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Property prices in New Zealand rise; investors share plans

Property values were still rising by 1.9 percent at the end of 2021, according to CoreLogic NZ’s House Price Index (HPI), up from 1.8 percent in November. Now that the property market is still hot, investors have revealed their objectives for the year.

According to Steve Goodey, a property investor in Wellington, Christchurch is a clear choice for investors, with the newest release of Quotable Value (QV) Quartile Index indicating Christchurch as one of the primary places with the most substantial increases for the 11 months ending November 30, 2021.

With a 30.6 percent price hike to an average of 1.125 million dollars in 2021, Goodey still considers Wellington’s market to be solid. For those that can afford it, Auckland remained a viable choice, with average property prices of $1.426 million, according to CoreLogic NZ.

“Auckland never really misses a beat when it comes to these things. At the end of last year, beginning of this year, auction clearance rates were not what they had been previously – there was a sense there were deals to be had. Auckland is a lot of the population of the country; we don’t notice it’s slowed until after it’s happened,” Goodey said.

Meanwhile, people who had left Auckland were expected to be seeking elsewhere, and a new home in Christchurch could still be purchased for $550,000 or $660,000.

Furthermore, Goodey stated that the land between Tauranga and Ōpōtiki was particularly appealing: “Ōpōtiki is really booming. With the transport network between that coast and Auckland, it’s a viable commutable space.”

Graeme Fowler, another investor, said that he would propose places with a total population of approximately 50,000 people where investors might receive a gross yield of 6%, which is a measurement of how much rental income a property returns relative to its purchase cost.

Last year, regional yield rates were only discovered on the west coast of the South Island, according to statistics from the Real Estate Institute of New Zealand (REINZ). Fowler believed that sort of area was still conceivable to find, but it would be difficult.

Sharon Cullwick, president of the NZ Property Investors Federation, stated that a lot of investors were waiting to find out what could possibly happen in the property market. She did caution, though, that eliminating the mortgage interest tax deduction would most certainly have a negative impact on investors’ cash flow.

“There will still be investors who are constantly looking for deals, and these could be in new builds or multiple income stream properties. Most investors try and buy in areas with a larger population,” Cullwick said. “The changes in borrowing will also reduce investors’ ability to buy, so cashed-up buyers will have an advantage.”

Tips for deal hunters and prospective buyers

Despite the skyrocketing property prices in New Zealand observed in December 2021, Mortgage Lab chief executive Rupert Gough predicts that the odds of finding a housing deal in 2022 will be relatively higher than they have been in the previous years.

Property values increased by 1.9 percent at the end of 2021, up from 1.8 percent in November, according to CoreLogic New Zealand’s House Price Index (HPI).

Despite the continued heat in the market, Gough claims that the combination of new lending laws and increased pressure on investors from higher interest rates and larger tax payments adds up to a greater probability for transactions.

”I would be surprised if you see a sudden flurry of them, but it will feel like it because there have been none for the past couple of years,” Gough said.

Gough anticipates further deals in July when property investors file their tax returns and see how the mortgage interest tax deduction affects their cash flow.

Gough encouraged prospective buyers to begin cutting costs right away since new policies set by the Credit Contract and Consumer Finance Act (CCCFA) is now compelling banks to examine spending before giving a loan. The CCCFA is designed to give protection to vulnerable borrowers from unscrupulous lenders and shop trucks.

Gough suggested that bargain hunters might take advantage of the legal changes by seeking regions where listings have exploded and houses that are unlikely to appeal to a wide variety of purchasers.

“For example, older properties that may not be attractive to many investors due to the removal of interest cost deductibility, but also not first-home buyers if the property requires a lot of work to be up to a decent standard,” Gough said.

He also advised prospective buyers to visit 20 open houses before trying to make any deals, providing them with a clear grasp of the target market in order to spot “when a diamond pops up.” They should also look at the closing date and tender sales, as auctions have often imposed a mountain of expenses on buyers due to the need for valuations and building inspections prior to bidding.

Housing cost in New Zealand for expats

If purchasing a new home in New Zealand as an expat is challenging, renting an apartment is an easy option. The most costly cities in New Zealand are Auckland and Wellington, which have higher property rental rates, dining out expenditures, and entertainment charges. Although the cost of living in these three cities is up to 50% greater than in smaller towns in the countryside, these cities also provide the most job prospects. Christchurch is a little more budget-friendly than other of New Zealand’s smaller cities, with costs that are cheaper.

The New Zealand Immigration says, “Finding a rental property in New Zealand is a straightforward process. You can find rental properties by contacting landlords directly, or you can go through a letting agent, for example, a real estate agent.”

You’ll need to sign a leasing agreement to formally rent an apartment. You’ll also have to pay a bond (also known as a security deposit in some countries) and some advanced rent payment.  To be able to move into your flat, be prepared to pay up to six weeks’ rent.

Housing Cost in Auckland per month:

1-bedroom apartment in the city centre: 1,500 – 2, 050 NZD

3-bedroom apartment in the city centre: 2,500 – 4,200 NZD

Housing Cost in Wellington per month:

1-bedroom apartment in the city centre: 1,500 – 2,200 NZD

3-bedroom apartment in the city centre: 3,250 – 4,750 NZD

Housing Cost in Christchurch per month:

1-bedroom apartment in the city centre: 1,500 – 1,700 NZD

3-bedroom apartment in the city centre: 2,000 – 2,400 NZD

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