There is clear evidence that property speculators are putting pressure on the Auckland property market.
Local property investors and Chinese buyers are putting pressure on the bottom of the Auckland property market and responsible for rapidly rising house prices in that sector.
A report issued today for QV New Zealand by Core Logic’s Research Director Jonno Ingerson, says that at the low end of the property value range (the bottom 30% of Auckland properties) turnover has increased to near all-time highs.
“The most active group of buyers there are investors who are now picking up 42% of all the sales in this low value bracket,” he says.
“They do so largely at the expense of first home buyers who back in 2006 were buying around 38% of low-end properties but now are just above 26%.
“The LVR speed limits have definitely had an effect in this part of the Auckland market.
“Incidentally, there has been little change in first home buyer turnover at the low end of the market in other parts of the country.”
He says the other demand driver in Auckland are the much discussed foreign buyers.
“There is no decent measure of foreign buyers available anywhere, so getting hard facts on this is difficult.
“However the anecdotes support Chinese buyers in particular paying above the odds in Auckland for multiple properties.
“Auckland property is seen as a safe place to invest their money, but also a great place to live and educate their children.
“And still much cheaper than Melbourne and Sydney I might add!”
Mr Ingerson says you have to look at what the motivation of these buyers is to see what might take them out of the market.
“It’s generally not rental yield as rents have not increased in line with house prices.
“That’s hardly surprising given that rent is more closely tied to average incomes, and they haven’t increased in Auckland much.
“So investors are banking not so much on rental yield but on the increase in the asset. Let’s call them capital gains.
“But they remain a paper gain until sold. If investors see this future capital growth at risk then they will be less likely to add to their portfolios.”
However he sees little incentive for Chinese buyers to leave the market.
“That would take a fairly major shock to the Chinese economy.
“While this is possible, you also have to question whether that would lead to a major flight of Chinese property buyers out of the market, or for them to dump their current properties at any price just to release capital.
“Perhaps more likely is a further influx of Chinese looking to New Zealand as their new home.”
(We are seeking reaction from the Government to this report and expect to add to this report through the day)