Housing shake up: all eyes on South Auckland to see if investors exit market

South Auckland auctions sales tonight and next week should give clues as to whether investors plan to exit the residential property market. Photo / 12rf

South Auckland home sellers are questioning whether they should rush to sell their houses before the weekend in a bid to beat new tax changes, real estate agents say.

That had all eyes turning to auctions today and next week for a feel on whether investors would exit the market following the Government's major housing sector shake-up yesterday, Ray White Manukau owner Tom Rawson said.

Investor groups had claimed the Government's extension of the bright-line test from five to 10 years and axing of the ability to claim home loan interest repayments as a tax deduction would send investment costs ballooning.

The tax changes were also set to impact from this Saturday, with those investors buying on or after this weekend set to be hit by them sooner than those who had bought earlier.

Rawson said his phone had subsequently been "ringing hot" with sellers asking whether they should rush their auctions forward in a bid to attract investors wanting to buy before Saturday's deadline.

"There hasn't been enough information provided for people to make really informed decisions, so everyone is really speculating in a fast-paced manner," he said.

Yet even if sellers and buyers found it hard to rush deals through before the weekend, South Auckland auctions would still prove an early litmus test to gauge the impact of the Government's changes, Rawson said.

Home to many of the city's lower-priced homes, South Auckland had long been a buying hot spot for investors, traders and first-home buyers.

That meant if investors or traders stopped buying, then "we will know about it before the Real Estate Institute or anyone knows about it", Rawson said.

He said Ray White Manukau had 15 homes on sale at auction on Thursday night, with one of them having been brought forward after a pre-auction offer to buy was put on it.

Auctioneer Robert Tulp, from Apollo Auctions, who was calling with colleague Shane Cortese says it was the fullest room he'd seen for a while.

"There was definitely competition from investors and owner occupiers that I haven't seen for a long time," he said. "I can't remember seeing so many people in the room, that's a sign that first home buyers are back."

During the past year's booming market, Rawson said his office typically expected 85 per cent of homes to sell during each auction.

Ray White Manukau owner Tom Rawson expects South Auckland to provide an early gauge of what impact new Government tax changes will have. Photo / Supplied

"Last week, we had a 75 per cent clearance rate under the hammer, with two more selling straight after," he said.

That would normally translate to 12 or13 of tonight's 15 auctioned homes selling.

"So if only five sold under the hammer then that would be a good indicator that things have changed," he said.

"Whereas if 13 or 14 sell, it will have been business as usual for those ones and then it would be onto next week's auctions to see what happens."

Elsewhere, such as in central Auckland's suburbs, the changes were likely to be felt more slowly, Ray White Remuera's Steen Nielsen said.

That was partly due to pricier central Auckland homes often being less attractive to property investors and because the tax changes singled out investors and speculators.

The bright-line extension, for instance, meant people buying and selling a house - that wasn't the family home - within 10 years would now have to pay tax on money made from the house's rise in value.

The second government change would stop investors from reducing their taxable income by claiming interest repayments as a business expense.

Blair Chappell, managing director of Williams Corporation, expects developers to profit from the Government's changes. Photo / Supplied

Nielsen said while Remuera was Auckland's biggest-selling suburb, netting more than $1 billion in sales in the past year, with a mix of different property types, his upcoming auction properties were more aimed at family buyers.

"There's a few people who have called me and asked me if they should put their homes on the market and try and sell it before the new rule kicks in," he said.

"My answer to them has been, 'look, if it is your family home I don't think they are going to be too affected by it'."

Blair Chappell, managing director at Williams Corporation, which specialises in buying homes on large city blocks that can be demolished to make way for new townhouse developments, expected developers to profit from the new tax changes.

The rules included an exemption for buyers of new build properties, meaning investors who bought a new townhouse would avoid the new bright-line rules and still be able to claim their interest repayments as a tax deduction.

That would likely see investors targeting cheaper new build apartments and townhouses that had previously been aimed at first home buyers, he said.

He said his team was already struggling to keep up with demand for new houses, but now that demand could "sky rocket".

"With investors potentially shifting their investment strategy over to new housing is going to put even more competition on the first-home buyers."