US institutional ownership is too low nationwide to be material compared to new housing build rate when considering overall supply shortage. Of note, there is institutional concentration in certain local markets, which diminishes purchase supply in those localities (and potentially contributing to price level firmness in those localities).
When I said "steadily declining interest rates causing an increase in demand for investments", I wasn't referring to institutional investment only (for residential properties this is almost entirely insignificant in NZ). I was referring to the motivations of all purchasers.
Nobody was paying the average of NZD1M for just a home - they were making an investment with future capital gains in mind (as well as getting a home). Now that credit is no longer cheap those capital gains are less than assured - even negative. So a correction is occurring. The correction has not been caused by a drop in demand for homes/places to live.
https://nlihc.org/resource/gao-releases-report-institutional...
https://www.gao.gov/products/gao-24-106643
https://www.census.gov/construction/nrc/pdf/newresconst.pdf