Foreign-buyer controls trim hopes of rise in residential property

Expectations for house price gains appear to have cooled ahead of tighter restrictions on foreign investors buying residential properties, Colliers International says.

The firm's latest quarterly survey shows a net 26 per cent of respondents expect house prices to rise in the coming 12 months, down from 36 per cent in the June survey.

Dunedin and Whangarei are the only centres where the number of people expecting prices to increase rose.

Auckland, Wellington, Hamilton, Hawke's Bay and Tauranga showed the biggest declines.

Chris Dibble, Colliers' director of research and communications, said the reduced positivity seemed to be related to changes to the Overseas Investment Act taking effect from October 22.

"Almost half of our survey respondents were pessimistic about the market impact when discussing the new Overseas Investment Amendment Act," he said. "Development activity and lower sales volumes also remain front of mind for survey respondents."

The law change will require most overseas residents to seek Overseas Investment Office approval before they can buy residential property. It was introduced by the Labour-led Government among a suite of policies aimed at making housing more affordable, particularly in Auckland.

The Government has committed $2 billion to help accelerate construction of 100,000 "starter" homes during the next decade. It has also given Housing NZ a mandate to build more homes, or lease properties in areas where there is a lack of social housing.

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While sentiment appears to have softened, 60 per cent and 44 per cent respectively of those surveyed in Queenstown and Tauranga still expect price increases.

Canterbury remains the most negative, with a net 6 per cent expecting price declines in the coming year. Sentiment in Palmerston North, where a net 11 per cent expect price gains, was the next weakest.

Confidence among commercial property investors also softened but not as markedly. A lift in confidence in Canterbury and Palmerston North helped offset weakness elsewhere and left the national measure at 21 per cent, down from 23 per cent in the June survey.

Dibble noted that a net 16 per cent of industrial property investors in Christchurch - the most in 18 months - are expecting an improvement in the coming year.