Residential sales to foreign buyers appear to have bottomed out

Property / news

Overseas owners more than twice as likely to be selling a New Zealand property than buying one

30th Oct 21, 9:21am by Greg Ninness

The number of New Zealand homes being bought or sold by foreign owners appears to have flattened off in the September quarter, according to the latest figures from Statistics NZ.

They showed that foreign owners (people who are not NZ citizens and don't have a NZ residence visa) purchased 132 residential dwellings in the September quarter of this year, barely changed form 135 in the June quarter.

That was down from a quarterly peak of 1116 properties bought by overseas owners in the June quarter of 2018.

Sales of New Zealand dwellings to overseas buyers dropped away substantially after restrictions on overseas ownership of residential properties came into effect in October 2018.

However there are exceptions, such as people from Australia and Singapore, and for some multi-unit residential developments.

Since the restrictions came into effect, overseas owners are now more than twice as likely to be selling a New Zealand residential property than they are to be buying one.

In the September quarter 354 residential dwellings were sold by overseas owners, also barely changed from the 366 that were sold in the June quarter.

In the 12 months to September this year 633 NZ dwellings were purchased by overseas owners, compared to the peak of 3951 in the year to September 2018.

Auckland remains the most popular location for overseas buyers, with 282 purchases in the year to September, followed by Canterbury with 108.

That compares with 2460 Auckland purchases by overseas buyers in the year to September 2018 and 351 in Canterbury.

However the Statistics NZ figures do not give a complete picture of activity by overseas owners, because they do not include purchases or sales made through a company structure, or a trust where at least one trustee was a NZ resident or citizen, even if the beneficiaries or settlor of the trust were non-NZ residents or citizens.

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42 Comments

by CWBW | 30th Oct 21, 9:29am 1635539393

What happen to the theory that foreign buyers are responsible for rising house prices?

News like these are blasphemous to the flat earthers.

by chebbo | 30th Oct 21, 9:47am 1635540472

That theory was only ever credible to people who have no idea what they're talking about; Grant Robertson, for example. In fact, Robertson went on to claim that it was an influx of Kiwi ex-pats propping the market up in the absence of foreign buyers, all returning home with pockets full of cash and their tails between their legs, fleeing the COVID madness overseas for the relative safety of Godzone.

Turns out it was actually a very low number, but unfortunately for that handful of people, it looks like they might have been jumping out of the frying pan and into the fire.

by printer8 | 30th Oct 21, 10:40am 1635543633

Chebbo

That theory was also very credible to many on this site who vehemently blamed Chinese nationals - resident In China - for pumping our housing market and in some instances implicitly that they were the single most important factor. The market has continued to rise despite the intro of the FBB and CCP restrictions on money movement.

So maybe there was a bit of scapegoating?

Having said that, the causes of house price inflation has many causes chiefly low interest rates, landlords by default, supply issues, high levels of immigration . . . and no doubt foreign buyers were also a contributor.

The reality now - for a variety of reasons - the days of rapid house price inflation will be simply reminiscing over a beer at the BBQ.

by Calaverite | 30th Oct 21, 1:05pm 1635552317

Not sure why anyone would expect to see a 1:1 relationship between foreign buyers and house prices. As you say there are a multitude of factors that drive house prices. But if you are claiming foreign buyers have/had no impact on the market then you are really claiming demand for an extra ~4,000 houses p.a. (~6-7% of the market) is irrelevant when determining prices.

by WellingtonInvestor | 30th Oct 21, 2:25pm 1635557128

Currently it is very low interest rates driving up prices. It is a fluid situation. Conditions change.

by Sam B | 30th Oct 21, 3:06pm 1635559609

The theory was very credible to anyone who went to a residential property auction in Auckland c.2012-2020. Depending on the suburb, an overwhelming number of buyers were Chinese - and not 'Kiwi Chinese', but Chinese in the sense of transacting everything through an interpreter. Given that actual ownership is extremely easy to hide through trusts or having a 'friend' buy in your name, the figures have never been meaningful. It just strains credulity for anyone who saw what was happening on the ground.

by muzled | 30th Oct 21, 8:43pm 1635579785

Spot on Sammy B. We were trying to by a house in 2013/14, didn't even get to raise our hands at multiple auctions until we lucked into one at election time.

And on Thursday we sold this place, it went onto TM Wed arvo, done deal midday Thurs. Less than 18hrs all up.

Multiple Chinese developers came through who all obviously had PR but there was nary a word of English spoken by any of the 6 parties in that 18hr period.

And going on the sum paid you gotta wonder where the money comes from.

No average Kiwi in their right mind would have paid that amount.

by K.W. | 1st Nov 21, 9:16am 1635711383

Same in Christchurch. Have attempted to buy several properties recently and all of them went to non-NZ Chinese people. All were sold way over market value in a multi-Asian auction bidding war. That then sets the new "comparable price" for the area, and next week everything sells for that price. Thats how we have achieved a 50-100% increase in prices in Christchurch in a single year. So nothing has changed - as the article states "they do not include purchases or sales made through a company structure, or a trust where at least one trustee was a NZ resident or citizen, even if the beneficiaries or settlor of the trust were non-NZ residents or citizens." As soon as one family member achieves residency, they are out there buying houses for the rest of the overseas family and friends.

by Just Some Advice | 30th Oct 21, 10:25am 1635542754

I don't think people suggested it was the sole reason?

by printer8 | 30th Oct 21, 10:53am 1635544381

JSA

Certainly there were numerous posts focussed solely on FB especially in the Auckland market.

by tomjones_04 | 30th Oct 21, 10:56am 1635544562

Old news.

Its the Kiwi fetish of hoarding houses and rinsing the fellow citizens of every dollar (rent) combined with cheap money.. that’s what got us into this pickle. Nothing to do with foreign investment, they behave in a more civilised and egalitarian manner for the most part.

by PocketAces | 30th Oct 21, 11:41am 1635547307

Back in the day they absolutely were, pushing house prices through the roof, mainly in Auckland, not caring how much they spent so long as they had real estate to hide their ill gotten gains in. I know it, you know. Now we have ludicrous house prices that we are pretty well stuck to because of it.

Chinese govt put the brakes on capital flight and now that money is heading back there, plus the capital gains made in the meantime.

by tomjones_04 | 30th Oct 21, 11:57am 1635548240

Yeah but who sets the price? Not the person purchasing. The greed is at the other side of the table I’m afraid

by Dale Smith | 30th Oct 21, 1:41pm 1635554494

It's always the underbidder that sets the price. If there wasn't one more person(demand) than the property being sold (supply), then the purchase price would be lower.

This is where very few extra buyers, especially those that can afford to pay more, can cause large increases at the margins.

by Spiceeh | 1st Nov 21, 4:39am 1635694789

Price increases have more to do with the regulations around advertised market prices. So much of New Zealands listed real estate is not given a disclosed market value and much of the local sales data is withheld by agents for lengthy periods in order to distort and mislead buyers perceptions eg in Australia a property is advertised with a disclosure document which indicates what the real estate agent believes it's worth in the market, and that value is regulated eg it can not be falsely over or understated by more than 10% otherwise agents can be punished and have been. That doesn't mean a house won't sell at a crazy price over and above the top range in a busy market, though it is likely to fall into that range in a quite or balanced market. It generally makes a huge dent in FOMO by minimising the obfuscation that creates the huge upward distortions.

by K.W. | 1st Nov 21, 9:20am 1635711601

One old 50's original and unrenovated 2 bedroom unit in an average area went to a brought forward auction the other day (Christchurch) on an offer of $500k (which was a still a ridiculous price to pay but arguably that was the market price). It sold at the auction for $700k which is completely insane.

by WellingtonInvestor | 30th Oct 21, 2:26pm 1635557213

Spot on. Conditions change and new factors then push up prices. Currently it is the emergency low interest rates and few houses in the market being sold

by Lapun | 30th Oct 21, 5:02pm 1635566576

Surely if the CCP has made moving money out of China harder there would be reduced reason for selling. Unless they are selling in NZ and moving to another non-China country.

by Rob Reid | 30th Oct 21, 1:28pm 1635553705

Foreign buyers have obviously been making a difference, especially to those of us living in Auckland. And cheap finance.

by WellingtonInvestor | 30th Oct 21, 2:23pm 1635557036

They were. But things change and NZs prices have gotten out of control. Even overseas buyers know when prices are crazy.

by PocketAces | 30th Oct 21, 2:41pm 1635558091

And if they bail out as it appears they are, they will have the exact same influence, only in reverse

by KH | 31st Oct 21, 9:02am 1635624162

Now foreign buyers are exiting, prices are declining. It's a factor.

Sadly the profit goes with them.

by LFCYNWA | 31st Oct 21, 11:23am 1635632634

Analysis is often retrospective and not introspective. The market 'shakes off' bad news and falls a month later 'on fears of'. The market is never the economy, the market is what the market does.

by Justa comment | 30th Oct 21, 9:44am 1635540292

At the moment NZ, particularly Auckland will be off their shopping list, there are better investments elsewhere eg Brisbane for 300k less, and better rental yield.

by HW2 | 31st Oct 21, 6:04am 1635613454

There is always somewhere cheaper than somewhere else. As for FBB Australia has FBB too and for longer than here....

by Justa comment | 31st Oct 21, 12:35pm 1635636945

FBBs yes, but we all know the purchase and certificate of title are done by an NZ resident, but the cell phone instructions and payment is coming from someone else in Ch___

However the anti laundering laws have helped here, but the foreign buys are still being made in disguise.

by Sam B | 31st Oct 21, 7:13pm 1635660799

I believe that that was happening, but also that it's dropped off a lot since a peak a few years ago. I think foreign buyers will continue to be net sellers, both in the figures and in reality. Time to take profits for them.

by Poldark | 30th Oct 21, 9:55am 1635540926

I have a new hypothesis for how news affects the NZ residential property market:

[News comes out] - > [Property prices increase]

One can fill any news item they like

by Let me be Frank | 30th Oct 21, 10:53am 1635544439

"However the Statistics NZ figures do not give a complete picture of activity by overseas owners, because they do not include purchases or sales made through a company structure, or a trust where at least one trustee was a NZ resident or citizen, even if the beneficiaries or settlor of the trust were non-NZ residents or citizens."

...which in effect makes the metric worthless

by Fairlyfrank | 30th Oct 21, 12:38pm 1635550732

Agree totally , the opaque nature of foreign trusts etc does not lend credibility to any comments on offshore purchases as there is a dearth of facts to provide accurate assumptions .

by Mrs The Point | 30th Oct 21, 3:16pm 1635560166

Hang on a minute. The ban also applies to trusts and companies. The majority of the beneficiaries/shareholders must be NZ Citizens/Residents. Foreign trusts cannot buy NZ property.

by Spiceeh | 1st Nov 21, 4:45am 1635695117

They don't have to be a foreign trust, they can buy through a domestic trust as long as a NZ resident or citizen is in the trust.

by K.W. | 1st Nov 21, 9:22am 1635711757

Exactly. The person with NZ residency buys the house in their name, the Trust agreement that makes them a Trustee is executed in China. How would NZ even know what agreements lie behind the purchase?

by Averageman | 30th Oct 21, 11:34am 1635546851

All the signs of a pump and dump. That they are selling should be a major flag for local leveraged speculators.

by printer8 | 30th Oct 21, 12:31pm 1635550260

Averageman

There may be some truth in that but sales by foreign owners have exceeded purchases since the FBB came into place (and certainly markedly over the last few years) yet the market has continued to rise over that period.

Yes, it is widely accepted that there is likely to be little upside to prices and some correction but increasing interest rates, government action directed at investors, minimal immigration, increasing supply, and affordability issues are all probably far more significant flags.

I wouldn't be too concerned about speculators . . . despite what one may think of them, they are not stupid.

by Chris-M | 30th Oct 21, 12:21pm 1635549689

Very sensible overseas house sellers. Long may it continue. I only hope that it is NZ property investors buying them and not FHBs.

by Wrong John | 30th Oct 21, 12:30pm 1635550223

Yes, the yuan will be heading back to the father land over the next 12 months. They have their own issues. And they will have done very nicely thank you very much. New Zealand: Tick. This will assist our market to rebalance, which could well be minus 20% or more, over that time frame. In all honesty, that would be good for NZ. Yes, some of us will be stuck with higher mortgage payments but we can guts it out, just like before. My guess is that the Sun will probably rise tomorrow morning, regardless.

by AJ123 | 30th Oct 21, 1:50pm 1635555057

Until Govt. stick to the theory of 'sustained moderation', these minor changes will have no impact on house affordability.

And news like this will be only categorized as false propaganda.

by WellingtonInvestor | 30th Oct 21, 2:22pm 1635556929

Getting out at the top of the market after some of the biggest capital gains in the world. Overseas buyers seem to be big in the UK at the moment and their prices in parts look cheap compared to NZ.

by JKB | 30th Oct 21, 5:55pm 1635569743

Growing political risk having capital in NZ. Government by decree, medical apartheid, three waters…..

by jim hansford | 30th Oct 21, 10:57pm 1635587871

Without the trusts decode noone knows what is really going on. It was created by the great and groomed to allow wealthy buddies to hide ill gotten gains while at the same time pilfering New Zealand assets and in some cases of shoring the profits. The structure is still alive and well with NZ journalism cowered into submission, if not infact being paid to step aside.

by Zack Brando | 31st Oct 21, 12:21pm 1635636112

Communists like the NZ Labour Party don't respect private property rights.

It's only a matter of time. Too risky to buy property in NZ on a freedom/ownership level..

As for prices - it's totally a landlords market. Cramming more and more tenants into the same house.. This is the Way..

Immigration and tourism taps need turned on to prop this ponzi up!! Though communist don't like small business..