Labour’s worthless foreign buyer ban

The Reserve Banks says the Official Cash rate will remain at 1.75%, but they may either raise it or lower it in future. That’s a real crowd pleaser, and a hint that an economic downturn is at least a possibility in New Zealand.

Foreign buyers

Labour has moved from wanting a total ban on foreign buyers of real estate in New Zealand to something akin to business as usual.

Among those exempt from the watered down ‘ban’, due to become law 1 July, are buyers from Australia and Singapore.

In addition, foreigners will be able buy up to 60 per cent of any new complex of more than 20 units — so long as they rent them to people who are ‘unrelated parties’ (good luck enforcing that condition).

Who’s going to check and take responsibility for ensuring the owner doesn’t rent it to their partner and co-habbit? The rental agent?

At one point Labour said foreigners buying off the plan would have to sell the property once it was built, now they can rent it out or — even worse — leave it vacant.

What the government’s change of heart means is that foreign students can buy property on behalf of anyone prepared to fund the purchase — the purchaser just won’t be able to occupy the property (again, good luck enforcing that).

What all this means is that there will likely be more foreign  landlords and if Singapore can obtain an exemption  to the ban, then any other country can apply for one too.

Meanwhile, the economists at ANZ bank suggest   rents will rise as government policies dampen house price inflation. In short, because house price inflation is down to single didgits the risk of buying an investment property rises.

“The foreign-buyer restriction, combined with other proposed policies, may make capital gains look less assured or investment look more risky,” write the bank’s economists.

“Investors may seek to offset this by charging higher rents. Demand to live in a house is relatively inelastic compared to demand to purchase a house. This means that increases in costs can flow through into rents relatively easily, as  long as household income growth and the housing supply balance are amenable. Indeed it is possible that this is  already happening in advance of policy changes, with rental inflation having increased through late 2017.

“The increase in rental inflation in Auckland CBD (and the recent tick up in rental yields) suggests the current  environment is conducive to rent increases.”

Prices slow

House price inflation has slowed again in the last few months say the economists at Westpac, with Auckland prices falling.

Thanks to an array of government policies, they  are forecasting house prices to be essentially flat over the next few years.

As for construction activity they say capacity constraints and access to finance continue to present a challenge for the building industry.

Rotorua Home Show

The annual Rotorua Home & Lifestyle Show, sponsored by OneRoof, is returning to the Energy Events Centre from July 13 to 15.

The show will have a range of exhibitors with everything from kitchens and flooring to new cars, spa pools to furniture.

Furnished rentals earn more

Landlords who are prepared to furnish their properties will earn more than if they rent them as empty homes.

According to Barfoot & Thompson, central Auckland properties in particular see the highest demand for furnished properties, most likely due to new arrivals needing somewhere to live until their own furniture arrives on a container ship.

According to figures supplied by the realtor, a fully furnished one bed home will earn $65 more a week than a similar sized unfurnished property, and a three bed furnished home will bring in $135 more a week.

The most popular furnished rentals at the branch are one bed properties, with a quarter of all its one bed rentals being furnished.