Will the ban on foreign investment affect your house price? Ben’s Barometer December 2017
When something is going wrong, or we are unhappy with our position, we look for someone to blame. In the real estate game, according to the government, that fault lies with foreign buyers. Why? Because they have come into our country, or not, and purchased our property which has subsequently driven up prices beyond which the average working Kiwi can afford. What has become apparent in the media is that when there is reference to ‘foreign buyers’, they are really talking about Chinese Buyers.
As an export-focused nation, the economy is driven by an open trade policy. Without this, we wouldn’t be able to sustain the standard of living we have become accustomed to. The China free trade policy of the early 2000’s was seen as a world-leading trade agreement. One which brought China onto the world trade scene. This trade agreement made the Chinese more aware of New Zealand, and the opportunities that our country offers. One of many such opportunities was property.
- New Zealand property prices were significantly cheaper than our neighbours
- The legal process to buy real estate is easy and guaranteed
- We have a stable democratic system
The Halo effect
As the property market started to gain traction, buyers spread out and looked for the newest hot spots. The golden triangle between Tauranga and Hamilton is a great example of a market driven by cashed-up buyers moving to lower-priced markets and paying above market levels. This put upward pressure on these markets, as they saw more value in the markets they had come from, just as the overseas investors did when they came a-knocking.
Now, after more than a decade of an open-door policy, the new government are unhappy with what has happened to the property market and has introduced a restriction on foreign buyers purchasing existing properties.
Will banning foreign investment make properties more affordable?
No. That horse has already bolted. And the price movement has already been locked in. As proven during the GFC, negative sentiment doesn’t result in a drop in property value, as rather than realise a loss owners simply don’t sell. That is, of course, unless they are under duress and required to sell as a result of life events such as divorce.
Who’s really to blame?
We are. We failed to realise what we had. We are no longer living in a bubble at the bottom of the world. Every week there are thirty-six direct flights coming in from China. As a young country, we can lack a long-term view, with a tendency to trade in the now, where foreign buyers look at the long-term opportunity.
Very ironically as I was writing this article, I received the email below – a last push into the Chinese market – quick get your house to market before it’s too late!
Following the theme of foreign buyers, I have been asked by many vendors recently just what effect the ban will have on the Wellington market. My opinion is none, as we saw little to no any evidence of foreign investment in the Wellington market. Like Canada, it was only Vancouver that had an issue with foreign investment, and Auckland is New Zealand’s Vancouver.
The local market is still a mixed bag with some outstanding results on some properties and some properties struggling to get out of the gates. Over the next couple of years the city will come under more pressure as policies and employment draw more people into the city.
Wellington Market Quick Facts
Average sale price by Ward:
December Fun Facts
The month of Christmas is upon us! Whether you are the type of person to squirrel away Christmas presents all year round, or the type to rush in last minute on Christmas Eve, most of us are affected in some way by “the silly season”. Did you know?
- December is the biggest retail spend month per year – in December 2016 Kiwi’s spent over $6.5 billion dollars on retail items. That was the highest ever month recorded by Statistics New Zealand.
- Shoppers spent $304 million more in 2016 than Christmas 2015 – an increase of 5.8%
- In December 2016 1.1 billion was spent on hospitality – a considerable jump from the previous year
- Early predictions have the 2017 spend for November/December up around $17.4 billion. That’s a lot of wrapping paper and Christmas ham.
That’s it for 2017. Have a safe and happy holidays and we look forward to bringing you more Ben’s barometers in the New Year.
If you, or anyone you know, could benefit from a considered market assessment by Wellington’s only licensed agent and registered property valuer, please do not hesitate to call. We are always very happy to help.