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The Auckland housing market is on the verge of losing all the capital gains it made in the last 12 months

The Auckland housing market is on the verge of losing all the capital gains it made in the last 12 months

By Greg Ninness

The Auckland housing market is on the verge of having all of the capital gains it made in the last 12 months wiped out.

Prices of Auckland properties have fallen so much in the last few months that median prices are within a hair’s breadth of going into negative territory on an annual basis.

They may already be there.

In February the average price of Auckland homes sold by Harcourts, the country’s largest real estate agency, was $934,428, down 1.1% compared to where it was in February last year.

While Harcourts’ average prices can be a bit choppy on a month by month basis, the figures do not appear to be an aberration.

According to the Real Estate Institute of New Zealand, Auckland’s median selling price peaked at $868,000 in October last year and has declined every month since.

In February it hit $800,000, down 7.8% from October’s peak.

But just as significantly, Auckland’s median price in March last year was $820,000.

So even if the median price for March this year doesn’t  fall any further from where it was in February, or if it increases by anything less than $20,000, Auckland’s median price will have declined to the point where it will be below where it was 12 months previously.

Then it’s goodbye capital gains.

The interesting thing about those numbers is that the downward trend they show is occurring at a time when Auckland’s migration-driven population growth is increasing at record levels and construction of new housing continues to fall miserably below the numbers that are required, exacerbating the region’s growing housing shortage.

How can this be?

As you might expect, the market is being influenced by forces converging from several different directions.

One of the biggest changes to affect the Auckland market over the last few months has been the relative absence of local ethnic Chinese buyers.

It would be hard to underestimate the impact they were having on Auckland’s residential property market up until about the end of the third quarter of last year.

They dominated some of what are often called the “big room” auctions where several dozen properties could be auctioned in a single day, and it wasn’t uncommon for them to account for around 70% of sales.

Often they were competing amongst themselves for properties and their bidding could be fierce. Sometimes it seemed as if the prices they were prepared to pay knew no limits.

Then late last year, just as the market geared up for the summer selling season, the Chinese tide went out.

Auckland now has a significant population of Chinese people, so there will always be some who are actively buying or selling properties.

But the numbers are well down on where they were a year ago.

Auctions that were packed with Chinese buyers this time last year are now much quieter and Chinese faces are often more notable by their absence rather than their presence.

When they are buying, they are more likely to be buying a home for themselves or perhaps their children than a pure investment property, and their bidding has been far more cautious than it was just a few months ago.

Often they will bid on a property only to let it be passed in, figuring that they may not face much competition from other buyers in post-auction negotiations.

With the odd exception, the days of the bidding frenzy are over.

This change in buyer behaviour corresponded with new restrictions the Chinese government introduced on the amount of money people could take out of China, cutting off one of the main sources of funding for property purchases by Chinese buyers in this country.

Around the same time, interest rates started rising and tougher loan-to-value ratio (LVR) restrictions on investment properties introduced by the Reserve Bank began to bite.

All of these factors began to weigh on market sentiment, which could potentially have a bigger impact on the market than actual drivers like interest rates.

The interest rate rises that have occurred so far have been extremely modest, with the average of the two year fixed mortgage rates offered by the major banks increasing from 4.35% when it bottomed out in May, to 4.84% in February.

That should hardly make a difference to property investors and won’t make any difference to those still on fixed rates, but it will affect market sentiment.

When investors see interest rates rising they know it will affect them at some stage, and when that’s combined with other factors such as higher LVR restrictions, they start pulling their horns in and the effects are compounded.

So who is left?

So with local Chinese buyers and other investors being more likely to be sitting on the sidelines now than they were a year ago, who is left in the market?

Three main groups – recent migrants who can afford to buy a home, people who already own a home and are looking at taking another step, either up or down on the property ladder, and first home buyers.

The first two groups remain very active, the last group less so because they are constrained by affordability issues in Auckland.

Some of the new migrants can afford to pay cash for a home, and many of the people looking to move up the property ladder are also well set up financially.

These are often baby boomers who have paid off their mortgage and don't need to raise another one to buy their next property, although they may need to sell their existing home to settle the deal.

Often they also own other properties, perhaps an apartment in the CBD for their children to live in while they attend university, or a holiday home and maybe an investment property or two.

If they have a mortgage, it’s more likely to be over the investment properties than their family home.

As investors have retreated from the Auckland market, these buyers have become much more prominent, and I believe that’s probably one of the main reasons why data recently released by CoreLogic showed a jump in the number of homes being purchased without a mortgage.

Although many of these people could be classed as investors because they own several properties, they are not necessarily adding to their investment portfolios when they make a purchase.

Many will be buying a new home for themselves and will not need a mortgage to do so.

And although prices in Auckland have started easing, they remain out of reach for most first home buyers, or at least for those on average wages.

So the Auckland market is becoming increasingly dominated by the wealthier buyers and this is showing up in the auction results which publishes every week.

These clearly show that homes in the more upmarket suburbs of central Auckland are selling more readily than those in the cheaper parts of town, such as the city’s southern outskirts.

Herd behaviour is also a factor at the moment.

Just as weakening market sentiment has caused investors to sit on the sidelines, the thought that the market has peaked has prompted a rush of new listings, as people try to capture top dollar for their properties before prices slide further.

This has pushed up the inventory of unsold stock over the summer months and created a buyer’s market in Auckland, as the smaller number of buyers have more properties to choose from.

The result has been falling prices, but it’s a slow leak rather than the bursting of a bubble, as vendors slowly adjust their expectations to a point that buyers are willing to pay, or in the case of first home buyers, a price they can afford.

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My prediction:
by Groen_mamba | Wed, 22/03/2017 - 08:08
Good info, thanks. Yes, I predict a median house price growth yoy end March of -2% based on LY March massive median increase.

Most overseas buyers look at top line growth when deciding to invest, so this will be even more of a deterrent for the NZ market, especially if there are still higher returns on offer in OZ etc.

Investors have been buying up in the regions, for example Hawkes Bay, properties near the main centers of Hastings/Napier for less than $300,000.00 with rent $350/week+ and an expectation of capital gains of 10%+ yoy for the next few years.

In respect to Auckland. Unless I see a price reduction in sections and cost of builds then you won't convince me there will be any significant drop yoy (this excludes rough parts of Auckland that will remain rough for the next five+ years).

If you want to find out who are buying properties with cash, then why don't you ask them? To save you the hassle, I have, they are ex-pats or people from overseas looking to possibly move here or at least have a bolt hole. The properties they are attracted to will be properties they may want to live in or provide their kids if they decide to come here for tertiary studies....

Its happening already , the market is usually right .

2017 will see a fall in migration under the new rules
Wage rates in construction will come off the boil ( thankfully)
Land developers may be forced to sell sections which have been serviced and holding costs are too high

The market is working , its self correcting

Without investors or FHB at the bottom of the chain, how long are the higher end property prices sustainable?

not any longer

Please explain how FHB and investors affect the top end market ? Thanks

If land in the more affordable areas drops in price, it becomes more cost effective to build high end houses in those areas rather than buying in the super expensive spots. So, you get gentrification of poorer areas, and that leads to the wealthier areas falling in price too. There's only so much premium people will pay to be in existing expensive properties.

So you're saying we gonna see high end houses built in the poorer areas that are going good down in value !
Don't think so

You may see some gentrification.

Yup. Ponsonby comes to mind.

When first home properties fall in value, the owners of those properties (last year's FHB) will not be able to move up the property ladder to a mid-range property when their pay increases and so on. Thus it might take a year or two.

When investment properties fall in value the pathway is more direct. Property investors got rich over the last 7 years and rich people own top end houses.

I'm following on QV via E-valuer for 4 properties in 4 different areas, as I have for five years now. The data shows a flattening of prices since July 1 2016 for all four properties. I find it disappointing the author selects a headline for this article which reads capital gains are on the brink of collapse. It's something I'd expect of nzherald or similar rags. It's also a misreprentstion of what the data is showing. Hysteria and hyperventilating over property prices makes for a good story, increase in readership, and potential uptick in advertising revenues, however it also irresponsibly adds fuel to a fire already out of control. Please improve your game

If prices are flat, then capital gains have collapsed to zero. The headline (or article) doesn't say prices are on the brink of collapse. I don't see the issue?

1) The headline on the home page reads "Capital gains on the brink of collapse in Auckland" - I've copied and pasted that.
2) Collapse means to fall suddenly. Over the past 8 months prices have not fallen, but remained the same.
3) The properties I'm tracking from 1 April 16 through to today are up 11% as per QV.

I gather you're not seeing what I am seeing, unnecessary misrepresentation on the part of journalism in a dangerous environment that should well do with out it.

Let's take a look at the REINZ data for Auckland, there's a chart here

At the moment, the annual capital gain is ~7%, largely due to the big rise last Feb->March. If prices remain flat from Feb -> March this year (and all the indicators are that the market is still running cool), this turns into an annual 2.5% capital loss. The article clearly refers to 12 month capital gains. I'd call +7% -> -2.5% a collapse, and we are on the brink of this happening.

Seems pretty representative of the situation to me.

It's representative of speculation, based on the 'if' narrative you've constructed. A ~9% decrease is not a collapse, its slightly greater than the +/-4% margin of error accounted for in political polls. Speculation, like political polling isn't an exact science either. Let's circle back in July and discuss the actual historical facts.

Sure it's speculative, but it seems like a good bet to me. Capital gains turning negative from +7% is a collapse. It's not a collapse in prices which is what you seem to be conflating it with. Whether prices collapse or remain flat for a while from here, I have no idea. The margin of error in a political poll is irrelevant as the methodology has no similarity. No need to wait for July, we should be able to verify the speculation in this story in about 2 weeks time.

Please go check the dictionary definition of the word collapse, and since betting and speculation seem to be your thing, perhaps the TAB might be a more suitable marketplace for you :)


No surprises here, but wait according to the "Government" the Chinese were not the source of the galloping house prices.. ?? Anyhow "Captured" my profit in March last year.. selling off properties (owned and rented for over 16 years) in need of major renovations.. a double win considering the huge building costs and in time spent in doing this. Getting people to quote was a mission, and reno prices out of this world. #dodgedabullet


Chinese RESIDENTS were buying with Overseas (not their own) money.
Can't say it any clearer.
The tap is now closed, no more money out of China.

As were students and short term visa holders.

And people on the other end of a broker's cellphone.

Just an amazing coincidence that the market turned when Chinese money dried up. The government has repeatedly told us that only 3 per cent of buyers are/were foreign.

You made a good call.

Better Things To Do now you can enjoy Punta Cana like me

LOL, Paradise is a little closer to home for me..

On a recent visit back to Auckland to visit my daughter, I couldn't help but laugh at all the half a million dollar crap shacks that have had deferred maintenance for at least the past 15-20 years, just by looking at the state of the roofs and outside exterior walls. Land prices are one thing, but trying to work out if a crap shack is worth saving, when the land is more valuable under the current climate is a whole different game. I would just prefer to walk away or hope that an earthquake swallows the house because that would be the cheaper option, rather than paying to remove it before re-building. The cost involved doesn't make any sense in the Auckland market now. The party is over and now the hangover begins.

You can check my comments on articles 3 months back
I said prices were going to fall back 1 year.
And I still say prices will continue to fall another year, back to 2015 (that's the plateau price)
Prices won't fall further down from Oct/Dec 2015.
I said.

Pretty sure given enough head winds in the Global economy they won't stop at 2015 prices..

Not sure, of course, let's sit comfortably and watch it happen

I also think it's likely that they will fall to 2015 and then plateau for up to a decade, if foreign property investment remains soft but other conditions remain the same.
However, I think further deflation could be possible if psychological factors, global headwinds, oversupply or reduced immigration come in to play. All of which are possible.

However, also possible that the NZD deflates and NZ houses will start looking very desirable again and foreign investment could be back, given time to work around the capital regulations in China.

I have friends born in the late 70's and 80's in Auckland. Professional couples with young kids, who have given up the dream of owning a home until their parents die (morbid I know). For their sake, I hope the market softens enough to restore rates of home ownership.

I wish I was that lucky.

Several siblings and my parents divorced before the boom and are now poorer than me.

Don't forget overstocks. I've always maintained there's no house shortage to live in (rent increases minimal), but there is/was a shortage of houses to speculate with.

This will drive prices down much further than 2015, as developers will struggle to maintain positive cash flow there will be a lot more distressed sales come through on new builds. When prices soften in this segment, watch the rest of the market tumble.

Pssss. . . . . pop

Rule 1 : Do not believe anyone can predict a market
I've seen & heard enough opinions in my life to validate my statement

True that but they can still make a prediction.
If people are predicting drops, I don't suppose it matters who gets into power as there won't be alot they can do other than somehow recover.
But if it doesn't drop how would the different possible governments affect it.


It looks like Ted's Chinese New Year was cancelled this year. Hopefully everyone was more sensible and gifted red packets to each other or small gold ingots. Luck is preferable to debt.

China has made it mandatory for mainland cornerstone investors in Hong Kong IPOs to repatriate funds when they sell their shares, a rule likely to hit smaller, cornerstone-reliant listings, four people with knowledge of the matter told Reuters.

The State Administration of Foreign Exchange (SAFE) has informed investment bankers and lawyers of the rule, borne out of government concern that cornerstone investment allowed large amounts of funds to leave the country and contribute to a decline in the value of the yuan, the people said.

China's Underground Bank Crackdown Risks Headaches in Hong Kong


Barfoots Auction Results this week (under the hammer):

Central Bays: 6 sold of 24 - 25% success rate
Epsom: 4 sold of 19 - 21% success rate
Manukau: 9 sold of 44 - 20% success rate

The top end of the market (e.g. Bays, Epsom) are no longer selling well. So it's not just the affordable suburbs feeling the pinch.

Top end of market is, Herne Bay, St Mary's, Ponsonby, Remuera, Mt Eden

Have you got Barfoots auction sales stats to support these areas are still selling just as well?

Just get yourself added to one of the Barfoots mailing lists!!!

21 of 57 sold in total.

A rough count of the affluent inner suburban suburbs (excl CBD apartments) was 4 of 11 sold.

Bad all round...

And pretty rare to be able to buy 6 bedroom villa on a quiet street about 200m from Eden Park, (even though it was a cross lease and total do up) for just $880,000, that's more like a 2014 price...

Triple wasn't the "prediction" by DubleD & Zachary that DGZ like Epsom would remain buoyant !
Yet another pair of predictors wrong.
In great company with the failed T Alexander who i well recall talking up the NZ economy at the very time taxi drivers & plumbers were calling talkback about a very sad business situation on the ground in reality land.

All very true NorthernLights.

A good piece of analysis. I think the expectations of capital gains has driven prices, and when they disappear many will exit the market. In terms of the immigration element, much of the recent net flows have been students, who can opt for very intense living and home stays. In the same context, higher rentals have kept many young people at home longer.

One of my concerns is that I suspect many of the people who entered the market in the past year are couples jumping on the band wagon and these are people who cannot afford the declines that are going to happen.

You've basically described a bubble

Don't worry, the Productivity Council say the taxpayer needs to invest heavily in Auckland. #INFLATETHEBUBBLE

Shhhh don't let the truth get out and spoil a good property spruiking narrative that most immigrants are wealthy non students

Several couples I know of in Auckland, early thirties couple of kids with money in the bank. They are in a position to buy some of the lower end stuff that is coming up for sale. They have said they're happy renting and will wait to see what the market does.

They're at the age where the have options of moving elsewhere too. Which makes more sense than buying in Auckland given Auckland's salary levels.

That won't last if Auckland prices keep falling, in fact the fall in the regions will be just about catastrophic once the bit of a backlog of Auckland exiters have settled somewhere else. In fact, they will be biding their time now on this news.

As a non property owner who plans to live in the regions for the rest of his natural, bring it on.

The regions will do better than Auckland, due to people leaving Auckland.


Great headline to draw the crowds Greg!
If you are a speculator and live day to day by these types of articles to time your market, you may be concerned!
For the Investor with long term's business as usual!

11k Auckland Property Listings for sale at TradeMe right now. Once we get that article that confirms prices are down year-on-year, expect those listings to shoot up to like 15k mid-May, maybe 20k by July


Chinese money and debt stacking junkies both muzzled. Good. Chinese and specuvestors have all been riding the upside. Banks tightening up, interests rates on the up, and Winston raising his sails (overseas owners register and more restrictions). Suspect if negative capital gains trend does indeed continue, banks will start asking the stupidly in debt/ interest only team for more equity, and some of the chinese will start bailing to bank their profit before the money hunting police catch up with them.

The property fundamentals text books were burned long ago. We have a real naked emperor moment approaching. Amazed the bulls can see it.

Can someone please explain to me as to where the overflow of migrants and those already congested into flats, rentals, garages etc, are going to live moving forward? If prices plummet I imagine not only the seasoned Investor being reluctant to sell but the speculator as well if they can't reap a profit. This may cause even further shortages of stock in the market. The initial panic dump will only go so far until prices come back far enough that big loses will be made and more sense will be to retain the those properties until such time as a profit is feasible.
Continued pressure from increased numbers into the country coupled with Aucklands lack of planning and after the fact efforts to fixing past/present issues can only lead to supply being squeezed to a point disaster, what happens then to those masses wanting to buy a house to live in? Will it go for bottom dollar then? Or those people people will creep back into the Auctions rooms once again, will we see investors back in the market to fund the huge population who either don't want to own and choose to rent or can't afford to buy?
Will this just be in line with the regular up and down cycles of the property market? Perhaps all this will contribute to the next boom down the track?

Only dumb money speculators will hold on to the property. Having your capital tied up on a 0% or negative return is bad. Eating interest expenses are also bad on speculation. The whole idea of speculation is to trade in the short term to take a leveraged gain, not to hold a bad trade. You realise your losses and then put the money in another investment or speculative trade.

Agreed dictator!
Only dumb money "invests" into something that is a speculation....
to quote Warren Buffet....Rule number 1...don't lose money....Rule number 2 ....don't forget rule number one.

Upside..... you claim long term ! Therefore you claim HOLD when in fact now the time has passed to sell and take maximum profit$$$$
Quoting Warren Buffetttt is not the same as acting like him

NorthernLights, yes hold indeed for long term investment, with property and stocks it's time in the market that counts not timing the market(thats more of a guessing game)! Warren buffet is a great investor because he does not speculate..... Look at the REINZ figures for the past 20 years, even adjusted for inflation the numbers look healthy for a long term investment in property with various boom and bust cycles. If you are basing your investment over a 10-20 year period chances are you may be better off than simply cashing out every time the going gets tough. I suppose it does depend on what each individuals idea of investing is.

This is assuming you have a reliable crystal ball that can show you the future. Who has one of those?

Well Zachary you are the one who has professed to know all !!
We presumed you had the crystal balls

Definitely not Bernard Hickey!! My crystal ball performs much better, just ask BH!

Anyway this is no surprise, anyone looking at the market knew this was happening months ago...

I don't think we will see much of a drop in house prices until rent drops or interest rates go significantly higher. The Zachary rule of thumb is that if the rent covers the mortgage interest of the house value minus 100k then the price is right. If a 650k house earns $500 a week in current conditions it is about right. Of course location considerations impact things fairly dramatically. The above scenario is for a house out South or West. The reason for this is that one can reasonably expect 2% inflation on the entire value of the house so your 100k can return 10% or more. It's not a super great return but it is better than having your 100k in the bank. High immigration levels, relentless globalisation and the appeal of key cities in the English speaking countries makes this a fairly safe bet.
Here is a good example:

Yeah dream on Zachary, rents are dropping too or haven't you been paying attention.

Sorry to be the bearer of bad news. I know you are emotionally invested in this. I could raise the rents on all my properties but I am a nice landlord. I know some people who I am trying to help out who are desperate to rent a place near where I live.
Upside above pretty much sums it up.

Ditto. I am in similar situation... but I won't raise just yet as I am too trying to help people.

By 'similar' do you mean 'the same'? =)


Oh landlords doing their tenants a favour ahead of their own profit...I need to rub my eyes and wake up because I don't believe it.

Doing Tenants a Favour, It does happen, I've done it in the past.. however surely it is still reasonable to expect "Market Rates". Anyhow I have learned to be skeptical.. one of the times I helped out "significantly" with cheaper rent (at the request of a freind) I found out the "man" of the house had had full time job offers that he refused so that he could pursue his love of the "Arts" on a part time basis.. leaving his wife to carry the load and support him and the 3 kids.. I had some words followed by actions and their was a "shift in his perspective". I mean what did he think it was.. "Paris" in the 30's.? Also turns out they had enough money for the deposit on a house, which they did after my words.. Tosser! Or was I the tosser?

You could have been a patron of the arts!

Yes patron of arts! Hats off to you ;-)

Incorrect Zachary. During GFC (2007/08) US rents predominantly held firm however prices of property got decimated.

Quite a different scenario with different rules and fundamentals. Owning a house or two to rent out is part of the Kiwi folkway. It's a lifestyle not a quick buck sort of thing. Crappy returns sometimes but we keep at it for the long term. Don't even bat an eyelid at losing a year's capital gain.

Exactly right. This is not the first time I have mentioned that we are in it for the long haul. For me, probably another 25 years, so it doesn't really matter how the market is of close to zero impact for me.


Difficult to reconcile this with your frequent crowing about how far above CV houses in your area are selling. You sure spend a lot of time talking about house prices for someone that isn't affected by them. Still, it's promising that you might now be able to join the party arguing for lower house prices for the good of the country.

Surely I am allowed to have hobbies? Researching on something I like as a hobby doesn't necessarily mean I am affected by it...

It's one thing to be interested in house prices as a hobby, it's another to openly celebrate when they increase.

I wonder if you suffer from the same cognitive dissonance I get sometimes with shares. As someone who is in the accumulation phase, I should be celebrating when share prices fall, but there's the temptation to pat myself on the back when shares I own increase in value. You're a long term investor, so cheap house prices benefit you, right?

Yes it is actually. I am looking for a rental up north around Puhoi at present ;-)

Puhoi! Why??

Rural locations are only worth buying in if the return is spectacular. There is a reason why you buy close to where people want to live and work... ie. so you can get tenants that pay the rent...

I have someone there who can look after the property for me, so it makes sense to buy a rental there. And you'll be surprised how many Puhoi residents are commuting to Auckland for work daily.

Originally we were just reporting the facts that prices were generally hitting certain percentages over CV and increasing. The chatter about imminent house price collapse has been going on for years and any comment that recommended buying was generally shot down with much abuse. The perception of "crowing" was more a I told you so you wouldn't listen sort of thing. Double digit house price inflation has put the long term landlord in a good position because he now has a reservoir of equity that exceeds the normal rate of gain giving him a buffer. This is probably quite an alien concept to a sharetrader who would recommend selling everything immediately last October. However if landlords thought like that the landscape would entirely change and it would be a different game. House prices would be much more volatile.

"we" is that an admission of being in cahoots with DGZ??

We don't ever conspire outside of this forum. That's the gospel truth.

We are who we are and we are here with you.

How is it possible that you reply to Zach's comments within 3 minutes of him posting his own comment? It's as if you know the EXACT time he'll be posting...

this comment I'm replying to, and the one above, are 2 examples just within the last half hour:

by Zachary Smith | Thu, 30/03/2017 - 10:33
by Double-GZ | Thu, 30/03/2017 - 10:36

by Zachary Smith | Thu, 30/03/2017 - 10:37
by Double-GZ | Thu, 30/03/2017 - 10:41

Are you logged on as Zachary Smith on a laptop and as Double-GZ on your mobile phone?

How is it impossible that we are logged in at the same time as we are two different individuals?

We are just like permanently online - wired into the matrix. Also this article is of keen interest to us.

We have somehow been assimilated into the same collective, and can sense each others' presence from time to time.


If you guys were in a movie it'd be called Me, Myself and Interest.

...or Dumb and Dumber.

good one, triple... looks like I was playing the man too,,, apologies!

I actually don't mind the comparison. It made me chuckle.

me too...

or Beauty and the Beast

Hahaha that's actually a funny comment, not gonna lie!!

RickMulach you nailed him
There's no doubt Zachary & Double-GZ are real estate spruikers
Sadly firms like B&T used to allow auction bids by their own agents to boost the auction price I remember seeing it reported. I have no idea if this isn't still the case but I do know the internet blogs are used for business and I find it troubling that these two(or 1) are allowed to operate herein such a unchecked fashion

You are 100% correct NorthernLights. I have no doubt Double-GZach is a Real Estate spruiker. Certainly provides comedy to the comments section on this site, I doubt anyone with half a brain actually takes what he says seriously. Definitely drives the page views up, I can tell you that much. More clicks to, more ad revenue. But they're both in IT so they should already know that.

Yep you're totally right NothernLights, they certainly have a lot more invested in the market than just property.

Because they are both efficient business people

its not really business, more pleasure, when fooling around with each others testimonials

Zachery - lets get to the bottom of your true macro-economic understanding. If rates in the US don't go up (which reflect global rates), how are pension funds going to make their promised return of 7-8%? Are you expecting the Fed to allow pension funds to default just so borrowing rates stay low?

You can't have it both ways - if rates are low then pension funds get killed. Sooner or later rates must go up or pensions funds will default.

Can you please explain how global rates will stay this low and not force pension funds to default?

Zachary says "Don't bat an eye at losing a years capital gain "
If that's your thoughts then you are not a businessman
The fact you kiss goodbye a massive gain !
I'm going to the beach I can't stand stupid speak like that Zach

It's not "stupid speak" as I explained, this is not the share market where stocks can be cashed up more or less instantly. The top 10-20% of capital gain is kind of ethereal as I have noticed when selling property.
Honestly I am starting to think they are right about the long tern affects of leaded petrol.

The other day you wrote

"I don't recall either me, DGZ or THE MAN putting people down. We only have the greatest respect for our fellow commenters"

Yet here you are insulting someone.

I agree with Zach, if you're an investor, as opposed to a short-term speculator, it doesn't matter much if values go down for 1 year compared to the many years of gain, actually, it's to be expected. You will gain far more by holding your properties rather than buying and selling them regularly. For starters there are costs associated with selling and buying houses and then you get classified as a trader by the IRD and you want to look after your tenants.

It's not "timing the market" it's" time in the market"

The same could be said of the share market but people like Dr Smith and TM2 seem to like to deride anyone who invests in the share market.

Hi Zach I think you are spot on. I am sticking to what I have always believed i.e. house prices in good areas/suburbs will always hold their values (yes location location location). Despite the slowing in number of days sold, these suburbs will attract a different set of buyers, and the same goes to the rental market. Great commentary Zach.

I feel the need to point out that specuvestors are not landlords and as they sell the properties don’t disappear. I know it’s anecdotal be I see empty (most likely landbanked) houses all over the place. Now to Upsides point there will be a reshuffle but I think we will actually see properties come on the market there have been empty for years or at least “under employed”, can't say what this will do e.g. net gain, net loss?? I'd say it will have a small impact to supply.

The issues with your rule of thumb are that interest rates may continue rising meaning rent doesn't cover interest and capital gains cease over the medium or even longer term meaning the 'investment' (being generous with the term here) is dead weight and costs the investor money.

I understand in your case that you're assuming 2% price inflation, but consider how many years of 2% price inflation it would take to recover if prices fall 20% in the year or two after purchasing. I'll think you find the average mum and dad speculator will sooner sell than feed a bad investment money for 10+ years.

I prefer to work with data rather than cherry picking.

Hard to see how you could cover your mortgage interest rates even on the gross yield, ignoring costs? Fingers crossed that house price inflation shows up, eh?

You can find individual examples of properties where the figures work out and you have a 100k to sink long term. I gave an example above. It has never been easy though. The data you have given shows yields on the total value of houses in good and bad areas. It is much more complicated than that. Landlords use their original purchase price.
This is why such activity is almost the exclusive preserve of hobbyists. To a corporation it doesn't make sense, does not compute.

You're quite right, using the original purchase price does not compute. How much you paid for something is irrelevant to whether it currently represents a good investment.


Hilarious ZS. In a downturn, anything goes... I once bought a property returning 40% PA! (In Dunedin and yes, in the 21st Century!). It didn't matter that it was essentially a money printer, if there's no credit, no buyers and lots of sellers, all hell can break lose. BTW interest rates were 6% at the time...

have I got this right?
650k house buy price, 550k house worth. that 10% you still have to pay rates, insurance, so brings it down to 5% lets say. But that's only realise it in the future. Right now it would be neg cashflow as rent would just cover interest but not rates, insurance, maintenance.

rough work:
> 650000*.04
> 26000/52
> 650000*.02


I just wanted to say; Excellent article Greg, thanks for having the courage to connect up the dots and finally realize that the absents of Foreign Buyers and their credit fulled capital has had a most significant effect on the NZ and more over the Auckland property market (And in the global gateway cities).

Not surprising that Auckland is headed for a serious market correction given how little infrastructure we have. I still think we're looking at a -20% drop in Auckland's house prices and that WILL effect the currently more expensive areas too. Which are being currently propped up by local Investors cashing up and buying in their retirement areas, that won't last for long.

I don't think people in Ponsonby are going to start selling their properties for $350k less than they bought them for....I wouldn't be so sure if you bought in Otahuhu however...


They don't need to, the bank will

Wanna bet??

Ponsonby will be down 20% too! It's already down from the peak, just not the same houses reselling at losses yet...

I feel for the owner-occupier buyers who took on properties before the LVR restrictions came in. If they went in with minimum deposits and interest rates are up at the time of re-financing - it doesn't bear thinking about.

And we don't know how many of the recent bulge of Kiwis returning from OZ already owned houses in AKL so would not be buying. Family members who are renting a house off Oz based Kiwis have been told their landlords might be returning and want the house. High migration (net of students and short term work visas) does not necessarily cause an equal surge in demand.

Here's how it works. The conservative long term hobby landlord anticipates 2-3% gain in house prices. That gain is on the entire amount, equity plus mortgage. Rents largely cover the mortgages. Equity is earning 10% a year over the long term and you are constantly adding to it. These are the fundamentals. The loss of an entire year's capital gain is expected. After twenty years one or two properties can be sold turning all the others into a positive income generating business.

The next time any house in any street sells at a lower price, it will re-rate ALL properties in that street/suburb/town, regardless of the owners individual intentions. That will fundamentally alter the capacity of current owners to buy/relocate to another property as lenders will reduce the amount of financing they are willing to contribute. It's the reverse of when property prices rise, for the same reason. But....stressed owners can ride-out property prices rising. They are going to find out doing so in a falling market is nigh impossible. And then, the next time any house in any street sells......

Exactly, sinking prices kills investment sales - not because people don't want to buy, but because banks won't lend...

The cycle is already underway, hold onto your hats...

That's why its called a cycle. I hope all the property owners out there have good equity!! Some certainly won't. It's now that many people will understand the purpose of the RB's LVR rules.

Many people have said it before : there will be tears..

When you have 64(corrected) billion of interest only loans
and property prices dropping (negative equity) how long before the banks start to call in the loans?
OBR event incoming?

This is crazy, there's $50,000 of mortgage debt for every man, woman and child in this country. We have totally become a peasant society again.

But the ones at risk are mainly those with the share higher than 80% LVR. So, no where near that bad - but still a lot of mortgage debt given our collective debt to income ratios. Major job losses across one or two sectors are even more a risk factor than LVRs. Particularly risky where two incomes are needed to service a household's outgoings.


"One of the biggest changes to affect the Auckland market over the last few months has been the relative absence of local ethnic Chinese buyers"

So everyone accepts that it was the Chinese buyer that were responsible but still the denial from the government and media also at that time, though everyone knew the truth.

Even now if you go to the real estate agents they say that buy now before the Chinese buyer comes....if do not believe, check with any of your friendly real estate agents.

It is time to bring the correct facts to the table. If one has to find proper solution, one has to analyze the mess without any bias but that is not possible as long as national is in power.


So given everyone else seems to openly acknowledge it - including many / most in the real estate sector - are National simply openly lying to the people of New Zealand?

Why do they have so little regard for Kiwis?

Ummmmm maybe because the dumb ass kiwi have voted them in three times, once maybe, twice, that's pushing it, but three times definitely proves deaf dumb and blind. So they run with it, can't blame them for that.

Picking on a particular race of people tends to lose way more votes than it gains.

They're just like the lying Clinton media...

all i have heard from auckland property investors for the last year that house prices could or will not fall
"not likely to happen"
"not certain or likely to happen or be true"
"not likely to happen"
"not likely to happen or to be true"
"so unlikely as to be difficult to believe"
you’ll be lucky
"used for saying that something is unlikely to happen"
there is no question of something
"if there is no question of something, it definitely will not happen"
long odds
"if you say that it’s long odds that something will happen, you mean that it is not very likely"


Great news Labour will ban all foreign buyers buy existing properties
This includes:
- non resident foreign buyers
- resident foreign buyers (students & temp visa)
- any company/trust where a foreign person has 25%

Spread the word !

Finally a party looking out for NZ Citizens & Permanent Residents.


That's wonderful! Are you sure do you have a link Joe, they get my vote if they do have that as a policy and it's about time that someone is prepared to stop the rot.

Is that true?

I've only seen before that that'll limit them to new builds.

I wrote to them asking if they'll consider a Stamp Duty on purchases from short term and student visas, foreigners, and companies and trusts with foreign ownership / beneficiaries. No answer yet.

I have no issue if they limit to new builds as least this will encourage supply which is lacking.

The important aspect is that foreign buyers will relate to both

Resident Foreign Buyers
+ Non Resident Foreign Buyers. (Students & Temp Visa)
+ Companies & Trusts (25% foreign interest)

“Nick Smith thinks building on park land is a solution to the housing crisis. But he refuses to do things that would actually make a difference including banning foreign buyers, taxing speculators, stopping state house sales or launching a massive government building programme,” says Phil Twyford.
not sure if that is exactly what you want?

As a country we have a number of serious issues that need to be addressed. But the situation appears to be a bit like attempting to fix an arterial bleed with band aids.

We're treating the symptoms not the disease.

Because fundamentally this National government is still in denial that we have any disease.

Everything...everything, is a sign of success!

I'm sure even our long waiting lists for non-urgent surgery are a sign of success. I mean, they show how good our surgery is, so good that many, many people want it! How is that not success?

This should give all the serious property investors something to think about come election time. National have bleated on the 'supply' and done nothing on demand. Heck, the Chinese government is doing more to quell their citizens buying up big time overseas.
So if Labour bans purchase of existing houses to foreign buyers- less competition to investors
-if bright line test extended to 5 years- less speculation, better for long term investors
-if changes made around negative gearing(still being looked at?)- no issues for the long term investors like The Man!
-A Kiwi build program would see more FHB purchasing new places, therefore lower priced existing houses purchased by investors with higher yields.
What's not to like about that?

So they will ban non-resident buyers. Not what was said above.

Labour promises to deal with the China FTA which gives Chinese nationals the right to be treated no less favourably than any other nation. But the Nats gave South Koreans the right to buy in their FTA. It's scandalous. David Parker wrote about it a few days ago.

Their housing minister has confirmed this. Their website needs to be updated to reflect this policy.

It will bring the NZ "foreign buyer" definition in line with the Australian Governments.

Foreign purchasers
You will be a foreign purchaser if you are a foreign natural person, a foreign corporation or a trustee of a foreign trust.

Foreign natural persons
You are a foreign purchaser if you are not:

A citizen or permanent resident of Australia,
Or a New Zealand citizen with a Special Category Visa (Subclass 444)
Foreign corporations
A foreign corporation includes:

Corporations incorporated outside Australia, and
Corporations incorporated in Australia if a foreign natural person, another foreign corporation or trustee of a foreign trust has a controlling interest in those corporations
Foreign trusts
A foreign trust is a trust where a foreign natural person, foreign corporation or in the trustee of another foreign trust, has a substantial interest in the trust estate of that trust.


Gees looks like Labour is getting my historically Blue vote this year. thought I was going to have to go to uncle Winnie


Will Vote anyone but national.

This will seem to be the story in next election unless better sense prevails and national acts now but highly unlikely as 9 years of power has blinded them with.............

Not a minister just yet !

Hasn't stopped rampant house price inflation across the ditch. Ways round it will always be found.

Brilliant timing - 'house prices continue their fall of recent months. Labour says we should destroy even more of Auckland home owners equity by banning foreigners and really collapsing prices'. Bound to give them a landslide of support.

Perhaps more to do with with winnie wooing.

Wow. So on this basis standard residency visas would also be considered "foreign buyers".

Great article, and about time someone gathered the info in one place and told it like it is.

"So the Auckland market is becoming increasingly dominated by the wealthier buyers and this is showing up in the auction results which publishes every week.

These clearly show that homes in the more upmarket suburbs of central Auckland are selling more readily than those in the cheaper parts of town, such as the city’s southern outskirts."

Little concerned about any assumption that more upmarket suburbs will continue to hold their price or sell readily.

Generally, when the market begins to rise, it is the more expensive houses/suburbs that rise first and then the cheaper house/suburbs are dragged along/follow. The rationale for this is quite simple; it is due to price differential. When the market falls, it is the cheaper houses/suburbs that fall first and then followed by the more expensive ones. Again, due to price differential.

As the market is just beginning to fall, it is natural that this has been noticeable in the lower end of the market.

It is probably also worth looking at the drivers. Possible negatives affecting house prices are: interest rates likely to have more upside, foreign buyers not only not buying but selling up due to the unlikely lack of future capital gains, unlikely to see the spring bounce due to uncertainties around the election, and there is increasing uncertainty about world events especially political events in the USA. A probable positive is continuing high immigration (which is most likely affect the more affluent suburbs) but this could readily change with improving production in China and consequently the Australian mining economy picking up again.

Put yourself in the place of someone looking to moving up the housing ladder. With the uncertainties in the future of the housing market and other political and economic factors and the likely increasing mortgage rates; are you going to looking at moving up?

I think that we will see prices in the more affluent suburbs pull back over the winter.

Quoting you printer:
"when the market begins to rise, it is the more expensive houses/suburbs that rise first... When the market falls, it is the cheaper houses/suburbs that fall first and then followed by the more expensive ones"
So you say the more expensive suburbs rise 1st and decline last, sounds a lot better to me than the cheaper suburbs which, by your own definition, rise last and drop first

Good point but I don't agree with your sentiment.
You wont miss the bang with the drop in the affluent suburbs; up bigger, up longer, but then down bigger. Prices tend to be more volatile in higher socio-economic suburbs in times of property cycles such as in 2004/7.
However, the most volatile of all areas are seaside holiday homes as swarms of middle income people leverage of the increase value in their homes to buy the kiwi dream to go with their new found wealth. Unfortunately when the market tends to drop, they all need to get out at the same time especially as interest rates rise.

Things are different now. A large percentage of auckland houses which sold for >$1.5mil in the last 4 years have gone to Chinese investors. It's difficult to determine how they will react if prices fall by 20% and the NZD depreciates by 30%. They may be happy to sit on that loss.

Reckon they'll hold

Primary objective was to get cash out of the middle kingdom and into land somewhere

Yes but they have the money out. Selling the Kiwi property doesn't mean the money has to go back to China. They could look elsewhere for good yields or housing inflation.

Lots of demand and lack of supply upside in the last 10 years. Lots negatives coming now. Professional investors will have sold the poorer assets in need of maintenance to increase equity last year.

The carnage will be the specuvestors who have been drinking bottles of bubbly and slapping themselves on the back for how great they are, and have missed the fact that things have changed big time.

End of the day this needs perminantly fixing or we will simply export another educated generation to Queensland to join the 500k 18-35 year old kiwis that are already there. The number one thing driving them there is housing (nice beaches accepted). I guess we could simply import another massive group of chinese and indian students and then their familys like National has elected to do to fill the hole of youth workers.

We are are a democracy. Pick what future you want, but housing is the crux.

Dead right. Any young Kiwi family wanting to buy their first home would be insane not to move to Queensland once the Aussie economy picks up again. Auckland unaffordability 10:1, Brisbane 5:1 and frankly the homes are better built than most of ours.

I have heard from tradesman in Australia that the houses built in NZ are superior to Australian built houses.

I have worked in Aus and been told the same by builders, the framing and trusses are made of thinner calibre timber. Part of it may be due to less earthquake risk.

And it's not just us: Transparency International: Only 1 in 5 London Homes Are Sold To Locals

Good article, even if old news. As I said here 2-3 weeks ago a senior RE figure told me prices down around 10% on average, and theres a chance that could hit 15-20%

Property prices are ALWAYS sticky on the downside. The GFC was the biggest event since the great depression and solid cities (auck, welly, chch, palmy even) fell less than 10%. Vol goes down, but people have a deep faith in property in this country and no one wants to sell in a dip...

While Auckland flat lines for 10 years, equity rich aucklanders with a few brain cells will invest in growing, cheap secondary cities, and get another 50% plus gain on the banks borrowed money as these secondary cities play catch up. Buy PN.

LOL I think you have been smoking the koolaid, Yes NZ didn't have a big dip post GFC but that was an exception not a rule. The bad debt that has accumulated still needs to be liquidated. The regions are no different unless jobs and wages are suddenly going there post crash... Good luck getting a 50% gain, try a 50% loss. Fools and their money...

A 250k Palmerston north house, up 50% is 375k. FHB's can use govt. subsidies up to 400k!.. hence the slow grind higher to this govt. supported price level as FHB's compete over extremely limited stock in this booming Uni city.

At 375k this is still affordable, and even within 3-4x household income.

Is all about picking the right city to invest in during this part of the cycle.

PN population growth is around 1.1% per year, consistently, currently around 2% due to immigration, similar to wellington city - both have housing shortages and rapidly rising prices in spite of whatever is happening in the overcooked Auckland market.

you might want to check those figures, house prices went from + 12% to - 10% in 2009 that is 22% change

What's PN ?

2006 reference; Awesome find. A washed up comedians view from a tourists point of view.

You buy boring, under valued assets with strong fundamentals to gain wealth (buffets core strategy).

You forget PN has NZ's largest Army base, Big airforce base with Singapore airforce about to move 600 families over to use the facilities in Ohakea.

Largest Midcentral hospital between welly and Hamilton - aging population means PN sucks in ppl from all the 1 million who live within a 2 hour drive, esp though rural towns where age means a well developed city with EVERYTHING you need becomes a must.

Most importantly, its still cheap, its still coming from a low base, and even after another 50% onto of the 20-odd% up since I started recommending (and buying there myself) will not be hitting affordability limits - govt funding will mean 400k will be the price frustrated FHB's will end up paying as they use grants and kiwisaver to essentially get a free deposit of 40k (10% under welcome home loan) - and they can enjoy the quarter acre dream with room for their kids to play, and the best schools in NZ (PNBHS in particular).

Buy PN real estate

Just STOP now! You are embarrasing yourself. Nobody wants to live in Palmy! And nobody in Palmy needs them buying houses!!!!

And I need to add that Palmy does NOT have the best schools as far as education goes. I left Palmy with my daughter just before she started intermediate and if I had not of moved to Auckland, she would most likely not have made the grade into Auckland University. The schools in Palmy offer limited subjects unless you are willing and able to pay for private school fees!

The last true kiwi lifestyle city remaining - 'Olde NZ' - time to think, time to live. 100k people, similar size to Tauranga and Dunedin but you'll never see it hit the headlines, which is great, flying under radar and making buying investment properties there under 300k still currently possible

Best buy is in Dunedin not Palmy.

Prices would have fallen much further in Auckland with the GFC but the RBNZ slashed the OCR from around 8.5% to 2.5% and reflated the market. It's not in the same position now.

Bit hard to replicate that this time round with the OCR sitting at 1.75% though.

Gee thats aweful.
Apart from the Aussies have there beeen any slipups that crash someones grid, Im being lazy and not researching. There was the mess inthe US that occured befor wind and solar were even considered. The one that took out the NE states.
I trust our NZ engineers have a handle on it and if they dont it wont belong before houses that can will leave the grid.



Greg, as someone who has actually been in this market for the last year or so I can confirm that everything you write is absolutely spot on. Key and English tried to fudge the statistics by trying to claim "non-resident for tax purposes" buyers were the only foreign buyers. Absolute rubbish. My personal experience was in late 2015 about 70% of people at Barfoots auctions were Chinese and it was evident from their behaviour about half were buying on behalf of someone else. Since they spent considerable time on the phone speaking Chinese it would be a fair deduction they were foreign Chinese buyers. Market sentiment has changed and the fact NZ now has the world's most unaffordable housing has dawned on most people as being absurd so many have decided to wait for a drop in prices. Regrettably there is still a ton of Chinese money out there trying to cheat the Chinese tax authorities and National don't care much about the pain experienced by FHB's so my guess is at some point the Chinese will come back in. I now truly believe the last thing Bill English wants to see is affordable housing in Auckland as it would upset his rich backers.

And this is incredibly frustrating. It seems incredibly dishonest.

All the more frustrating because Bill English is the first to stand himself up as a good Catholic. Bill, Bill, Bill..."Thou shalt not lie!"

Too true, Rick. And 'thou shalt not double-dip either', but his faith and beliefs didn't stop him, so how can one believe anything that comes out of his mouth these days. John Key saw the light, had an epiphany you could say, and got out. He knows trouble is on the way.
The thing is though, I don't get it. Why all the obfuscation? What is the agenda? I can understand Labour and the Greens; they have an ideology they try to adhere to, but National? It's a real puzzle in my mind. Perhaps someone could enlighten me!

At it's heart I suspect lie two things:

1. They don't want to admit failure on housing

2. Selfish interest: a) their core voter bloc are those benefiting from house price rises, and b) they themselves hold quite the portfolios in many cases too.

I reckon they've been pretty happy to benefit from the power and money, despite the fact it means selling out the young and upcoming generations of Kiwis (who haven't been voting anyway).

What else but a desire for money and power, that's greater than any ambition for the long-term good of the country?

Yep, I'll go with that. Hopefully the young will see the error of their ways and vote come September.
If, (some will say 'when') National lose the next election it will be interesting to see who of their current crop will retire! I can think of 5 of their current top ministers who will take their substantial retirement benefit, 6 if you include the current speaker.

True RickStrauss - and more importantly if they admitted there was a housing problem, the expectation would be that they should take responsibility for it. But the problem about that, is that if we do infact have a bubble, there is nothing that regulation can do about it. You just have to let the market do it's thing. Either way National lose:
1. They take responsibility for the issue, introduce new regulation, causes crash - economy tanks. National lose election.
2. Do nothing. Market remains out of reach of average kiwi FHB. Too much money spent on housing debt. No money left for useful spending. Economy shrinks. People lose jobs. Dissatisfaction from public. National lose favor with people. National don't get elected.

National and the supporters are living on false hope that can only last so long. Act and there's a good chance that could be the tipping point for the market - which they would then be blamed for. Do nothing, issue doesn't go away, and the 'don't have's' eventually outnumber the 'have's' - again they lose.

At least we know we can lay all these negative outcomes at the feet of John Key and Bill English.

They acted knowing exactly what was going on. This is their legacy.

It'll be a travesty when John Key gets his knighthood. I thought they were supposed to be given for service to one's country, not just to oneself.

I can't see him getting a knighthood especially if you consider what he promised to deliver before getting elected to what he actually delivered.

I am not sure he left any legacy other than extremely high house prices due to government inaction.

So Support and Vote for change.

I think it's a good time to wait. If Dec last year was peak (12 O'clock) what are the indicators that we hit bottom (6 O'clock)?

Unfortunately no-one is really that good consistently to predict the future. The best way of knowing it was 12 O'clock, is to recognize when its now 12:15. The same way to know its 6 O'clock.

Melbourne and Sydney and Brisbane are still up. So is Toronto and Vancouver is going up again and the Canadian Hamilton is still up. Seattle is still up, Hong Kong is still up.

Any so-called global disappearance of "Chinese" capital investment of which you speak appears to be not happening.

Forget about the Chinese.

What is happening in Auckland is entirely a local phenomenon. People no longer wish to live here.

So where's you're evidence?? When the figures clearly point to foreign investment having distorted the property markets in all those cities? And where's your evidence that Vancouver is going up? And don't use yearly figures that's Zachary's trick.

Here's a nice graph for you; See that big red line that drops off sharply after Oct 2016, that's Greater Vancouver! After the Foreign Buyers Tax which resulted in -40% sales drop.

Here's another interesting article for you: How Vancouver got its housing bubble under control: a lesson for cities like London and San Francisco

You're a month out of date - Vancouver is going up again.

Canada had its biggest monthly increase ever in February 2017 and Vancouver was up 1.4%.

Where is the global slowdown on Chinese investment?

From your own source:

A red-hot housing market in Toronto has raised concerns in recent months and prompted talk about a foreign buyers tax like the one instituted in Vancouver.

The B.C. government brought in a 15 per cent tax on foreign buyers last August.

Prices in Vancouver, while up in February compared with a year ago, are off their highs set in September as measured by the Teranet-National Bank index. The number of sales in the city has also decreased.

That is my point, there is no global lack of Chinese investment $. Toronto is running so hot right now that they are thinking of bringing in the BC style 15% tax. And even Vancouver went up in Feb 2017, in spite of having that tax. And Seattle and Melbourne and so on.

This column is saying the reason for the fall in Auckland in Feb 2017 is due to Chinese purchasing coming to a halt. And that the halt was caused by a change in Chinese foreign investment rules.

Yet we can see there has not been a slow down in global Chinese investment. Therefore there must be another cause for the Auckland property market falling - not the Chinese.

I think the reason the Chinese have stopped buying in Auckland, is because it is no longer a hot market. I think that the underlying cause is that people are leaving Auckland (as you and I have both contemplated doing).

Ah yep, I see. It's a fair argument, if the Chinese demand is not slowing elsewhere. Maybe they've decided Auckland is poked too.

....or the Chinese were never in the market to the extent that people believed they were and the real culprit was New Zealand "investors". Now that their funding has been curtailed the "pressure" has gone out of the market.

Well the only problem with that is that the Auckland 30% LVR restriction for Investors was first put in place in around May 2015 and the market just kept going UP!

Though it did cause the pushed Local Auckland Investors (Boomers mostly) to push out to the provinces such as Hamilton, Tauranga, Queens Town etc...

The only other dip that happened to Auckland in Oct 2015 to Jan 2016, when the IRD requirements came in to try to keep track of Foreign Buyers and to make sure they paid CGT.

So yes it is Foreign Buyers that have massively increased the Auckland property market, there's NO doubt about that.

While true the market kept going up the LVR changed in 2016 and the banks changed the lending rules. Before they would be quite willing to lend to anyone - now that has changed. Because several things happened at once it is very difficult to sort fact from fiction. Don't forget the slow down started to happen in October that was before the clamp down by the Chinese authorities on money leaving the country - and would expect some after run. This didn't happen. Additionally other parts of the world are still running hot ( if you believe what others are saying).

The vilification of foreigners makes them easy scapegoats with no real hard evidence. A few weeks ago it was reported that in NSW around 11 percent of houses were bought by foreigners

I suspect that it is a similar percentage here.

Additionally only Australians and New Zealanders are able buy existing property in Australia yet the market is "hot" - investors are driving the market not foreigners.

Humm well I remember looking in to an investment property for Auckland in summer 2015 and being turned down for a mortgage, even though I had a large amount of capital. It due to my working on a short term contract at the time, since the larger International IT company that I use to work for had closed down due to Auckland being too expensive and the NZD too strong. So I can assure you that the banks were a lot more restrictive to resident Investors.

I do think that China has clamped down on money laundering quite a bit and is very likely to keep it's capital restrictions which is a very good thing, for them and for us. Hopefully they'll now be more interest in investing in people instead rather than just things.

Vancouver's Average House Price Drops By Nearly One-Fifth

Some $1.36 billion changed hands Vancouver’s market in January, compared with $2.8 billion a year earlier.

B.C.-based mortgage lender Dominion issued a warning recently that newly-enforced currency rules in China could put a damper on Vancouver’s housing market, which has seen a boost from foreign buyers in recent years.

As of last month, Chinese nationals who request a currency exchange will now be required to sign a declaration that they will not use the money to buy property, among other things. Anyone who violates the rules will be banned from currency conversions for two years, and will be subject to a tax audit.

While I don't doubt what you are saying and agree about China clamping down - I think that the Chinese make a convenient scapegoat when the true culprit is just a little close to home.

It's not a case of 'scapegoats' it's just a case of freely available credit. A similar thing happened in Europe mainly back in the 90's when the Brits started buying up property overseas (That included NZ) but that was more of an emigration thing coupled with property investment, but a least they were renting out those properties.

More recently the more freely available credit with extremely low rates from Asia has encouraged bulk property purchasing resulting in a lot of overseas empty homes, that has drastically increased property values for short term gain by restricting home availability. This has led to destabilizing certain gateway cities economies forcing them to introduce new tax measures for Foreign Buyers.

This has been demonstrated over and over again.

We'll be able to judge once we see what Auckland does relative to the rest of the country.

....and what happens in the rest of the world.

I think it's both, definitely. I know enough people in banking and real estate to have heard plenty about reduced demand / ability to buy from China.

I think that the global boom continues and that the places that have fallen in the last 4 months are due to local conditions:
- Perth has seen the end of a mining boom that had WA overspend by a shedload.
- Vancouver created that 15% tax on foreign investment.
- Christchurch as the rebuild is ending.
- Auckland as more & more locals contemplate heading for the exit - or is there another reason?

Here's evidence and and example that Chinese investment has run out of credit, held off by their own government.

China’s Army of Global Homebuyers Is Suddenly Short on Cash

And by the way; if there is an increase on the Canadian side it's more likely to be from Americans moving from the US to Canada to escape Trump.

And the continued strength in Australia is also Americans? And why aren't we knee deep in Yanks, this place is warmer than Canada?

The Chinese (and everybody else) invest in hot property markets - end of story. When we had a lot of Chinese investing here it was due to us having a hot market. We no longer have a hot market, hence the Chinese aren't buying, it is not because they have run out of money.

The simple reason why we're not 'knee deep in Yanks' as you put it is due to them preferring to be closer to home with all the comforts of home. Plus we can't offer the high salaries that the Americans are use to.

But saying that there actually has been a bit of an increase in people from the US emigrating here, though they tend not to be the cashed up Americans who can afford to purchase a home here (Well not the ones who work in IT anyway).

I think there is a lot of myth making going on with very little in the way of hard verifiable facts.

Here you go, re Americans plus other immigrants leaving to go to Canada form the BBC:-

Canada's immigration website crashes during US vote

Is 'Trump-effect' to blame for US students fleeing to Canada?

Canada's Immigration Minister: System Is Dealing with Fresh Wave of Refugees

Most of this is pure speculation - not fact or proof that people are actually moving to Canada.

And the rising prices in Seattle and Portland are what? Canucks fleeing Trudeau?

Places that went up in February: Melbourne, Brisbane, Sydney, Seattle, Toronto, Vancouver, Hamilton, Miami, Portland, Hong Kong, Queenstown and so on and so on. Cash is cheap and the global property boom continues.

Cities that went down in February: Halifax, Perth, Auckland, Athens.

Auckland belongs to a very small club of highly unattractive investments. We are so high cost/low return that investment is unprofitable even now when money is virtually free. Thanks Len Brown and Phil Goff for making land costs so freaking high.

I think the issue is that cash is going to be less cheap! Global interest rates have to normalise or we will have pensionageddon.

House inflation fuelled by cheap debt is without question what we have seen. However, having huge debts when interest rates rise is a very different situation.

People in the US are currently getting a good return on normal investments so they don't need to invest in NZ real estate. The only people from the US wanting to move to NZ are going to do so for the lifestyle as you can make much better salaries in the US. I'm a NZer in that camp I want to move back but right now with a high exchange rate and the housing market looking like it's dropping quickly I'm better off to stay put, let house prices drop and hope the continued Fed rate hikes push the NZ dollar down.

Hi Unaha-closp. Yes you are right about Seattle; my son works there and i just helped him buy a home. He tells me the Chinese have now moved in there too and driving prices up. He bought across Puget Sound a nice 4 bed home on about 1/4 acre site with view of the water, huge garage, 2 lounges etc etc for US$385k. Seems the Americans can build for a fraction the cost of us here.

You will good a nice place in Upper Hutt or NAPIER for that sort of money

I think you might be a bit out of touch with Upper Hutt prices there Nimbo.

This is the cheapest 4 bed house currently for sale in Upper Hutt. It's $350k but its description is "renovators dream" and needs lots of money spent on it.

A nice place in Upper Hutt now is over $400k, many well over.

I suggest reading up rather than issuing declarations.

Economist, for example.

Delboy1953 - I'm curious, how much will your son be paying in rates / or tax as they refer to it up there? My brother lives in Chicago and he brought a similar priced house and the rates were just under 20K from memory. 75% of which the council allocates to schools.

Doesn't this sort of news help National, as it may take housing off the table as the number one election issue, as this sort of thing makes housing more 'affordable' on paper? But the fact is that if interest rates rise, there could be a lot of people who may be under a lot of financial stress. I refuse to pay that sort of money for a shack in Auckland on principle, and would rather live somewhere else. Wellington prices are still going up a lot though, and wouldn't be surprised if they almost get up to Aucklands levels.

I don't think it help them at all to have presided over a bubble, their response has been lacklustre at best. They promised many things in 2007, and have failed dismally at most of them.

Well, the message for sellers is clear: don't put your property on the market unless you're forced to do so. And avoid the auction method like the plague! Market your property at a realistic fixed price and be prepared to wait a while for offers.

Buyers: your time has come as bargains are emerging. (There are some vendors who HAVE to sell: e.g. those who have got themselves donkey-deep in debt.)

Long term owners/investors with good, well-located property will be fine. Auckland will come again - but probably not until after the September election. Also, the LVR regulations will eventually be relaxed. The Govt won't want the market to dip too much.........

I really do think Auckland is a great market to invest in for the long term - even compared with overseas markets like Sydney, Melbourne, New York and London. Jobs, migration and climate augur well for Auckland.

I used to fancy Queenstown/Wanaka but now I worry about the Alpine Fault Line.

Wellington is likely to remain a solid market, despite the earthquake risk. All the Government money being paid to public servants and for running Government agencies (plus the massive roading infrastructure investment) means Wellington remains a pretty safe long term bet. Certainly, I wouldn't sell up well-located property in Wellington.

If you want to take a punt on the provinces then Palmerston North is looking particularly good: strong tertiary education centre backed up with solid agriculture and a 90 minute drive to Wellington. Have a look at prices in good old Palmy: $350,000 buys a decent 3brm family home in an ok location - and it will rent really well. Hint: get hold of some land from the CBD through to Massey Uni if you can. Palmy's prices won't hold forever, as I'd wager the price-gap will close with the major centres.

Love it!

Only Mark Lundy could drive from Palmy to Wellington in 90 min,

Why are property buyers split so arbitrarily into a few groups in this (and other) articles??. There are many people who simply sell their one home and buy elsewhere due to changing tastes and changing relationships/family /job circumstances. They are neither investors nor 'first home buyers'. If the buying and selling isn't far apart , most get the same net effect regardless of the state of the market. Agency and other transaction costs may be going up however, and that could certainly be worth examining. It may be far less exciting, but it seems strange to ignore a surely significant part of the market .

I see this as scaremongering so the political parties don't change the status quo

Election year so the last thing people in power want is a change in housing policy regarding Housing Demand.

Labour's new policy of a Foreign buyer ban both "resident & non resident foreigners" is exactly the medicine this market needs.

I would go one step further and apply a 15% stamp duty on investors. This will stop any flipping that currently occurs.

I think what you will find is if we continue to tinker with the property market it will only further frustrate FHB's and those less well off. The winners will always be those with equity and Accountants. Continue playing around now and NZ's property market will turn into a basket case. The FHB's are already stuffed with the 40% LVR as many people buy an investment property before their first home, unless of course they are from Invercargill.

NZ's property market already is a basket case, one of the most unaffordable in the world. The main thing frustrating FHBs is high house prices, any action taken which results in a steadying or drop in prices will benefit them in the long term.

Yep taking away unnecessary demand on existing housing can only help FHBs.

- Ban/stamp duty on Resident and Non-Resident Foreign Buyers (ie people who aren't citizens or permanent residents)

- Stamp Duty 15% on investors (any 2nd home)

I reckon Chinese owners are going to hold. People are mistaken if they think the primary motivating factor for them and others is capital gain. Their objective is to secure a nice house in a nice suburb in a premier, English speaking, transit hub city that has good schools and Universities and an established ethnic infrastructure. It is somewhat like colonisation. Airhead cities with an established lodgement in military parlance. Fortunately they come in peace.

They are obsessed with their children's education and future prospects. Even in China being able to speak English is a major career advantage. Wealthy families send their young children to English speaking pre-schools now and then on to English schools. There are 300m Chinese students studying English. A university degree from an Anglophone country and fluent English almost guarantees success. However most realize that it is far better to live outside of China and their Western educated children are unlikely to return to China. I know a Chinese family who have a son and a daughter. One is now studying in Sydney and the other is going to Oxford, both on scholarships. Their father grew up in a house that had a dirt floor. This is what the West, especially the English speaking West, can offer.

They don't even need to cut ties with China which is just a short trip away on Boeing 777 or Dreamliner. Once they get into New Zealand the world is their oyster. It basically opens the doors to all the Anglophone countries and Europe too. And they don't need to change their lifestyles much with Chinese stores everywhere, newspapers and the Internet giving access to all TV channels.

The other reason places like Canada, Australia and New Zealand are popular is because they are perceived to be clean. Great places for bringing up children.

Yawn - not again - this is like a stuck record - sigh

No good counter argument then BadRobot? My theory makes sense and matches my observations. Chinese will not be fleeing Auckland anytime soon.

If their stock market is anything to base behavior upon (which seems to be a strong herd type behavior), I think if they start getting near to, or into, negative equity situations quite a few might jump ship.

And before you say 'but this is property' not stocks. If the pressure comes on, given the highly leveraged nature of the property market, and there's a big shift in sentiment - you might be quite surprised how quickly people change their tune.

It's not a question of a counter argument - your "theory" has been has hashed many times before in previous threads. While you argument may make sense and may even be logical - it doesn't necessarily make it true - what is missing is a little thing called hard verifiable evidence.

I have provided data.We can see it with our own eyes! Look at all the schools in Auckland. And it is what they tell me themselves.
I'm not making moral judgements here, it is what it is. The West is a way better place to live than China. I have been to China.

"I have provided data" - where ?

"I'm not making moral judgements" - not sure this conversation has anything to do with moral judgements but anyway

While I don't doubt that the West is "better" than China at the moment, I think you are overstating the importance of the English speaking world and the importance of Auckland because it supports you pet view of the world ( which has been pointed out before has decided racial undertones)

BadRobot, I was noting the importance of the English language to the Chinese not the "importance of the English speaking world" primarily. English is the first language of around a dozen countries and an official language in seventy or so and commonly used everywhere which makes it very useful for a traveller or a settler. To a Chinese person English is an important and significant second language. During Mao's time they learned Russian but things have changed.

While I don't doubt the "value" of learning English - it is of value only where English is spoken i.e. "the English speaking world" - as an example for the most part it would be of little use learning English and then going to Russia. While some Russians speak English - I am sure a majority do not. Other languages such as Hindi and Spanish have very large native language speaking populations.

More importantly why did you post the your "theory" in a article about capital gains or the lack of it in Auckland.

Mate, no one wants to live in Russia or South America. The article also mentions the Chinese ten times. My theory here is not so much about how glorious English is but about the motivation of the Chinese buyer. I also came across a new immigrant family whose twelve year old can speak English on account of him having been immersed in it since pre-school in China. I then went off and "researched" this on the Internet. Even found out that some Asians have their children's tongues surgically altered in the belief it will reduce an Asian accent when speaking English.

I don't think Auckland is going to devalue as much as people hope, at least central, primarily because of the Chinese attitude. Incidentally many Chinese blame the Chinese for high prices.
Now before you go off and yell, "but that's unverifiable!" most comments here are anecdotal and opinionated. That's what makes it fun.

From wilkipedia

This list includes Zimbabwe, South Africa , Pakistan and Cameron - would you want to live in any of these country's.

Have you ever been to Russia or South America ?

While I have not doubt that learning English motivates some Chinese, it may not motivate them to move specifically to New Zealand or Auckland ( which I think is what you are trying to imply). There are many other cities and countries in the English speaking world that are ahead of Auckland as a preferred destination.

I have no opinion on what will happen to the Auckland housing market because as the last year or so has demonstrated no one really knows what is going on. I think the future is going to be very interesting and will catch a few people out.

Regarding why I ask for proof - I think you miss the point. People on this and other websites make claims which when put under the microscope don't stand up to scrutiny ( DC has done several articles where statistics haven't backed up people's claims). People I have noticed on this website seem to use wild ass guesses (WAG for short). Additionally I want to make my own conclusion - not be told what to think - which I think I am entitled to do - so if your are going to make a claim back it up with some facts after all the website is about "helping you make financial decisions".

One thing I have noticed about you BadRobot is that you tend to focus on one detail, insisting on absolute proof, and miss the big picture. In my original comment I mentioned a number of factors that Auckland has in common with the other hot property cities. They all have different weightings but English speaking is a big one. I know this because I have asked them about it. A British cultural foundation is another big factor because it is perceived as safe. Places that have a history of good returns on housing is a factor too. How easy it is to get through the immigration hoops and the possibility of arranging parents to come as well is a big thing. The weather plus many other factors. Auckland basically ticks all the boxes.
Comments need to be somewhat brief without being an entire thesis so will generally always fall short for someone with a mind like yours.

* I have visited Russia. Someone fired a rocket propelled grenade at the US embassy while I was there.

Well talking missing the bigger picture Zachary, you seemed to have missed two vital factors for Auckland; 1) Infrastructure: our CBD is teen tiny and 2) Salaries which are very much decoupled from current property prices.

This makes us far less desirable than the more popular gateway cities, that and being at the are end of the world.

Many immigrants from China are small business operators. Yes Auckland is smaller but it is New Zealand's premier city. It's not much different flying in a 777 from Beijing to Auckland than Beijing to Sydney. Auckland to Sydney is only three hours. Auckland infrastructure is not that bad - Waterview tunnel opening soon!
It's very typical of Kiwis to be cynical and self deprecating. Who would value crappy old NZ? Guess what? You don't know how lucky you are.

You sound like a politician.

I don't require absolute proof but I do require some proof not broad statements which you could drive a tank through which may or may not have any relevance but no one has any way of knowing. It's called the scientific method. Again you are the one making the broad statements - I am asking for some evidence. If you are an IT engineer as you say you are - do you use the shotgun approach to diagnosing a problem - if you do you must be a poor engineer.

You accuse me of not seeing the big picture - curiously it is YOUR big picture that I am not seeing - which is not necessarily everyone else's big picture. I think you expect people to just believe you.

I have been to the Soviet Union - while I was there the was a little problem with Gorbachev being placed under house arrest by some generals - I was in Moscow when the coup collapsed.

Kids poo in the street in China. That's a fact.

I agree with Zach that the Chinese migration to NZ is unlikely to reverse. I just don't know that the Chinese people who settle in NZ have been massively influencing house prices. Immigration must effect house prices, but the disparity between rent inflation and house price inflation leaves a huge question mark in the supply/demand argument.

I would guess that the main issue is specuvestors, capital flight and a tax regime that favours housing speculation in a perfect storm. Bubbles are psychological, and they effect people in China every bit as much as they do native born Kiwi's. If people are told that there is a tax effective way to make butt tonnes of cash easily, of course they are going to do it.

But the specuvesting isn't necessarily 100% on the shoulders of Chinese immigrants. And I agree with Zach that many Chinese immigrants want to be in NZ for socioeconomic, quality of life and cultural reasons primarily. Some or even many, of these people may also be specuvestors. So they may sell 2nd,3rd, 4th homes if the housing market tanks. But probably won't be selling up everything and returning to China.

While I don't doubt "kids poo in the street in China" ( I'll take your word for it). Where I have I said that there will be a wholesale reversal ( some will - a minority - for many reasons). I agree with you about the influence of the Chinese on the housing market.

".. "kids poo in the street in China" ( I'll take your word for it). "

Should we demand evidence .... Oooooooooooo!

Please don't take my word for it. Google will readily verify that it is a thing. They even have special kids clothes with back flaps so parents can readily hang them over the road.

But I also meant that comment as a joke, because there were lots of negative comments about living in China and one I often heard was about kids pooing in the street. Especially from friends who had visited China. I'm sure there are lots of things that each country/culture does that another culture might find odd or even gross. I've heard many non-Kiwis say that they think it's disgusting that Kiwi's go into shops or walk about on the pavement barefoot. Different cultures have different norms.

Just wanted to clarify!

Spitting in China really got me down. Spitting on the bus, in a restaurant, even the waiters sometimes, girls and boys. Not just little ones, big hoiky ones. I did wander off the well beaten tracks though.

They spit in Auckland too. I used to walk past their restaurants on the way to Britomart while they were out the back having a smoke and a spit. I never ate at their restaurants again because I was so revolted. Welcome to the new Aotearoa where the streets are filthy and infrastructure doesn't exist because ratepayers are already tapped out to the max.

In Perth house prices fell by 2.4% in Feb 2017, a cumulative 5% fall over 12 months. Perth is a nice town with great schools, and it is definitely in the West.

The problem for Auckland and Perth isn't that we are competing with China for attractiveness. Our problem is that we are competing with Melbourne, Sydney, Canberra and Brisbane. All places are better than China, but two of them have stalled/falling property markets. Everybody wants to make money and you can make money in Melbourne or Sydney - not Perth or Auckland.

We are going to follow Perth.

"All places are better than China, but two of them have stalled/falling property markets."

A very worthy thought and comment. If you live under an authoritarian regime like China you have issues aside from first world thoughts of huge profits.

Now it might be worthy to blame the Chinese people on this. However, if the government doesn't understand why they did it or doing it, its going to be a disaster (like Trump way) sooner or later. Living in China for more than a decade, my experience about Chinese was like earn more as well as survive better and that's is the motivation of life. Essentially, that's applicable in almost every single personalities either from neighbour or colleague or classmate or friends. They are friendless, ego-centric and community-biased. Apologise in advanced if any Chinese readers are reading this (I know you are) and hope you won't misunderstand me. The dictatorship under they were grown up perhaps does not exist anymore, however, psychologically the generation is still shocked.
On the other hand, western country is an opportunity for all and its also sustainable for long term towards humanity as well as for rest of the world. As soon as you have the feeling for others and think about those FHB's as your next generation, you are not supposed to spoil that tradition of being good to others. What chairman Mao did, it is not applicable here and this society is more tolerable towards any of the opinion either its Falun gong or Tibetan. I know your black money is now turned in to white and you are capable of or in the verge of increasing the price of daily commodities to invest to grow it further. Again it never ends and end of the day that's your community going to be isolated again even you try to hide your head in the sand and ignore or pretending to misunderstand rest of the world. Western world exists and it will for any foreseeable future towards better for humanity. That finance can be invested in innovation and for that betterment of next generation when there will have trillion of people living in this tiny world or solar system. We miss the spirit of innovation of compass, which showed the way previously. And I believe our government one day would learn to avoid the trap of Li Keqiang's heavenly smile. Run Kiwi run! Run faster!

Jonathan Wallace (rich lister) has made his choice, Palmy all the way. Average prices of close to 1 million this won't help the Palmerston north housing shortage at the lower end however.

Big play though, from a guy that's normally only commercial.

1m Palmerston North house..... that is when you know the world has gone mad lol

Yes, but the big difference being that for the PNth million dollar property, it would (roughly) be valued as:

LV - $250.000
VI = $750,000

Whereas the million dollar AKL property is:

LV = $750,000
VI = $250,000

In other words, it is the land value in Auckland that is disproportionately over-valued. The value of the improvements (VI) or the built structures are roughly of equal value no matter where you are in the nation.

Or put another way, sell your 3 bed/1 bath, 1950s semi-detached in AKL and buy a new or near new, 4/5 bed, 3 bath detached McMansion in PNth.

But yeah, one million is mad for a standard family home - no matter where!

But you will have to live in Palmy though, I love the pubs and breakfast is great. But what about the beach. Your a long way for fishing and surfing.

Himitangi's not that far for swimming, and they have a surf lifesaving club - and you can run the kids motorbikes on the beach and dogs run free there too. Lots fewer restrictions... much more freedom :-).

This was an interesting opinion piece;

Kate, you have children. Do you want them to have any chance of owning their own house in their lifetime? Stop promoting the Manawatu to the rest of the country! Let them fight over their over valued land and leave our region to our own!

Palmy is shit and the rest of the country believes it enough to never contemplate buying here. Why would you promote it to others that will become your children's landlords???

You are trying a sort of reverse psychology talk up the book thing?

NO! I actually want to keep one good city in NZ to be available for my children to live in, work in and own in. I don't care about Auckland anymore. What I do care about is my daughter being able to live a great life in the burbs without my help! The rest of the country already believes Palmy is shit, so it is easy for me to re-inforce their own beliefs! Why do you want to be bought out of your house and cushy lifestyle? Believe me when I tell you that many Aucklanders are looking at your property right now. Palmy is cheap as chips! But where will you go?? I'm also an ex-Aucklander!

Yep John Cleese was right. Keep your money in your own backyard. There is nothing to see in Palmy. Buy in Auckland and stay there!

There is no place in the entire country that is more than 2 hours drive away from a beach or fishing spot! That is the beauty of New Zealand. But you are right about Palmy. Best you keep looking elsewhere for a bargain. Palmy is off-limits to most outsiders and they like it that way!

Stop promoting Palmy!!

An astrophysicist I know reckons that Palmy is the centre of the universe.......

Yep that is why nobody wants to live there!

I am sure there has never been so much hot and sexy debate about Palmerston North, in its entire 160 (approx) year history! Good ol' comments section, no property stone left unturned.

Nothing sexy about Palmy. No jobs, shit houses, shit neighbours, shit weather. Nothing to see here... move along down the road to Wellington.

hahaha - yup, no stone, eh?