Investors a ‘ghetto’ hazard

‘Amateur’ investors who don’t know how to maintain properties could damage whole neighbourhoods. Susan Edmunds reports.

Parts of New Zealand are in danger of becoming slums within five or 10 years if the concentration of investor purchases is allowed to continue, property experts have warned.

CoreLogic data has shown investors account for 42 per cent of Auckland’s overall sales, 38 per cent of Wellington’s and 42 per cent of Christchurch’s.

But within those cities, the data shows areas with the most affordable housing are firmly in investors’ sights.

Where firsthome buyers might once have been prevalent, landlords now reign supreme.

Wellington’s central apartments have become an investor favourite. Analyst Nick Goodall said that so far in 2016, 70 per cent of Te Aro sales had been to investors. ‘‘At the same point last year, they had accounted for 58 per cent of sales,’’ he said.

Wellington Central and Mt Cook were also popular investor options – about 60 per cent of each suburb’s sales were to investors through 2016.

Outside the apartment market, cheaper suburbs such as Ranui (56 per cent investor sales), Avalon (53 per cent) and Lower Hutt have become popular landlord options.

Ranui was only the 19th-most popular suburb for investors last year.

In Auckland, investors are snapping up apartments, too – particularly in Grafton, where they are responsible for threequarters of sales so far this year.

Traditional first-home suburbs feature, too – 65 per cent of the sales in Glen Innes this year have been to investors, up from 45 per cent at the same time last year.

‘‘Manukau suburb, in central Manukau, which is a mix of houses and apartments, has also been a popular destination over the last few years with 63 per cent of sales to this group during the beginning of both 2016 and 2015,’’ Goodall said.

But investors have dropped away in Kelston, where they represent 57 per cent of purchases this year, from 61 per cent last year, and Blockhouse Bay where they are 43 per cent of the market in 2016, from 59 per cent in 2015.

Another analysis done by Auckland University researchers found 80 per cent of sales in Otara were going to investors.

New Zealand Property Investors Federation executive officer Andrew King, said cheaper suburbs, and more affordable options such as apartments, had always been popular with investors.

He said they were not only cheaper to buy but the percentage of tenants wanting them was higher.

‘‘At the moment in those areas there is a lot of overcrowding occurring and there is the potential for rents to go even higher.’’

He said not many investors would put their money in Ponsonby, Mt Eden or Parnell.

Property commentator Olly Newland said it was risky to have investors dominating cheaper areas. ‘‘I don’t like it. We need investors to provide rental properties but when they get to a position of dominating the market it’s a short trip to ghettos and slums. If an area is nothing but rentals and absentee landlords, over time it will go backwards.

‘‘Homeowners look after their properties better than investors. Most investors are amateurs and don’t know how to do it.

‘‘If you own your home you don’t think about what you spend on it within reason, you paint it when it needs it, do repairs. But investors are keen on watching their pennies. It gets worse over time. In five or 10 years’ time, we could have a problem.’’

In Christchurch, Akaroa has the highest percentage of investor sales, at 65 per cent – up from 50 per cent in 2015. Riccarton took the second spot and Broomfield was third.

Christchurch apartments were also popular – 62 per cent went to landlords.

But Goodall said it was too simplistic to say that investors were targeting the cheapest parts of the market.

‘‘Most of our analysis has shown they operate across the value ranges, so while they are active at the bottom they are also active in the middle and top ranges, generally because they have the capital allowing them to purchase the higher-value properties.’’

Investors have also become more prevalent in Omaha, with 70 per cent of sales to people who already own a house. Goodall said this suggested it was a popular holiday home destination, and buyers were using equity in other houses to leverage finance.

‘If an area is nothing but rentals and absentee landlords, over time it will go backwards.’