I wrote in my column last month about the double digit rise in values of some of Auckland's outer suburbs over the past six months and how the QV Residential Price Movement Index now shows the average home value for the Auckland region has topped $800,000.
There's a range of factors contributing to this and one was raised in a recent interview by Radio New Zealand's Nine to Noon presenter, Kathryn Ryan with Yi Wei Lowndes, a Chinese New Zealand real estate agent for Barfoot and Thompson in Auckland.
Yi Wei Lowndes has lived here for 27 years, is married to a New Zealander and has been in real estate for nine years. She advertises properties directly to Chinese buyers online and 90% of her clients are Chinese. She said only a small group of her clients are foreign investors living overseas, most are Chinese New Zealand citizens or permanent residents but quite a few are new migrants who have just arrived in New Zealand under the $10 Million Investor Plus category.
Immigration rules were loosened in 2009 for this group of migrants; so unlike other applicants they don't have to pass English language tests nor do they have to live in New Zealand for a minimum of 184 days each year for three years to gain permanent residency.
Lowndes said her clients see property investment as an easy business they can do without English and they are buying property as soon as they arrive including homes, lifestyle farms, holiday homes, rental properties and land for housing developments. She said in China the property prices are really expensive and in comparison New Zealand seems very cheap to her clients. They also can buy the land freehold here whereas in China the government retains ownership of the land and property is only sold on a leasehold basis. Plus, New Zealand doesn't have the stamp duty, land tax or capital gains tax that China has.
Lowndes described auctions where her clients are bidding well over the expected value of a property and when she tells them they should stop bidding as they are paying too much, but they say no, this is cheap compared to China and she says she can do nothing to stop them. Lowndes says she has had clients who have paid between $300,000 and $400,000 over the expected market value for the property in order to secure it.
Kathryn Ryan pointed out in the interview that most ordinary New Zealanders don't have $10 million dollars cash so these new migrants have the bidding power at auctions.
Add to this the fact that the LVR rules mean you need a 20% deposit on your first home and new rules announced by the Reserve Bank will require a 30% deposit on an investment property in the Auckland Council region from October 1. These rules only make it harder for people to buy their first home, holiday home or rental property.