If you’re planning to sell your property in Auckland, New Zealand this year, you would be interested to know that the Chinese are back in the hunt. Yes, Chinese property investors are back in Auckland and they are more active than ever before. This is in spite of the restrictions put in place by the Chinese government on the movement of money for investment in overseas property.
Indeed, because of the capital flight from China witnessed in the aftermath of the 2015 stock market crash, the Chinese government has introduced a slew of new measures to ensure that Chinese investors keep their money in China itself rather than invest in properties abroad.
The new regulations led to a serious decline in Chinese interest in New Zealand in 2015. This was compounded by new laws in New Zealand that required IRD numbers and bank accounts for all foreign investors.
But things have changed a lot for the better in 2016 as buyer activity has well and truly picked up in Auckland, with more houses selling at auctions. Indeed, home prices were up by 11.6% in February, 2016 on a year-on-year basis.
As real estate analyst Andrea Rush explains, "Reports were that activity levels during February were picking up across the city, as were auction clearance rates and that Chinese buyers are back in the market."
Auckland property coach Ron Hoy Fong has over 400 clients, most of them Chinese investors keen to invest in New Zealand. He says that there are two reasons for the increase in Chinese interest in Auckland properties this year.
#1: The easing of restrictions on privately held capital in China, that were put in place through the Qualified Domestic Individual Investor (QDII2) programme
#2: Increased confidence of local New Zealand buyers because of the buoyant state of the economy and the jobs market.
That, according to Mr. Fong explains why the Auckland property market has performed so remarkably well this year.
Mr. Fong says, "The market is going to go bananas after May. I anticipate we'll jump back up to the 50 per cent over capital values this year ... we are not in a lull. All we had was the Reserve Bank's new ruling and now they are going to go for it."
He explains that not all Chinese are investors, there are many who want to immigrate to New Zealand for a better quality of life. "I have heard the mortgage brokers are getting more busy with enquiries from Chinese buyers, but a lot of them are waiting for their IRD numbers,” he adds.
Meanwhile, home prices in Auckland continue to rise. The median home price in Auckland in March, 21016 rose to $798,000 and the average sale price was $866,782.
As Peter Thompson of Barfoot & Thompson explains, “March is always one of the busiest sales months of the year, and a good indicator of where prices are tracking for the remainder of the year. In March the average sales price was the third highest on record, within $10,000 of the all-time high in November last year, and 5.4 percent higher than last month.
“The median price at $798,000 is the second highest on record, within $2000 of the all-time high in December last year, and up 8.1 percent on February’s median price. When prices are this strong in March the trend is for prices to hold steady through the year. As it has been for the past two years, lack of supply remains the main price driver,” Mr. Thompson adds.
The property market in Auckland is clearly overpriced. An average home here is 10 times the median household income, up from 5 times 20 years ago.