Regions near Auckland at risk of being caught in a speculative housing bubble

Property

Speculators risk pushing regions outside of Auckland into housing price bubble territory - Homes.co.nz

3rd Apr 17, 3:56pm by Greg Ninness

Regions around Auckland risk being caught up in a housing market bubble and Auckland property investors are probably to blame, according to property information website Homes.co.nz.

The website has compared the rate of growth in median house prices around the country from 2012 to 2016, with the rate of population growth over the same period (see chart below).

"The data suggests that neighbouring regions are at risk of being in a bubble, and Auckland investors are likely to blame," Homes.co.nz said.

"While Auckland house prices have grown fairly steadily since 2012 alongside steady population growth, neighbouring areas have seen a huge spike in the last 12 months that has clearly outpaced any pressure from population growth.

"For most regions within a couple of hours of Auckland, House price growth in the last 12 months has outpaced population growth significantly, putting questions around what sort of bubble the housing market in these areas could be in."

Homes.co.nz spokesperson Jeremy O'Hanlon said speculative investment activity was probably to blame.

"If there is no fundamental change in the demand for something and prices start sky rocketing, it's reasonable to assume that speculative investment is the culprit," he said.

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78 Comments

by Kate | 3rd Apr 17, 4:20pm 1491193252

Is The Herald running some kind of Bob the Builder - Yes You Can campaign?

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=118…

What's funny about this is that they must be churning them out in a hurry. It starts like this;

... Today, the couple have just sold their first property, which was bought in Matamata in 2013,..."

And then goes on to say this:

So they changed their priorities and began working and saving hard, and within a year managed to save a 20 per cent deposit for four-bedroom Matamata property, which they bought in February 2015 for $330,000.

Just last week, they sold it for $410,000.

But Clayton said they didn't buy it to make money, but more so that they could use it to leverage a mortgage on an Auckland property - which they managed just three months later.

I'm confused - were there two Matamata properties, or one? Was it (or they) sold today or last week? And if you buy a house specifically for the purpose of using it as leverage on another asset - and then having achieved that end, you sell it - is the sale subject to CGT?

by J.C. | 3rd Apr 17, 4:28pm 1491193710

NZ Herald is owned by NZME, which is owned by APN. Real estate is a key revenue driver for media organizations across Australia and NZ. Ours has always been lighter on the hard sell than across the ditch. The editorial force is steadily transforming.

by fat pat | 3rd Apr 17, 7:28pm 1491204530

Housing crisis? What housing crisis! Two more from the herald with the same theme…

How to buy a home before you turn 30: Millennial tradies get a head start
'Toughen up, stop complaining, join the army,' landlord tells wannabe buyers

~~IMHO the Herald is just the mouthpiece of the Nat propaganda machine.~~

by dollar_bill | 4th Apr 17, 1:11pm 1491268286

Dinosaurs! Who reads the Herald any more?

by unaha-closp | 3rd Apr 17, 4:28pm 1491193718

Wow d'oh, there is maybe a global credit fuelled housing boom going on or something.

The only news worth mentioning here is that the regions around Auckland took so long to get involved in the current global housing boom. This delay occurred when NZs 2010-2015 money was sucked into the insane Auckland land price market. From 2010-2015 the land price speculation in Auckland offered returns that beat the global credit fuelled housing bubble. Len Brown blew an even bigger bubble.

However now that land prices in Auckland have stalled NZers are figuring out we can build and make money at the same time - a lesson the rest of the world learnt 5 years ago. Investment is now fleeing Auckland for the provinces, long may it continue.

by J.C. | 3rd Apr 17, 5:10pm 1491196249

Well the extent to which you can continually drive the reach and frequency of asset bubbles is unknown. It's fundamental to the economic establishment globally and in NZ, but the implications and consequences are only beginning to surface.

by John from Holland | 3rd Apr 17, 9:44pm 1491212653

Its not a global house price boom. House prices are only going crazy in some countries where the tax, banking, regulatory and cultural conditions are right to enable it.

by unaha-closp | 4th Apr 17, 10:30am 1491258646

Certainly some places are more prone to price exuberance than others, as I pointed out above, no where on the planet had conditions as crazily upwardly inclined as Auckland was under Len "to infinity and beyond" Brown (Lab).

Global interest rates are low and so a boom is occurring everywhere except where there is high unemployment. Some places rise faster than others, some don't rise at all.

by unaha-closp | 4th Apr 17, 3:38pm 1491277086

And some inflate so fast, right over the top, hit the ceiling and pop way before the others.

by Wiseguy | 3rd Apr 17, 4:57pm 1491195433

Does anyone know what happened to the recent article regarding NZ being the best place to live??

by J.C. | 3rd Apr 17, 5:12pm 1491196345

They're a dime a dozen. City and country rankings are how publishers drive revenue and traffic and raise awareness of their brands.

by dictator | 3rd Apr 17, 5:17pm 1491196645

The April Fools article should still be floating around. Tried to direct link and got access denied. Hahaha.

by THE MAN 2 | 3rd Apr 17, 5:06pm 1491195971

Kate, why would,it be liable for Capital Gains Tax?
The first property was for their own occupation and the 2 year Brightline for tax was brought in well after 2013!!

by Kate | 3rd Apr 17, 5:08pm 1491196131

Don't know that was my question.

by rastus1 | 3rd Apr 17, 9:06pm 1491210417

The only way it works as leverage is by an increase in value. If I were ird I'd be all over it.

by Kate | 3rd Apr 17, 10:36pm 1491215785

Yeah, that was my question - if one purchases a property for the specific purpose/intent of achieving a capital gain for the purpose of leveraging a second/subsequent property purchase - is a sale of any property purchased for that reason subject to capital gains?

Someone from interest.co.nz ought to ask IRD - and let us know.

by Wildcard | 4th Apr 17, 9:38am 1491255525

I remember reading something about the definition of "income" according to a New Zealand Act or statute thingy. It was something along the lines of that anything that is bought and sold with the intention of making a profit/making a profit counts as income. So going by that then flipping a house would count as income and would be taxed at 30% or 33%. I also read about how the Gubmint wants to tax the capital gains made from the asset appreciation of selling gold and silver.

by RickStrauss | 4th Apr 17, 11:31am 1491262265

Seems dangerous then to publicise one's intent to do this in a newspaper for all - including the IRD - to see.

Subsequent retractions likely..."No, we didn't originally plan this, honest."

by MisterB | 3rd Apr 17, 9:31pm 1491211893

The article said they bought in 2015 feb... sold march 2017... what a coincidence one month after bright line. However, if bought for gain, still cgt liable

by THE MAN 2 | 4th Apr 17, 8:09am 1491250179

For Christ sake you want to tax someone who has bought a house to live in!,,
The prices would have gone up by far more in Auckland over that time so she is certainly no better off.
Geez, there are some pathetically jealous people on here!,,,,,

by Yankiwi | 4th Apr 17, 8:57am 1491253029

I'd use the descriptor of rational myself.

I know more than a few people that shift every few years to generate "tax free" capital gains. I'm a strong proponent of a CGT, even for a primary home, if there was evidence of intent to generate capital gains. The article makes it clear that the intent was primarily capital gains. These gains should be taxed in my opinion.

by MisterB | 4th Apr 17, 9:36am 1491255390

@TheMan2 --- where did it say anywhere that she lived in it???

by Wildcard | 4th Apr 17, 9:46am 1491255987

Lol, if she bought it to live in then why did she sell it a month after the bright line test expired?

by MisterB | 3rd Apr 17, 9:38pm 1491212284

The article never said they lived in it... it said they bought to get leverage... eg capital gains. Pretty sure she didn't earn 200k doing financial security consulting in matamata. Whatever that is. If financial advice, was she registered?

by nymad | 4th Apr 17, 9:06am 1491253577

Yea, there's something not quite right about this story.
Fact checking is so pointless these days though, I guess..

by MisterB | 4th Apr 17, 9:35am 1491255331

Herald fact checks like it copy checks.

by Narrabeen Boy | 3rd Apr 17, 5:17pm 1491196651

Wow Hamilton is growing almost the same as Auckland!!!thought there was more trafic on the roads!and what about Queenstown it's going ballistic!!!

by donbond | 3rd Apr 17, 5:28pm 1491197304

And National leader says that their is no speculation but only supply issue is the reason.

How in the world can anyone getaway with such justification. Even media is silent and fail to expose national.

Corrupt vested intetest

Election Year.

by ngakonui gold | 3rd Apr 17, 5:32pm 1491197568

Asking price of 1 miilion plus very common now in Rototuna,Hamilton.Had a look a 2 of them in the weekend;
(just to see how the other half live) and they were beautiful homes.I don't know how they would stand up to 2/3 kids running around.
The problem is with people wanting over 1 million for their homes a basic 3/4 bedroom home in the surrounding areas is around 550k to 600k far too much for what they are.

by Kakapo | 3rd Apr 17, 5:42pm 1491198124

Did this story fall down some kind of wormhole from 2015?

by MortgageBelt | 3rd Apr 17, 5:47pm 1491198455

The torrent of foreign-related money pouring into Auckland housing is spreading indirectly to other regions.
Surprise surprise.

by J.C. | 3rd Apr 17, 6:37pm 1491201479

It's not necessarily a "logical progression."

by Wiseguy | 3rd Apr 17, 6:50pm 1491202258

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=118…

by MortgageBelt | 3rd Apr 17, 7:17pm 1491203875

These inspiring stories of first home buyers really show how straight-forward it is to buy a house in Auckland.
And if these stories are run every day, then the people may be persuaded?

by Independent_Observer | 3rd Apr 17, 9:06pm 1491210409

Can you believe they just added another one. Shouldn't there be another angle on this or is the Herald completely biased?

http://nzh.tw/11831078

by MortgageBelt | 3rd Apr 17, 9:49pm 1491212972

Perhaps political minders or similar have ordered a home buyer story every 2 hours?

by pythagoras | 3rd Apr 17, 10:22pm 1491214929

Let's analyse this. According to the article:
The house cost $750K.
Amy had $150K deposit.
When Amy is 30 (7 years from now) she can access $100K left to her by her grandfather.
She has a $500K mortgage.
They pay $470 per week on the mortgage.

There is mention of a partner Tegan, but the article does not say if Tegan had any money of her own to help with the deposit. Let's assume Tegan brought nothing to the deal, and the loan is indeed $500K. Presumably, the bank found a way to let granddad's $100K in 7 years for now count as part of the deposit.

A quick go on the interest calculator shows that $500K, at 4.5% interest, would cost $584 per week.

How to get the $470 per week figure quoted in the article? Interest.co.nz's calculator wouldn't let me put in a loan term of more than 30 years. So I lowered the interest rate to 2.75% and that gave $471 per week.

Perhaps Amy has tapped into the corporate bond market as a viable non-bank funding source, as Roger Kerr recommends :P

by Macadder | 3rd Apr 17, 11:07pm 1491217624

Tegan is maybe the "flatmate with benefits" maybe paying $120/week rent to Amy

by Kakapo | 4th Apr 17, 7:39am 1491248392

I'd like to see an honest 'how we bought a house in Auckland' article. "We imported hundreds of kilos of ContacNT from China concealed in packets of potato starch. We got it through Customs by bribing workers. Then we forced a chemist to cook meth for us, and distributed it through the local gangs. The cash was piling up, so we put it into real estate, because the government hasn't extended the money-laundering regime to houses."

"I'm a complete moron, and all I do is instagram myself doing idiotic gang signs in my dad's backyard pool area in Parnell. I have a trust fund. Happy Days!"

by Brock Landers | 4th Apr 17, 5:46am 1491241607

Here's what that dropkick slumlord really thinks of us kiwis.

https://s32.postimg.org/nknkqja6d/garylin.jpg

by Zachary Smith | 4th Apr 17, 7:28am 1491247709

Interesting image - I saved it. I have often thought that praising an ethnic group is as bad as disparaging one. The implication with praise is that one is better and another is worse, two sides of the same coin. I do think that new citizens who come over here and take advantage of decades, nay centuries, of municipal, societal and institutional development may be missing some compassion, missing the big picture. I'm reminded of a conversation I had with one once about New Zealand. He said that Europeans had built a great society in New Zealand, much better than communism, but it couldn't last as it was unsustainable to give such assistance to the poor with so many new people arriving.

Edit: This is great to wake up to this morning:

Prominent Kiwis pen open letter saying free speech is under threat in NZ universities

It is profoundly important that we don't introduce new laws that criminalize opinions. It could turn out that mass immigration results in us losing our great social welfare system AS WELL AS our freedom to express opinions and associate with whomever we like. This is critical to who we are.

by JetLiner | 4th Apr 17, 9:20am 1491254407

This is why I don't think that you and DGZ are the same person. I don't agree with everything you say, but you have genuinely interesting and insightful (albeit controversial) comments to make about the bigger picture, like this one, whereas DGZ just waffles on about house prices and school zones and not much else... like a monomaniac. :)

by sammnz | 4th Apr 17, 10:09am 1491257362

Basically what he said was:

Chinese less likely to empathize with people they aren't related to
Chinese less likely to donate
Chinese less likely to contribute to society

We don't need people who don't contribute.

by RickStrauss | 4th Apr 17, 3:53pm 1491278024

My SO went to a Chinese shop in Atrium on Elliot the other week. Came back saying "That's interesting...they offered me a cheaper price for paying cash instead of EFTPOS".

One wonders...stores in central Auckland possibly offering "cashies"? How common is this becoming in retail stores, you wonder. I hadn't seen it before.

by Kakapo | 4th Apr 17, 4:16pm 1491279390

Keep your eyes peeled and you'll see businesses with separate tills for cash and eftpos transactions. Way of skimming off the cash without a paper-trail.

by PocketAces | 4th Apr 17, 4:30pm 1491280217

Keep an eye on what is being rung up on the till if you are paying cash, I use cash quite often and I can attest that more often than not, it is not rung on the till.

by sharetrader | 4th Apr 17, 4:35pm 1491280542

oldest trick in the book been around for years, next time you buy a paper they give you change from sitting on top of the till and not ring it up
adds up x amount of papers sold per day for a year profit not counted

by PocketAces | 4th Apr 17, 4:37pm 1491280677

I never buy newspapers

by RickStrauss | 4th Apr 17, 11:35am 1491262548

Wow...

He might want to add "more stereotyping than the average New Zealander".

Or - autobiographically - "we marry rich girls and get a $200,000 house deposit from her daddy better than the average New Zealander".

But I'm confused, if all one's characteristics work so well...why would you want to migrate to a society created by inferior people? Surely not because it's better in any way, right?

by Hardly | 3rd Apr 17, 7:34pm 1491204881

First time poster, long time reader.

I'm really looking forward to the Barfoot/QV figures which must be due out tomorrow. No conspiracy theories but if they show the first year on year decrease for Auckland, I wonder if Barfoot will try and pip QV like they usually do or just hold them back.

It's worth noting for all the people who say next month will be better that April has some things going against it. It has both Easter and ANZAC day so surely this will suppress buying interest. That has been the claim previously.

While I'm on a roll, those NZ herald articles are awful. I thought the stuff series was bad but the Herald really one upped them. Great for readership though. I forwarded them to my mates and they all read and were outraged. The worst was the fellow who got started with $200,000 from his family. Talk about unrealistic.

Finally, I just want to give a shout out to DGZ-Zach. I love your performance art, keep it up.

by Fritz | 3rd Apr 17, 8:29pm 1491208188

I try my best to avoid visiting the Herald, but I admit I often succumb.
I really don't want to pump the revenue of that trash rag, with all its agendas.

by JetLiner | 4th Apr 17, 9:27am 1491254862

I agree; I'm on the point of removing it from my bookmarks, because it's just mostly junk now and flat-out, in-your-face, shameless property spruiking and Daily Mail trash articles. However, there are some good finance/investing articles sometimes (e.g. Brent Sheather, Mary Holm).

A tip: You should only visit the Herald with your browser wearing a full-strength ad-blocker. You really need protection! Doesn't stop the dirty feeling you get afterwards, though...

by RickStrauss | 4th Apr 17, 2:24pm 1491272640

You can always use http://archive.is to create an instant web archive of the page and post that instead. It avoids giving the Herald ad revenue if you wish to share some of the optimistically titled 'journalism'.

by MisterB | 3rd Apr 17, 9:34pm 1491212051

No dgz Zac comments today... he's too busy writing herald articles.

by fat pat | 3rd Apr 17, 8:03pm 1491206580

There's some missing information in the statistics. What is the net worth of the people entering those regions? Where will the extremely wealthy baby boomers choose to live in their retirement?

I always thought Taurnaga would do very well out of that transition. Perhaps Bay of Islands or the Coromandel? All have great soil, great weather, great beaches, geological stability, and proximity to Auckland. However, Tauranga is the only one with infrastructure, a bit of a vibe, and hospital facilities.

by 2 Tooth Bora | 3rd Apr 17, 10:11pm 1491214314

Interesting the Herald leaves no room for comment particularly for the Asian who attacked, abusing kiwi culture, calling us lazy f*****s whilst feeding of the local renters and getting rich ;) suggest the little C watch his back. Property industries must be desperate, at the bottom of the barrel, years of quantative easing and asset bubbles is probably coming to an end, debt can't go on for ever exceeding GDP and the average earner/family must have affordable housing/roof over ones head for our community to function properly. Do you think the media will revisit these commercially savy property tycoons if the market returns to real economy incomes? Do you ever read of people loosing in property?

by pythagoras | 3rd Apr 17, 10:22pm 1491214962

(repeated post, please see my reply above, sorry)

by Amimus romaticus | 3rd Apr 17, 10:30pm 1491215408

I bought my first house in the early 1990s. I had a Ford Cortina and the love of a good woman. Actually, the love of a super hot woman. Everyone talks about the value of my house, but not so many about the value of my wife and children to me. Go figure.

by Brock Landers | 4th Apr 17, 7:37am 1491248269

Sounds pretty good. My generation got priced out of having children.

Like everything else we used to make in NZ we just import from China now.

by An_Observation | 4th Apr 17, 7:41am 1491248476

One is very much the max around most of my friends. There are a few with two or three but they are usually lower income earners/work part time. They have the time and energy to look after the kids while getting large subsides from the GOVT. Only one of them is a home owner (god bless. Welcome Home Loans)

by redcows1 | 4th Apr 17, 9:00am 1491253251

Or maybe they put a higher value on family than they do on assets and that drives the choices they have made.

by David George | 4th Apr 17, 9:56am 1491256579

Could be, we had three and love them to bits but some friends have restricted themselves to none or one out of concern for the future environment. They feel pretty cheated with our outrageous open immigration policy.
Auckland 2100: https://www.theguardian.com/global-development/gallery/2017/mar/02/plas…
https://www.theguardian.com/environment/2017/jan/31/bay-bengal-depleted…

by RickStrauss | 4th Apr 17, 11:37am 1491262625

>"outrageous open immigration policy"

I believe you meant "National party economic plan".

by Wildcard | 4th Apr 17, 9:59am 1491256776

Easy to say when that "higher value" is supplemented by leeching off the taxpayer.

by An_Observation | 4th Apr 17, 10:34am 1491258887

One can only apply that if the financial incentives are removed from having more kids.
I in no way meant to discriminate or put down their choices, it was more of an observation from my circle of friends.

by jerry_NZ | 4th Apr 17, 7:22am 1491247329

Can someone tell me how the couple earning $117.000/year is getting $500k mortgage while me earning $150k/year got MAXIMUM of $500.000 ???
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=118…

by marshal | 4th Apr 17, 9:02am 1491253376

Different situations. they are a young, no kids, less expense. You probably have several kids to feed, a luxury life style, huge credit card limits and so on. Cancel your big credit card, and willing to save some money. Bank is protecting their own interst.

by jerry_NZ | 4th Apr 17, 11:28am 1491262124

ZERO credit card spend (do not own one!). I was told it will be 3x my income +/- - im 41 ... is that the case?

by Zachary Smith | 4th Apr 17, 2:54pm 1491274479

Have you tried using a mortgage broker?

by MisterB | 4th Apr 17, 9:42am 1491255727

Because there is something you arent telling us. Looking at a big bank calculator, it says $150k for joint app with 10 children, yes 10, would still let you borrow $580k. So....

Is your income verifiable? Or is it from 10 boarders? .... is there other debt? etc etc. Apples with apples Jerry.

by jerry_NZ | 4th Apr 17, 11:29am 1491262186

solid position +10 years in the same company, 100% verifiable.

by MisterB | 4th Apr 17, 3:41pm 1491277305

Then you've gone to the wrong bank. Try another.

by linklater01 | 4th Apr 17, 9:43am 1491255831

Population growth for Western Bay of Plenty is given as 5% over that period. What would be much more interesting would be the population growth in Tauranga/Mt. Maunganui relative to house price increases for that period. It would look very different.

by JungleG | 4th Apr 17, 1:52pm 1491270724

First post and not my area of knowledge. But if you divide the price growth by the population growth to get a sense of relativity, seems like areas like Lower Hutt, Timaru and Dunedin have had highest growth in price relative to population? Maybe a sign of people moving to where houses are cheapest, yet limited housing stock? Or effect of lvr rules meaning investors looking for cheaper houses where they can afford 40%?

by Yvil | 4th Apr 17, 2:47pm 1491274057

I don't necessary agree with the headline that
"...regions outside of Auckland ... into housing price bubble territory"
Apart from Hamilton and Tauranga (WBP) all regions have risen less than 40% and many a lot less. Add the fact that all these regions had zero increase from 2008 - 2012 and you get max 12% - 39% increase in 8 years, far from a bubble

by pythagoras | 4th Apr 17, 2:57pm 1491274645

In response to the Herald article about Aimee buying the $750K house that is referred to, above.

I have figured it out: if they pay interest only on the $500K loan at 4.89%, that would cost $470 per week.

If that's the case, then is it ''buying''? Maybe it is more like renting from the bank. And, taking the very big risk that either the value of the property will increase in value, or anticipating that Aimee's income will increase over time.

by Zachary Smith | 4th Apr 17, 2:57pm 1491274668

I think you are correct. Even if they do pay capital back they may not regard that as a cost as it is a bit like saving. I never consider the capital part of a mortgage repayment as a cost and if I was describing what my housing costs were I would only include interest, rates and insurance.

by MisterB | 4th Apr 17, 3:44pm 1491277452

Which would be wrong. Paying off capital is not like saving, it's like paying off debt.