Opinion: What does the Auckland property market and Canada have in common?

While some report that the Auckland property market boom is about to collapse, others have said to the contrary. So who is right?

Well no one really. How do we really know, all we can do is guess at best, however changes to Canada’s immigration policy might have something to do with it.

Canada has recently closed down its popular investor program which was popular with wealthy Chinese and to cut a long story short, the capital that was destined for Canada is now flowing into Australia and New Zealand, in particular, Melbourne and Auckland. Whether the whole Canada saga is as bad as some say, the perception among Chinese is that Canada are ‘not friendly’ and given recent dealings with Chinese investors, when they get a ‘bad feeling’ about something, they quit, end of.

Canada’s cancellation of an immigration program popular with wealthy Chinese is adding to concerns that a country once welcoming of China’s investment and immigrants is now closing the door on both. – WSJ.com

So the flip side is that all this lovely money flows into our country and therefore it is one of my primary reasons I cannot see the property market in Auckland collapsing catastrophically like some commentators have forecasted. Coupled with a lack of supply prices I expect should remain stable if not increasing slightly over the medium term. The LVR has not dented the market as much as some thought, as buyers seek alternative ways to get cash, which interestingly has not (yet) led to the non-bank lender bubble that cropped up in the late 70s when this was last in vogue. Although these LVR restrictions have impacted the lower end of the market, i.e. your first home buyer, they won’t have any effect on the top end where most of the investment cash is going.

New Zealand developers pretty much have the smaller end of the land sales market to themselves, but for site sales over $5 million they now face increasing competition from offshore parties. – nzherald.co.nz

From first hand experience in recent months, capital controls in China seem to be the biggest brake holding back investment in property in Auckland. Some clients have only been able to suck out $1m NZD per month which for multi million dollar properties means long and lengthy settlement periods however property is selling in critical growth areas which influence prices across the board as it trickles down through the suburbs and price spectrum.

But what about interest rates? What about them? Yes sure they will have some impact but most smarties should have locked in something by now and should only be an issue in the short term until readjustment happens, which will possible coincide with new stock arriving on the market mid/late 2014 so therefore it would balance out but nothing to completely make the ass end of the market collapse.

Len Browns recent brain fart around an income based Auckland tax  has some quite reaching implications for larger land owners as well as those on lower incomes. If rates we not already damaging enough, by whacking people for more money to prop up his farcical council, I cannot wait to get out of this area fast enough. Yes the rating system as he says is inherently unfair but it isn’t so much the rating system itself, it is the amount it is charging to suck up the income it needs to pay the credit card bill. Cameron Brewer pointed out that as of June 2013, net interest as percentage of rates reached 19% and could go (most likely will go) past the 25% max limit set by council treasury policy. So that is one third of rates income in interest alone! Seriously, someone has to stop this council running amuck and bring it into line. Fiscal responsibility is not in the councils vocabulary, dictionary or minds it seems.  So what impact has this on larger land owners? We it means many farmers struggling with rates given the increase in values in their property will face a hard decision whether to stay or go, which means more sprawl of lifestyle block scabs devastating the rural pastures  of Auckland.

So while Chinese foreign investment into New Zealand is good for those who are able and willing to sell property, Len Browns proposed tax ideas makes the prospect of staying here even harder. And if you want to buy a house here, why bother? Go somewhere else, Auckland, the place I was born and raise is not a place I want to stay.

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