How to make a $3 million property in New Zealand
A $3m property is no longer a “million dollar idea”, as it once was.
As property developers struggle to find the funding to buy new homes, the real estate industry is finding new ways to build the homes that the public wants.
With the exception of the $1.5m house sold to an Asian investor for $3.7m, the majority of new home purchases this year have been to overseas buyers who have no plans to live in New Zeland.
The first three months of this year saw a record number of new homes in New York and London, followed by Sydney, Brisbane, and Melbourne, according to the Real Estate Institute of Australia.
New Zealand is also leading the world in the number of home sales, with a record 44,000 houses sold in 2017, according the Bureau of Statistics.
But the number one reason New Zealanders want to buy is to live, according Toowoomba-based property consultant Nazemi Property Consultants.
“The people who are looking to buy these homes are people who have had a good job, they’ve got a family, and they’re not going to go anywhere else,” she said.
In fact, there are now more New Zealand homes being sold to foreign investors than anywhere else in the world.
For the past 10 years, the number who have been overseas buyers in New England has increased from 13 per cent to 22 per cent.
Since then, New Zealand has seen an average of 12,000 new home sales a year.
One of the biggest reasons for this has been a boom in international demand for New Zealand property, particularly in the property market, according Professor Terence Kelly, director of the Institute of Land Economics and the Director of the National Land Institute.
Many of the foreign buyers are coming from overseas as well as from Australia and Australia’s overseas territories, he said.
The biggest growth in foreign ownership has been in the first 10 months of the year, according data from the Bureau for Statistics.
New Zealand house prices are down in recent years, but the market is still in great shape.
And if New Zealand is able to grow its house price in line with international growth, it will be able to afford to pay for housing, particularly the affordable homes, according Mr Kelly.
Property analysts say New Zealand’s economy is also expected to grow by more than 5 per cent this year.
But New Zealand house price growth is also likely to be constrained by the cost of building and maintaining the homes.
This means that if the country can continue to get a decent quality of life from its property, there will still be people who want to live there.
If you have got a really good house, you should be able afford to live here, said Mr Kelly, who has spent many years working with New Zealand developers.
“There is nothing wrong with a home you buy, it just depends on whether it is going to last.”
It’s not like you’re buying a house to live on.
“He said foreign buyers often had little or no experience buying property in Australia.”
You don’t have the same experience as people who buy in the States.
“They might not have been able to get into a bank, they might not be able access credit, or they might have never been to a property development in New South Wales.”
Mr Kelly said he was not aware of any foreign buyers being denied a mortgage to buy a home.
“I think that’s a little bit of an overreach, but I think the reality is that there are still a lot of potential buyers out there.”
The Australian Property Institute says the number and type of buyers is the biggest factor determining where new home prices are going.
Foreign buyers are not the only ones looking to make money.
There is also the issue of affordability.
A number of economists have suggested there is a risk of an overheated market for new homes.
The BIS estimates that prices are likely to increase in the medium term, particularly because of the expected increase in demand for housing and investment property.
The Reserve Bank has already taken action, with the introduction of the mortgage interest guarantee scheme.
It is understood that the scheme will increase the minimum down payment to 10 per cent of the property price, up from 5 per per cent currently.
While that may sound like a small price to pay, it could make a big difference in the short term.
We will see if the Government can get its house in order, or if a further tightening in mortgage conditions is required.
However, the government has been criticised by some economists for not doing enough to ensure new home buyers have access to credit, particularly if the scheme is introduced.