The willingness of overseas-based Chinese buyers to pay above the odds has become the stuff of Auckland legend. Photo / Doug Sherring
The willingness of overseas-based Chinese buyers to pay above the odds has become the stuff of Auckland legend. Photo / Doug Sherring
Aucklanders like to brag that Chinese buyers will pay more for their property. For the first time leaked sales figures suggest they may be right.
It seems everyone in Auckland has a story to tell about Chinese buyers wanting their house.
One elderly Takapuna man was startled to hear a Chinese syndicate was interested in buying his well-established family home.
His place wasn't even on the market when a real estate agent door-knocked the 82-year-old last month, said a relative.
"A Chinese syndicate was wanting to buy a series of sections to build a block of apartments. The hard-sell was on apparently, but thankfully he resisted the temptation."
A few suburbs away in Birkenhead, another real estate agent cold-called, leaving his card in the front door of a huge, stately white house, also not on the market.
"It was the smiley face (on the card) which made me call him," confessed the owner, who had just finished extensive renovations on his three-level wooden villa. "He said 'we've got Chinese buyers'. So we've got a CV of $1.9 million but I asked for $3 million. I haven't heard back."
Local agents aggressively market Auckland houses throughout Asia. Photo / Chris Gorman
It's not surprising the owner deliberately pushed the price up. The willingness of overseas-based Chinese buyers to pay above the odds has become the stuff of Auckland legend - a perception enthusiastically fuelled by many agents.
"Our Chinese buyers helped us [at] Harcourts Flat Bush push the house price even higher in East Auckland yesterday and set a new record high price," agent Tom Chen wrote to his clients in June about an auction, which he said was "again, dominated by Chinese buyers" with "a much higher budget".
Chen told the Weekend Herald he meant Chinese people who live here, not foreigners, but the evidence suggests most of the big money is coming from overseas. Local agents aggressively market Auckland houses throughout Asia to Chinese buyers, who can borrow money at much lower interest rates.
In April, an ad on a Singaporean radio station promoted Auckland as "an investor's dream", with no land tax, stamp duty or capital gains tax. In 2013 a Chinese TV producer offered local sellers commercial spots in Asian markets "to get the attention of the majority of the affluent Chinese community".
The trend has even alarmed some real estate agents - Barfoot and Thompson's Ian Thornhill raised concerns in 2013 when a Chinese investor with "surplus funds" bought an Epsom house, reportedly for more than $2 million, and then left it empty.
"I don't think it's a good thing at all," he told the Herald. "Kiwis are getting really upset. They can't compete with Asians who have the money and they pay more ... It's as plain as the nose on your face, what's happening in the auction rooms each week."
Similar stories are being told around the world as wealthy Chinese investors, worried about the dramatic slowdown of their country's economy and real estate market, pour their money into safe havens abroad.
Last month, Chinese buyers were confirmed as by far the biggest foreign buyers of US real estate, spending $28.6 billion in the year to March at an average of US$831,800 per property, compared to the national average of US$255,600.
In Australia, where soaring prices match those in New Zealand, foreign buyers are banned unless they build a new house or settle in Australia.
Open discussion about Chinese property investment here is crucial for the whole country, because Auckland's runaway property prices are keeping interest rates artificially high, which props up the Kiwi dollar and hurts exporters.
But so far, any debate has been hampered by a lack of information about where buyers come from, mainly because New Zealand has refused to follow Australia's example and set up an overseas buyers register.
The Government has made some concessions - foreign buyers will need to have an IRD number and a New Zealand bank account from October - but the information will still not be available to the public.
Meanwhile some real estate leaders and banking commentators have accused the critics of racism and produced alternative figures suggesting there is not much of a problem.
A BNZ-REINZ survey of real estate agents in 2013 estimated the level of foreign buyers in New Zealand was only about 8 per cent.
New figures
Phil Twyford obtained details of 3,922 Auckland property sales by one unidentified real estate company from February to April. Photo / Chris Loufte
Today, the
Weekend Herald
can reveal house sales data which suggests the influence of foreign buyers is much greater than that. As explained in our analysis, the figures do not directly identify overseas-based Chinese house buyers - but they point to a discrepancy between the number of Chinese buyers recorded and the number of Chinese residents in Auckland, which is difficult to explain any other way.
The figures come from Labour's housing spokesman Phil Twyford, who predicted the trend would increase when a "tsunami" of Chinese money flooded in after the relaxation of foreign investment rules in China.
Mr Twyford obtained details of 3,922 Auckland property sales by one unidentified real estate company from February to April. Labour analysed the buyers' surnames using Auckland electoral roll data, which shows how likely each name is to belong a certain ethnic group. For instance, almost 96 per cent of Aucklanders called Li are Chinese, compared with 40 per cent who have the surname Lee.
Based on Labour's analysis, buyers of Chinese descent accounted for 39.5 per cent of sales - more than four times the 9 per cent level of ethnic Chinese in Auckland's population who are New Zealand residents or citizens.
In contrast, European Aucklanders comprise 56 per cent of the city's population but only 40 per cent of house buyers.
The figures indicate Chinese buyers target more expensive properties, which tend to influence the rest of the market. Chinese buyers made up a relatively low 33.1 per cent of the sales between $400,000 and $600,000, but this figure rose to 36.1 per cent in the $600,000-$800,000 bracket, 42.9 per cent for $800,000-$1 million homes and 50.1 per cent of those buying properties sold for more than $1 million - compared to only 36.3 per cent for Europeans, the next largest group.
Smith is the most common surname in Auckland but it ranks only 20th with house buyers - Chinese surnames Wang, Zhang, Li and Chen are the top four from the leaked data and they dominate purchases.
A similar unscientific but compelling picture emerges in the details of the sales lists, seen by the Weekend Herald. Chinese names are the most prominent in weekly sales for many suburbs, including all 11 in one week for Albany, 11 out of 14 in Epsom (a popular suburb for Chinese residents) and eight out of 10 in the Massey area.
Chinese sellers (23.1 per cent) and Chinese agents (35.7 per cent) are also well out of proportion to the resident population.
Housing Minister questions data
The Govt's register would give far more accurate information about overseas investment in Auckland housing, says Nick Smith. Photo / Mark Mitchell
Housing minister Nick Smith dismissed the data as unreliable and questioned Labour's surname methodology. He said the Government's register would give far more accurate information about overseas investment in Auckland housing.
But Mr Twyford said the data strongly suggested overseas Chinese buyers were having a major impact on Auckland's overheated property market and proved New Zealand was out of step internationally with Canada, Australia, Hong Kong and Singapore, all of which had restrictions on foreign buyers.
"Speculators, both foreign and domestic, account for 41 per cent of all property sales in Auckland and are undoubtedly driving up house prices beyond the reach of hard-working Kiwi first home buyers."
He said Labour had considered the possibility that Chinese residents were richer than most Aucklanders and were buying property out of proportion to their numbers but Statistics NZ data suggested the opposite. Only 5 per cent of Aucklanders earning more than $50,000 (the top income bracket) were Chinese. That suggested many of the buyers were not New Zealand citizens, but investors based in mainland China.
Last month, real estate listings web site Juwai.com estimated mainland Chinese would pour US$10.9 billion ($16 billion) into New Zealand property when the Chinese Government implemented the second phase of its Qualified Domestic Individual Investor programme, allowing more citizens to buy overseas property.
Simon Henry, Juwai's co-chief executive, questioned Mr Twyford's numbers and source. "Data that comes from a political party has to be taken with a grain of salt, especially if it deals with such a short time period."
However Ammon Acarapi, an Auckland Property Investors Association board member and SuperCity Mortgages business development manager, said he was startled by the numbers.
"It's far too high. Chinese are inflating the market and it's creating a pressure. If they chose to walk away, the ramifications on homeowners or investors could be quite disastrous.
Mr Acarapi said he was concerned that overseas buyers were borrowing from China at low interest rates - which have been as low as 3 per cent compared to about 6 per cent for New Zealanders - then sitting on the property a few months, selling at a profit and not paying any tax.
"My clients are often out-bid by Chinese at auctions. Chinese real estate agents who have been in the industry a short time are are hitting the top of the industry almost overnight.
