Market for places bought by investors has suddenly turned

"Buy now," says a top Auckland residential investor, because the city's real estate market has finally turned and places usually bought by investors are going for up to 30 per cent less.

Ron Hoy Fong, with 31 properties valued at $23 million, says the Reserve Bank loan to value (LVR) lending crackdown and the Government's moves against foreign buyers have taken their toll on places landlords would usually buy.

Gary Lin, another Auckland investor who has 14 properties valued at $10 million, said fewer buyers wanted investment properties.

"A lot of investment properties are being passed in, particularly in south and west Auckland. About 70 per cent of them are passed in at some auctions. It's a good time for first-time buyers. Prices have dropped 5 to 10 per cent," Lin said.

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First-time buyers are in a better position than they have been for some time, said Hoy Fong, QSM, a third generation New Zealander, former civil servant who operates from Mt Roskill and member of the Auckland Property Investors Association.

The market for stand-alone housing or non-investment properties had not turned, he said, but it had particularly changed for two-bedroom units investors usually snapped up.

Ron Hoy Fong, super investor property coach from Ronovationz. Photo/Michael Craig
Ron Hoy Fong, super investor property coach from Ronovationz. Photo/Michael Craig

"Now is a good time to buy. We're in a buyers' market all of a sudden and it's only because the LVR rules have been introduced and it's stopped a lot of investors buying as well as the overseas buyer who would normally buy in a rising market," says Hoy Fong, a property coach whose students have bought New Zealand real estate valued at $1 billion.

On November 1, Quotable Value released its QV House Price Index which said the Auckland market was rising by only 13.8 per cent year on year, down on the 20 per cent-plus previously. The 13.8 per cent rise was "the slowest rate since March 2015," QV said.

Hoy Fong said many people did not realise the market for some places had turned.

"Prices are dropping in certain areas. It's the investment properties that are just dropping right out, as much as 20 or 30 per cent," he said, citing Auckland central areas "where there's a lot of properties normally for rental. Home buyers don't want to buy these," he said.

Now is a good time to buy. We're in a buyers' market all of a sudden and it's only because the LVR rules have been introduced and it's stopped a lot of investors buying as well as the overseas buyer who would normally buy in a rising market.

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Apartments were not affected but demand was well down for tidy two-bedroom brick and tile units in areas like Sandringham, he said.

"It's only a temporary slowdown," Hoy Fong said, because overseas buyers would remain keen on New Zealand as well as Australia and would be back buying soon.

As evidence of the changing market, he cited how one of his students has just bought a two bedroom brick and tile Sandringham property which Quotable Value had an E-valuer instant valuation sum on of $720,000. That was the approximate expected price the property would reach, based on sales in the area and the type of property it was.

However, Hoy Fong said the place with a garage had been passed in at auction "and we bought it at $620,000."

The unit would now be converted into a three-bedroom property using the dining area for the new bedroom. A wall would be erected, Hoy Fong said. That would add substantial value because three-bedroom places are so much more desirable, returning much higher rents and with higher valuations than two-bedroom places.

He expects about $230,000 to be immediately added to the property's value once the wall was up.

"What cost us $620,000 will value at $850,000, something like that, because there's a shortage of three-bedroom units in inner Auckland."

Students of Hoy Fong's Renovationz property coaching business were buying five to 10 Auckland properties a week, he said, and had bought 1700 properties since 2009. He has 600 students.

"Property values I've noticed have dropped quite a lot because there's less competition in the market to buy these sort of places," said Hoy Fong who regularly attends auctions.

Other reports are also coming in of lower auction clearance rates, at around 80 per cent a few years ago but now down as low as 30 per cent at some major Auckland agency auctions.

Barfoot & Thompson, with about 42 per cent of Auckland's residential market, reported lower sales volumes in October, falling from March's 1341 to 778 last month, the second lowest this year.

Harcourts said October sales volumes were down 4.7 per cent compared to September "but are fairly consistent when compared with the same time in 2015."

Hoy Fong is running a seminar at Waipuna on Saturday from 9am with investment specialist Brad Sugars. More information is at www.ronovationz.co.nz/bradsugars