Furious bidding in a middle class suburb ... and its aftermath. PLUS: A quick summary of the quick-flick tax coming into force today, and the new LVR measures kicking in on November 1.
NBR contributor Michael Coote talks about new housing measure
Scroll down for quick summary of new restrictions and tracking measures.
Pundits are still debating whether there’s been a plateau or slow-down in the Auckland property market over the past month — and the impact of the looming measures to dampen local and offshore investors, the first of which kick in today (scroll to end of story).
But if it exists, negative sentiment has yet to hit Marsden Ave in the Auckland suburb of Balmoral – just a few blocks from homes that feature in the new series of The Block NZ.
Two mid-September sales in the street hit records.
With its three bedrooms, tired kitchen and good size section (632m²), 95 Marsden Ave has a July 2014 CV of $1.15 million.
Recent sales in the street have seen furious bidding duels between Chinese buyers push prices to what locals regard as a jaw-dropping $1.5 million (post-GFC, homes along the street were selling around the $650,000 to $750,000 mark).
But they have nothing on the action that unfolded at number 95.
Bayleys agent and auctioneer Andre Coppell tells NBR he and fellow agent Cheryl Crane had five registered bidders. He accelerated the auction process after one put in a pre-auction offer of $1.7 million, placed by a neighbour. Bidding began at the figure but Mr Coppell was soon thinking “oh my goodness” as an Indian buyer and a Chinese buyer (both NZ residents, NBR understands) pushed the price up and up.
The bungalow eventually sold to the Indian bidder for $2.02 million — easily a record for a three-bed home in the middle class suburb.
The drama didn’t end there. NBR understands that feeling miffed to have missed out, the Chinese buyer marched up the street to number 77, also for sale, and made a king-hit pre-auction offer.
The agency selling number 77, Unlimited Potential, won’t comment on the selling price. But the property was sold before its auction, which had been scheduled for September 24. An Unlimited Potential insider confirms it sold for more than $2 million; NBR understands the price was $2.05 million. The four-bedroom bungalow's July 2014 CV was $1.25 million.
Slowdown?
Barfoot and Thompson has recently reported fewer Chinese buyers at auctions and open homes.
Mr Coppell says he personally hasn’t seen a slowdown recently. He says this is possibly because higher-end Chinese buyers have spread their focus beyond the Grammar zone to neighbouring suburbs like Balmoral.
He notes Bayleys just sold 11 out of 11 apartments at Maritime Square in the central city in quick time. On his and Ms Crane’s patch, the pair are closing deals on another two properties. One, in Sandringham (a rung down the property ladder from Balmoral) is expected to be signed off at $1.7 million. A second sold at auction for about the same amount.
There are a number of countervailing forces. There are new measures and possible measures to dissuade non-NZ resident investors, but New Zealand's currency has fallen faster than China's, and those of other possible target countries for Chinese investors, making our homes more attractive.
The tanking Shanghai stock market arguably makes alternative, offshore investments more appealing. New rules give citizens more freedom to invest outside China (a development Juwai.com and its keen follower Phil Twyford see as pouring $US10.9 billion into the Auckland property market). But some report the bureaucracy and scrutiny around exporting capital is challenging and off-putting, at least in the short term.
On the local front, more homes are being built, but not enough to keep up with record net immigration, particularly from the UK, India and China.
And although Barfoot & Thompson says Chinese bidders are thinner the ground, Quotable Value figures out today say Auckland prices are up 22.6% year-on-year, with a 6.7% rise since June, while Infometrics tracked a 2.3% gain between August and September.
New measures
Two Budget 2015 measures come into force today. Non NZ-resident buyers will be required to open a New Zealand bank account, register with IRD and to provide a passport and tax number from their home country.
These policies are pitched as tools to dampen the Auckland housing market and properly track the number of foreign buyers for the first time. The data will not be shared with any other country.
However, some commentators, such as NBR contributor Michael Coote, say there's anecdotal evidence that non-resident Chinese buyers assume NZ will data-share with China regardless and that those with "naughty money" have taken fright.
The so-called "quick flick" or "bright-line" tax also kicks in today. Those who sell a property within two years of purchase could face a tax on their capital gain (which will match their income tax rate). The new tax will not apply if the property is your main home, inherited, or its sale is part of a matrimonial settlement.
The Reserve Bank's tightened loan-to-value rules (originally due today, October 1) will now kick in from November 1. They will:
- Require residential property investors in the Auckland Council area using bank loans to have a deposit of at least 30%;
- Increase the existing speed limit for high LVR borrowing outside of Auckland from 10 to 15%; and
- Retain the existing 10% speed limit for loans to owner-occupiers in Auckland at LVRs of greater than 80%.
By one estimate, 40% of property sales in Auckland are to investors. Mr Coppell says the tighter LVR rules will hit local mum-and-dad investors but leave non-NZ resident buyers untouched, presuming they borrow funds in their home country.
Revenue Minister Todd McClay has issued a discussion paper on a possible resident land withholding tax of up to 33% aimed at foreign investors who sell NZ property for capital gain. Submissions close tomorrow. If the measure is implemented, it will be from July 1, 2016.
