New Zealand's real estate
The Prime Minister of New Zealand made a big move!
On the 24th local time, New Zealand's elected Prime Minister Jacinda Ardern pointed out in an interview with the media that this ban only applies to non-New Zealand residents. She said: "Our goal and commitment is to prohibit foreign buyers from entering the New Zealand existing home market."
Ardern claimed that the Labor Party under her leadership and the New Zealand First Party and the Green Party that will form a coalition government with the Labor Party have reached a consensus on this policy.
"We agree on the issue of prohibiting foreign buyers from buying existing homes in New Zealand," Ardern said. While announcing the ban, the female prime minister also announced plans to reduce the number of immigrants.
As we all know, New Zealand has been regarded by international investors as the most promising real estate investment destination. After low interest rates, limited inventory, and high net inflows of immigrants have driven up housing prices, New Zealand is facing a crisis of housing affordability.
According to estimates released by the ANZ Bank in February, the housing shortage in New Zealand has reached 60,000 units and is growing at an average daily shortage of 40 units. In the past, American investors were considered to be the main factor driving up New Zealand's housing prices. However, the scale of the influx of Chinese buyers in recent years has far exceeded that of American buyers.
Previously, there were concerns that overseas buyers were putting too much pressure on New Zealand’s infrastructure and housing prices.
New Zealand’s First Party leader Winston Peters added that New Zealand “is no longer for sale”. "The reality has changed, and New Zealand has sent a clear signal to the world that this country is no longer in the state of being sold in the past. We are very happy to see this change."
Rising house prices
The country is facing a housing affordability crisis, which prevents many people from obtaining housing.
In recent years, low interest rates, limited housing stock and immigration issues have pushed up housing prices.
Prior to the September election, foreign ownership and housing shortages were prominent problems in New Zealand’s larger cities. In the September election, the conservative National Party ended its nine-year rule.
"We have agreed to prohibit foreign buyers from buying existing homes," Ardern said on Tuesday (October 24). She also announced plans to cut immigration and create jobs.
Previously, there was concern that overseas buyers were putting too much pressure on infrastructure and housing prices. Chinese investors have always been one of the largest overseas buyers in the New Zealand real estate market.
In recent years, the increase in house prices in New Zealand has been driven by immigration, low interest rates and limited housing supply.
According to data released by the Real Estate Institute of New Zealand (REINZ) in September, the median house price in Auckland, the country’s largest city, was US$845,000 (approximately US$582,000), which was close to the same data released by REINZ in November 2008. Nearly doubled. In the capital, Wellington, the median house price rose by 10.6% to NZ$531,000 in the same time period. REINZ's investigation is based on the actual selling price. According to data from the New Zealand Real Estate Institute, the average house price in Auckland is US$582,700.
During the announcement of the housing policy, Ardern also revealed that he had received a call from US President Trump on the evening of October 23. She said: "The relationship with the United States is extremely important, and this relationship will not change."
Over the past year, New Zealand’s housing price growth has slowed, but it remains one of the fastest growing regions in the world. This country has a population of approximately 4.6 million. For New Zealand, where most areas are sparsely populated, too high housing prices are not normal. Although the country’s housing price growth has shown a downward trend in the past year, it still ranks among the best in the world.
A recent survey by the real estate consulting firm Knight Frank found that the annual growth rate of house prices in New Zealand was 10.4%, dropping from third to tenth in the ranking of 55 real estate markets.
Real estate prices in remote areas have risen
Homes.co.nz spokesperson Jeremy O'Hanlon believes that high housing prices in the Auckland area have led to a housing price bubble in surrounding cities and regions. "The rapid increase in housing prices in the Auckland area has resulted in a few hours’ drive from Auckland in the past 12 months. Housing prices and populations in other areas of China are rising rapidly."
In places such as Whakatane, Opotiki, Gisborne, Rangitikei, Whanganui, Palmerston North and Horowhenua, after years of low housing price growth, housing valuations have also begun to show a relative increase.
NZ Property Investors Federation Chairman Andrew King said, “Rotorua seems to lack rental housing. This is the demand. Investors are looking for investment opportunities outside of Auckland. Low housing prices mean you don’t need to invest too much. The down payment for the local government and the good income from local rents are the attractiveness of some regional central cities."
Hilary Parker of the research firm Infometrics said that regional housing prices are catching up. "Although the housing market in Auckland is cooling down, housing prices in some regional areas, such as Rotorua and Whangarei, are rising due to better economic development. Rising, housing prices in the capital, Wellington, have also experienced very strong growth, but the price increase in this area is still lower than the price increase in many other parts of New Zealand over the past six years."
According to analysts at Homes.co.nz in New Zealand, Fordlands in Rotorua is the area with the largest property appreciation in recent years. The average house price rose from $132,997 in September 2016 to $181,003 this week, representing a 36.1% increase in house prices. In a study conducted by the University of Auckland this year, Fordlands was even called the most "absolutely poor" area in New Zealand.
The increase in house prices was followed closely by Taumarunui, where the average price increased from 76,515 last year to $103,390 this year, an overall increase of 35.12%. Housing prices in Hastings have maintained steady growth, with an average price ranging from $389,243 to $517,187, an increase of 32.87%.
"Despite a little distance from the growth rate of house prices in 2015, house prices in some suburbs in New Zealand have remained strong." Homes.co.nz spokesperson Jeremy O'Hanlon said.
In the Auckland area, suburban Wellsford has an outstanding performance in housing price growth, with an increase of 8.56%; followed by Lynfield with an increase of 8.09%; Mellons Bay and Omaha with an increase of 7.39%.
The fastest growing area in Wellington is Churton Park, which is as high as 18.11%. Belfast has become the fastest growing area in Christchurch with an increase of 6.23%.
"House prices will have another round of reshuffle. The huge population growth pressure may become a factor that affects the overall situation. The tidal effect is playing a role. What we see is that the increase in housing prices in this country is gradually weakening and declining, but this change is in the whole country. Different regions present different stages."
Information forecaster Mieke Welvaert also recognized that the increase in housing prices in big cities has begun to be eliminated by the increase in housing prices in small cities.
"Even if housing price growth in Hamilton and Tauranga enters a period of cooling off, houses in these areas may not be affordable for everyone. In this way, people will choose to commute from the marginal areas, and the housing prices in these areas are relatively close to the people." Said. "In some areas such as South Waikato and Rotorua, job opportunities have increased significantly. This has increased the demand for housing in the area to a certain extent. Rotorua has great potential to replace areas such as Tokoroa and the Bay of Plenty."
"Opotiki is currently benefiting from the good job prospects in the Whakatane area, but the local economic development itself also has optimistic prospects. The local and regional governments are investing in the construction of a seaport for the local aquaculture industry." She said the attraction of Lower Hutt is that it is Wellington. Buyers are a more economical choice because this area is perfectly connected to the city center.
House prices fall in the next three years
According to the prediction of New Zealand economic experts, during the new coalition government, New Zealand's house prices will fall by 10% to 13%. With the announcement of the New Zealand Coalition Government's policy agenda, commentators from all sides are analyzing the impact of the policy on the New Zealand housing market.
According to Gareth Kiernan, chief economic adviser of Infometrics, a New Zealand business research institute, during the new government, the growth of New Zealand’s population and net immigration will slow down, and house prices may fall by about 10% in the next three years.
He said that the real estate market has slowed down due to the tightening of loans and the lack of money for investors. "It now appears that the desire to make money from the property market has been completely shattered."
What may happen after that is that investors find that the real estate market is less profitable. Even if they can obtain loans, they lose the desire to buy, and the real estate market is further downturn.
ASB chief economics expert Nick Tuffley said that the tax policy of the New Zealand government will become a big issue for investors. "It now appears that the New Zealand coalition government may continue the Labor Party's policies in the future." That is, the listing period of investment housing is 5 years, and the sale of real estate within 5 years will be taxed.
Real estate investors are facing changes in tax policies, which make the income of investing in real estate less. Due to various uncertainties, investors will remain cautious about the real estate market in the short term.
He said, “In the short term, the possibility of a skyrocketing house price is very small.” In this way, buyers will have time to conduct a thorough inspection of the house and further bargain with the homeowner. However, if house prices continue to fall, the number of houses on the market will decrease, buyers will have no more choices, and the range of house price fluctuations will shrink.
Nick Goodall, head of CoreLogic's research department, agrees with experts. He believes that the new government will introduce policies to restrict real estate investment, which will further restrain the demand in the real estate market.
But he believes that house prices will not fall sharply in the future. Because houses are still in short supply in many parts of the country, first-time buyers or first-time buyers will buy houses once they see a suitable opportunity.
On the other hand, if the house price is too low, the homeowner will not sell the house unless the homeowner has financial problems, or the interest rate is too high to repay the loan.
Factors of rising house prices
Of course, there are also views that oppose the regulation of the New Zealand government, accusing Ardern of not understanding the economy. They said that when the value of the house drops, people feel that their wealth is shrinking and consumption is reduced. When the value of real estate rises, people feel that they are wealthy, and even if they don’t borrow money, they can spend more money with the net worth of the real estate.
So, why does the New Zealand government point the spearhead of controlling housing prices at foreigners buying houses? According to local New Zealand media reports, due to the good investment value of New Zealand real estate, investors from nearby Asian countries and English-speaking European and American countries like to buy houses in New Zealand. Since the supply of residential properties is not high, the influx of foreign buyers can easily push up New Zealand house prices.
Last year, the New Zealand Labor Party claimed that the Chinese population in Auckland only accounted for 10%, but bought about 40% of the city’s homes. Many buyers may have come to New Zealand to buy houses through student visas or tourist visas. Although this amazing data has caused fierce controversy in New Zealand, Chinese buyers are definitely the main force pushing up New Zealand's house prices.
As of September this year, New Zealand’s official data showed that about 3%-10% of the houses bought by foreigners without New Zealand status and not paying taxes in New Zealand. But in big cities like Auckland, Chinese buyers account for 65% of all foreign buyers. In New Zealand, Chinese buyers accounted for about 38.2%. Obviously, the strength of Chinese buyers in real estate speculation should not be underestimated.
In this regard, the author believes that a total ban on foreigners from buying houses in New Zealand is tantamount to giving the local real estate market a "rest therapy". Although this can curb real estate speculation, it will have a great impact on New Zealand’s economic growth. The New Zealand dollar has depreciated nearly 5% against the U.S. dollar since Ardern won the cabinet battle, which also highlights the panic that foreign investors are eager to flee the country.
In fact, in addition to foreign investment property speculation and the influx of immigrants into New Zealand, there are two major factors that have caused New Zealand housing prices to rise too quickly:
On the one hand, New Zealand's mortgage interest rate is too low. The lowest mortgage interest rate in New Zealand in recent years is only 3.87%, and the high is only a little over 4%. Under this level of interest rates, it has encouraged speculative and investment property buyers to enter the market. Therefore, in order to control housing prices, we must first increase the mortgage cost of real estate speculators.
On the other hand, the housing shortage in New Zealand has always been serious. This has led to the fact that even if foreign speculative and investment property buyers withdraw, it is not easy for speculative house prices to fall because of the lack of housing supply.
According to ANZ Bank estimates in February this year, the housing shortage in New Zealand has reached 60,000 units, and it is growing at an average rate of 40 units per day. For this country with a population of only 4.6 million, the government should encourage developers to build commercial housing and affordable housing. Only by increasing the supply of housing can the high housing prices be regulated.
Under the pressure of resolving the pressure of the national housing, Ardern has come up with a "killer" that prohibits foreigners from buying houses in the local area. However, although such an approach can deter speculative property speculators from entering the market, the side effect is the rapid depreciation of the New Zealand dollar, allowing investors to flee, and the economic downturn will end. Therefore, while restricting speculative house purchases, it is also necessary to increase the cost of home buyers and increase the effective supply of housing. Only in this way can real estate return to residential properties.