Growing number of property investment dollars moving across the ditch

More needs to be done to offset the loss of millions of dollars in property and business investments to Australia caused by a growing exodus of wealthy Kiwis, says an industry expert.

New data shows that more 50% of vendors who have sold multi-million dollar homes over the past six months have moved to Australia. The sale value of the homes ranges from $4 million to $10 million plus.

Caleb Paterson of real estate agency Paterson Luxury says in addition to the sale of their residence, these home homeowners are also liquidating their other business and real estate holdings, resulting in the loss of tens of millions of dollars’ worth of investment leaving the New Zealand economy each week.

He says the lack of wealth being recycled at this level is contributing to a growing surplus of high-end properties around New Zealand.

“What we know about this demographic is they are extremely well-educated, skilled professionals who have the means to relocate to a new country without the constraints that many other Kiwis face.

Paterson says while a comparatively small proportion of New Zealanders leave the country, they often have significantly higher asset holdings and may own businesses that employ hundreds of Kiwis. As a result, their departure has a disproportionately large impact on the economy.

“I was working with one family recently who sold their house for more than $4 million and then liquidated their business investments of a further $14 million. These funds will now be invested into the Australian economy.

“The cumulative loss of wealth we are seeing at the coal face in recent months has been staggering and is reducing the pool of buyers in this segment of the property market and creating a glut of multi-million dollar residential homes,” he says.

Paterson says urgent changes to the existing investor visa framework for wealthy migrants are needed to help offset the millions of dollars of investment funding and skillsets being lost.

“While reports suggest it is easy for low-skilled labour to enter the market, the process for high net worth investors remains unnecessarily fraught with red tape.

Migrants who have been frustrated with New Zealand’s investor visa process look for alternative ways to buy property here, such as getting residency in Singapore or, simply giving up on this option and opting to gain entry to New Zealand via the more expedited skilled migrant visa instead. Both create an avoidable loss of millions of dollars of investment to the economy, Paterson says.

The growing trend contributes to dramatic discounting and creating a buyer's market.

“For those on the look-out for a new luxury home and who have the ability to purchase, these market conditions have created a significant opportunity.

“People needing to sell in the short term, have been discounting in some cases in million-dollar increments. However, for those in a position to wait it out, one in every five listings, a record number, has been withdrawn from the market so far this year,” he says.

Paterson said demand from high net-worth Kiwis moving to Australia has been so high he has established a trans-Tasman partnership with real estate agents in six Australian centres to help place them in new homes.

“Many of the record number of Kiwis moving offshore are moving because they have become disenfranchised with New Zealand in recent years.

“The Australian lifestyle is appealing, however, they don't have the local knowledge of which suburbs best suit their needs and so we have created a trans-Tasman network of agents to support their move into that market,” he says.

Paterson says the current surplus of luxury properties is a downstream consequence of the Government’s decision to retain the foreign buyer's ban.

When news of the potential lifting of the ban hit the market last year, property owners in the $3.5m+ segment began readying their homes for sale.

“The short notice of the government announcement prevented these homes from listing for sale before the peak summer season and it was inevitable that we would see this wave of new listings enter the market since the start of the year,” he says.

Paterson says with indications that prices in the premium end of the market have bottomed out and economists forecasting a seven per cent uplift by the end of the year, he is advising vendors who want to remain in the country to remove their homes from sale.

Depending on their circumstances, there are other investments that will provide better returns for their portfolios, he says.

For some owners, a strategic retreat from the market now could represent a half-million-dollar increase in their sale price. He is advising sellers who are planning to stay within New Zealand, to remove their homes from sale and try again at the end of the year.

“What we are seeing at the moment is a number of bargain hunters who have been in the wings for some time are starting to commit to a purchase.

“This type of behaviour is a strong indicator we are at the bottom of the market,” Paterson says.

Listings increase, sales fall

Meanwhile, the latest May REINZ data shows more listings and properties selling more quickly than a year ago.

These increases contrast with challenges in securing finance, changes in the job market, and the wait on OCR and interest rates to come down.

The total number of properties sold in May rose by eight per cent compared to April, from 5,834 to 6,303, and by 6.8 per cent year-on-year, from 5,903 to 6,303. Gisborne was up by 112 per cent year-on-year, and 11 of the 16 regions had increases in sales count month-on-month and year-on-year.

Nationally, seasonally adjusted figures show a 5.2 per cent increase, indicating that year-on-year sales counts performed slightly above expectations.

However, sales are still falling behind new listings, with the stock of unsold homes on the market reaching its highest level since 2015.

Listings increased nationally by 25.4 per cent year-on-year from 7,359 to 9,225, continuing a trend since the start of the year. Twelve of the 16 regions have had a rise in new listings year-on-year with notable increases in Wellington (103.3 per cent),

Hawke’s Bay (34.3 per cent), Marlborough (33.3 per cent), Auckland (30per cent), Otago (31.4 per cent) and Waikato (20.7 per cent).

Stock levels for May increased 22 per cent or 5,912 from 26,685 to 32,598 year-on-year and dropped 3.6 per cent from 33,815 month-on-month.

The national median sale price declined slightly by 1.3 per cent year-on-year, from $780,000 to $770,000, and dropped by 2.5 per cent compared with April, from $790,000 to $770,000.

The seasonally adjusted figures show a 1.2 per cent drop, showing prices performed slightly below usual.

Ten of 16 regions had year-on-year price increases with West Coast leading the way with a 14.1 per cent increase, from $355,000 to $405,000. Compared to April, only three additional regions had median sale price increases (Hawke’s Bay, up 2.3 per cent to $675,000; Manawatu-Wanganui, up 0.9 per cent to $560,000 and Canterbury, up 1.5 per cent to $680,000.

Median days to sell dropped by five days, from 49 to 44 days, compared to a year ago.

The HPI for New Zealand stood at 3,595, down one per cent from the previous month and up by 2.3 per cent for the same period last year. The average annual growth in the New Zealand HPI over the past five years has been 5.5 per cent per annum, and it is 15.9 per cent below the 2021 peak of the market.

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