Property market about to 'go bananas'

An Auckland property specialist predicts a huge inflow of capital into Auckland's property market this year.

An Auckland property specialist with close links to the Chinese investment community predicts a huge inflow of capital into Auckland's property market this year, despite China's financial crackdown.

Auckland landlord Ron Hoy Fong, who has 30 properties and runs coaching business Ronovationz from Mt Roskill, said although people based in China now found it harder to buy since the October 1 changes in New Zealand, he thinks that will soon turn around, particularly about May when he expects far more investors to seek to buy.

"I'm telling my students to just buy as much as you can, to get in before the Chinese," Hoy Fong said of his 450-student client base.

Ron Hoy Fong sees more Chinese investment ahead in Auckland, not less. Photo / Jason Oxenham

"I see more Chinese investment in Auckland, not less. There's going to be a increase in demand. I think properties here are going to go bananas," he said.

From October 1, foreigners buying New Zealand property need a New Zealand bank account and a New Zealand Inland Revenue number and Hoy Fong said that had created major holdups.

That resulted in Auckland house sale auction clearance rates dropping from more than 70 per cent a year ago to about 30 per cent in some cases towards the end of last year.

Hoy Fong's statements follow one of Sydney's top real estate agents saying his Chinese clients were finding it increasingly difficult to get money out of the country.

"It is getting harder for them to send money out ... I've been told since the start of the year it has tightened up," Lu Lu Pallier, from Sotheby's International Realty, told the Australian Financial Review.

China's central bank is strengthening capital controls to stem large outflows, as the Government looks to tighten restrictions on foreign currency transactions in Shanghai's Free Trade Zone.

The moves are aimed at reversing big outflows over the past six months as investors, concerned the weakening yuan could fall further, rushed to get their money out of the country.

In China, individuals are restricted to moving the equivalent of US$50,000 ($77,129) out of the country each year.

There were previously many ways to get around these capital controls, as banks and the Government turned a blind eye to money going offshore.

But in recent weeks as China's currency, the yuan, has come under increasing pressure from capital outflows and those speculating it is set to fall further, the banks have tightened up on existing regulations, the newspaper reported last month.

As the yuan has come under increasing pressure Chinese banks have tightened up on regulations. Photo / AP

Dr Oliver Hartwich, executive director of the NZ Initiative, said whether Chinese bought here would depend on their price expectations.

"If those are that there will be continued price increases and capital gains, it will make it more likely they will continue to invest," he said.

New Zealand Government moves demanding bank accounts here, IRD numbers and the Brightline test due to come into force this year, might make some difference.

"Maybe at the margins, but [it won't be] massive," Hartwich said.

"Some of the investors might be longer term, so I don't think that will have much of an impact.

"If anyone is concerned about Chinese investors, we need to increase supply because that would change the expectations of future capital gains," he said.

Bayleys commercial agent James Chan is also predicting strong overseas interest in New Zealand property this year and he cited China, Taiwan, Malaysia, Japan and Korea as sources of buyers.

Hoy Fong is a third-generation New Zealander, whose market-gardening grandparents were forced to pay the discriminatory poll tax to migrate from China.

He estimates he houses more than 100 people, taking in $13,000 to $14,000 a week in rent money.

Now 67, the former social welfare civil servant says he got into buying properties after he and his wife, Yoland, met an older investing couple who inspired them to buy.

Buyers from China could put huge pressure on the Auckland market, he said. "I'm told the buyers are still there. They want to buy. They just can't right now but they will - US$72 billion could leave China. That will go all around the world but some of it will come to New Zealand. "Even if it was only US$10 billion to US$20 billion, that's a lot," Hoy Fong said.

No figures are held in New Zealand on the number of buyers from China, or the amount they have spent on Auckland residential property.