If you thought the Auckland property bubble was bad now, then prepare for it to get a lot worse:
Chinese investment set to boom
The floodgates are set to open for Chinese buyers to pour US$10.9 billion into New Zealand real estate as restrictions on privately held capital are eased, according to a new report.
The report from real estate listings website Juwai.com, with 2.5 million properties and businesses for sale, studied the effects of the Chinese government’s second phase of its Qualified Domestic Individual Investor (QDII2) programme to allow its citizens to buy overseas property.
Andrew Taylor, Juwai.com’s co-chief executive, said rich Chinese were drawn to New Zealand. “Juwai.com projects that the pilot program will enable US$11 billion of new Chinese money to flow into New Zealand’s real estate market. …
Good news if you already own high-end property in Auckland, bad news for first-time home buyers as the bubble inflates further.
Geoff Barnett, national manager of Century 21 with 20 agency offices, was unsurprised by the US$20 billion figure and predicted it would be poured into new buildings.
That’s not a prediction it’s a smokescreen. Why would this money go in to new buildings – what land would they be built on?
“It’s nothing to fear. New Zealand needs overseas investment to help drive our economy. It’s a good thing,” Barnett said. “If it’s going into development, it’s going to help open up new properties so where’s the downside to first home buyers? It should create an easing in the supply of properties.”
More smokescreen. Incoming capital won’t naturally flow into new development, we have to make it happen*:
Labour’s housing spokesman Phil Twyford said Chinese people could buy nearly 20,000 houses with $15.9 billion, putting even more pressure on over-stretched stock.
“This shows the urgency of cracking down on the offshore speculation that is driving house prices beyond the reach of young Kiwi families,” Twyford said. “Labour’s policy is to ban foreign buyers, unless they intend to live here or by building new their investment adds to our housing stock.”
As far as ordinary Kiwis trying to live in Auckland go, Labour’s policy gives them the best chance.
Update: See Fran O’Sullivan on this topic.