Investors eye regions as law changes

Provincial New Zealand is where the action is for house price growth at present – and a looming law change might only add fuel to that fire.

New data from the Real Estate Institute shows record median prices in November in six parts of the country.

Northland prices were up 21 per cent on last year to a median $515,000, Waikato was up 8 per cent to $529,000, Hawke’s Bay was up 12 per cent to $470,000, Wellington was up 11.5 per cent to $613,000, Tasman was up 19 per cent to $645,000 and Southland was up 4 per cent to $275,000.

Auckland’s median price slipped 1.5 per cent year-on-year to $867,000. Canterbury’s was down 3.3 per cent.

ASB economist Kim Mundy said there was a clear divide between Auckland and the strongly growing provincial markets.

Property investors have warned that these areas could soon come in for more attention.

A bill has been introduced to Parliament that would ringfence rental properties, so that investors could no longer claim losses from their property portfolios against their other income.

This is a mechanism used by investors where rents do not cover the cost of ownership.

Inland Revenue said about 40 per cent of investors at any one time were running at a loss and the average amount of tax benefit claimed was $2000.

CoreLogic data has already highlighted the influence of investors in some of those areas with record prices – in Whangarei, landlords are now more than 41 per cent of the market. Their proportion of sales has jumped in Dunedin, too, to 26 per cent from 20 per cent early in the year.

Bindi Norwell, chief executive at the Real Estate Institute, said: ‘‘The laws that are being introduced around rentals will likely have investors more focused on yield than capital gain. This means that areas like Southland and Taranaki become much more appealing than the likes of Auckland as the rent/price ratio is more favourable.’’

Mundy agreed ringfencing could provide more fuel to those regional areas.

Buyers had spread out from Auckland to Wellington and Waikato and then Tauranga before moving further afield. ‘‘If you can invest anywhere in the country it would make sense to be looking to the smaller regions where the yield is quite a bit higher than the return you would get on an Auckland, Wellington or Hamilton house. ‘‘