels for the time of year, with August’s total of 6,320, for example, still about 15 per cent below the average for that month over the past 10 years.

There are plenty of listings, so the relatively low levels of sales are more about buyers: those who still feel confident about their jobs and can get the finance to take their time and secure a deal in their favour.

“That said, as mortgage rates drop the pool of willing and able buyers will start to grow again, and slowly erode that high level of listings – resulting in more competition and some upwards price pressure,” Davidson says.

“This might not happen overnight, however, given that interest rates are still relatively high, and existing mortgage borrowers on pre-agreed fixed rates won’t see the benefits of any cuts straight away either.”