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Auckland's market mystery

Rising prices can't be blamed solely on Chinese buyers, writes Peta Tomlinson

PUBLISHED : Wednesday, 05 June, 2013, 12:00am
UPDATED : Wednesday, 05 June, 2013, 5:04am

Reports of Chinese buyers snapping up large numbers of Auckland properties have been greatly exaggerated, according to a leading economist.

To be sure, New Zealand's clean, green image and vast openness is appealing to city-bound mainlanders and Hongkongers. As visitors, Chinese are arriving in record numbers - April's tourism figure was up 36 per cent year-on-year, pushing the sector to fivefold growth over a decade. And, according to Statistics New Zealand, China is the second-highest source of new citizens migrating to live and work in the country.

Auckland is clearly the target for Chinese buyers. Recent sales data shows that 19 per cent of overseas buyers of property in the north island's largest city are from China, adding more fuel to an already hot market.

Kerry Stewart, operations manager of Quotable Value, a New Zealand valuation and property information company, says a surplus of buyers and lack of stock is pushing prices up to meet demand. "We have seen instances of some properties selling for hundreds of thousands of dollars above their rating value," she says.

Indeed, Auckland's price increases are the highest in the land, jumping by more than 12 per cent in the past year. A survey of agents in which 45 per cent reported Chinese buyers as prevalent among foreigners buying in Auckland led to a predictable conclusion: that overseas money - most notably from China - was skewing values.

One Auckland city developer, Grant La Hood, says the impact of foreign buyers is "undeniable", and that "this has rightfully caused large-scale resentment towards foreign buyers investing in our housing market, and the government for their refusal to act on this issue".

But Tony Alexander, chief economist at the Bank of New Zealand (BNZ), says "the sprawling anecdotes regarding Auckland properties being snapped up by Chinese buyers are not supported by the evidence".

He does see why Chinese would want to come, given New Zealand's clean air. "The longer [visitors from China] are in New Zealand, the greater the time they can breathe without coughing or stunting the growth of their children," Alexander writes in his blog. This, combined with a desire to educate their children overseas, will add to demand for housing and push prices up, he concedes.

However, Alexander has done the numbers, based on BNZ REINZ (Real Estate Institute of New Zealand) surveys, and he says the real percentage of overseas purchases is "nowhere near as big as people say".

"In Auckland, an estimated 11 per cent of sales are to people offshore. Only 19 per cent of those buyers are from China," he says. "Of those buyers, 42 per cent say they plan on shifting to New Zealand. Therefore, we can state that at most 1.2 per cent of dwelling sales in Auckland are to buyers from China not planning to shift to New Zealand, and all of just 2.1 per cent of dwelling sales in Auckland are to people living in China."

Another 2.1 per cent of Auckland sales are to people living in Britain, and 1.7 per cent to buyers from Australia, Alexander notes.

He says New Zealanders are "casting around for reasons why" Auckland's house prices have jumped by 36 per cent since 2009, and some "conclude it's because of the Chinese".

The real reason, Alexander says, is a property shortage caused by years of weak construction.

And, although his data shows that the true level of Chinese purchases is not as high as is commonly perceived, that will change, Alexander says. "As more Chinese individuals look to invest overseas, they will increase their property purchases." And, when they come, foreign buyers "are paying top dollars for homes", says Neville Kemp, of Ray White Te Awamutu real estate. His blog notes that Chinese buyers want luxury properties, can afford them, and appreciate Auckland's best suburbs.

Auckland real estate agent Graham Wall has recently sealed two big deals with Chinese buyers on properties worth more than NZ$5 million (HK$31.4 million), and has made two trips to Shanghai to garner further interest. He is also working as a buyer's agent, sourcing property for Chinese clients.

Wall's company is about to start marketing "New Zealand's most expensive residential property ever" - a 32,000-square-metre mansion on Paratai Drive, Orakei, 2km from Auckland's central business district - which cost NZ$50 million to build.

It will "almost certainly" go to a Chinese buyer, he says.

Wall holds the "opposite opinion" to those who worry about overseas investors' impact on the local property market. "I love it, I welcome it," he says. "Every great city on earth is built on immigration."

Ross Hawkins, of New Zealand Sotheby's International Realty, agrees that wealthy Chinese are looking and spending millions on Auckland houses.

"There's definitely an element of that. We have a bit of a housing shortage here in Auckland, so they're also looking at multiunit sites, often to develop or modify for themselves or for rental income," he says.

Foreigners can buy a regular house or unit in New Zealand without restriction. Only waterfront properties, or sites of more than five hectares, need government approval.

Hawkins sees this as a good thing. "The Chinese are buying high-level homes, which is good for our economy.

"They are also bringing in business interests, which is really good for New Zealand-Chinese relationships," he says.


Buying Guide

What you can buy for NZ$8.8 million
Casa Del Mar (Home by the Sea), 35-39 Beach Road, Castor Bay, Auckland - an architect-designed clifftop masterpiece of four bedrooms, five bathrooms and views to Rangitoto Island.

What you can buy for NZ$100,000
The leasehold on a two-bedroom Auckland Central flat, with car park. Advertised with "small remedial issues that require addressing. However, this property is still a powerful rental machine".