Low returns prompt exodus
A WAVE of Aucklander investors may be considering forsaking their city’s housing market and looking elsewhere.
According to research by property consultants Crockers, many Auckland property investors have at least one property outside the city. Others are thought to be renting in Auckland and putting their money into a cheaper city or town, often within a two-hour drive.
Crockers marketing manager Kim Sinclair said because Auckland house prices were rising so much faster than rental returns, it asked investors on its database whether they would be prepared to move outside the city for better returns.
About half the respondents rejected this idea, possibly because they still expected good capital gains. However, about 30 per cent said they would be prepared to consider other locations in future.
Indeed, 22 per cent already had properties in Auckland and another location, and another 5 per cent only had investments outside Auckland. Examples included one investor with properties in Auckland, Taupo and Hawkes Bay; another had houses in Onehunga, Nelson and America.
‘‘Some were saying Auckland city, Papakura and Taupo. One person had a property in Auckland and a property in Ireland,’’ said Sinclair.
One place where more Aucklanders have been sighted is Mount Maunganui. Apartment prices there rose 27 per cent on the previous year in the April to June period.
Harcourts Advantage agent Nigel Martin said Aucklanders had been very noticeable in that area.
‘‘You’ve got the investment buyer who’s priced out of the Auckland market and feels it’s a bit overheated up there coming down here and getting a better return, and maybe catching the wave of price increases that might happen down here now. And you’ve got those who are looking to maybe buy a property down here to eventually move to.’’
He felt Aucklanders were not just looking for houses they could drive to in the weekends but also with fairly established communities and shops.
‘‘They want the full package, which what the Mount offers.’’
Hamilton agent Jeremy O’Rourke, of Lodge Real Estate, said there had not been an exodus of Aucklanders to his city, but a steady number of owneroccupiers were willing to commute. There were also young investors looking for a foot on the property ladder.
‘‘They might be renting in something like Ponsonby or Mt Eden, and we’re seeing them down here simply because they couldn’t afford to buy in those suburbs, and they don’t want to necessarily buy in some of the outlying suburbs.’’
Investors were getting a yield in Hamilton depending on what and where you were buying that could be between 5 and 7 per cent.
‘‘Whereas in Auckland we hear the yields are well below that,’’ said O’Rourke.
Aucklanders buying to live in Hamilton were often attracted to the city’s newer developments in the north-east. Some worked in south Auckland, which made for a shorter commute.
They can make big savings on their mortgage. O’Rourke said he knew of a three-bedroom, two-car internal access house in Albany which had recently sold for $820,000. A similar house in Hamilton would cost just $450,000 with a larger section.
‘‘So I think some people look at it and go, OK what could I do with that extra interest, and how could I spend that on my children, and what does this mean in terms of value of lifestyle,’’ he said.
BNZ chief economist Tony Alexander said people investing outside Auckland had been a phenomenon in the last two housing cycles in the 1990s and 2000s, but he had not heard of it happening so far this time round.
‘‘And perhaps that’s one reason why outside of Auckland and Christchurch the regional housing markets are still reasonably flat,’’ he suggested.
A drift out of Auckland could still occur, because everything following the global financial crisis had been taking longer, Alexander said. The problem for young people wanting to leave the big smoke was that they had few opportunities to earn the same kind of money.
‘‘I never got the impression they were the driving force at all,’’ Alexander said of the last Auckland exodus. ‘‘It was more on the investor side, and that was mainly a phenomenon of the 2000s cycle, when a lot of investors were looking for better yield outside Auckland, and maybe financing construction.’’
Previously there had been a flurry of Auckland retirees moving to Hawke’s Bay and Nelson in the 1990s and more recently, a number of young families moving to Kapiti and Tauranga.
There is a psychology to the Auckland property market that keeps prices high, said Alexander.
‘‘Two years ago I started coming across the comment I saw in the previous two cycles of, ‘If I don’t buy in Auckland now, I’ll never be able to.’ Or, if people are moving out of Auckland, ‘If I sell in Auckland, I’ll never be able to afford to buy in again.’ And that helps account for the shortage of listings in Auckland.’’
The fear of regret was a bigger influence than even the profit motive, he said. ‘‘That becomes self-sustaining. I think we’re definitely into that sort of environment and have been for at least two years.’’