Chinese buyers ready to return

According to our analysis at CoreLogic, buyer demand for Auckland property began to go backwards from mid-August.

This was in response to several measures introduced by the Reserve Bank and the Government to try and slow down the rapid increase in Auckland property values. Meanwhile, the rest of the country saw the usual spring surge in activity, especially Waikato and Tauranga.

Any or all of the changes could have contributed to the slowdown in Auckland activity. Not least could be restrictions on investors who are the most active buying group in the Auckland market, and we know that some of them are now looking at Hamilton and beyond.

But another intriguing change in the Auckland market has been the drop in interest from Chinese buyers. From late August we started hearing reports of far fewer Chinese bidders in the auction rooms, and they were notably absent from open homes.

Of course we have no way of confirming that officially as there is no measure of foreign buyer activity.

One of the changes introduced by the government is intended to allow just such measurement. From October 1 foreign buyers are required to have a New Zealand bank account and IRD number with a link back to their home country tax number.

There are several views as to why Chinese may have been less active lately. Some believe Chinese buyers are gone for good as the hassle of getting a tax number and the link back to China means buying in Australia is more attractive. Others point to the difficulty in getting money out of China following their stockmarket downturn in late August. Then there are others that think it is just a matter of time before they overcome one or both of these hurdles.

My pick is that Chinese interest will pick up again next year. While the new tax rules may put off some buyers, it will not put them all off.

Likewise getting money out of China will likely ease again, especially in the medium to long term as the Chinese Government continues to loosen controls on their currency.

Chinese New Year, which starts in early February, may also see some Chinese buyers out of the market as they travel to be with family during the festivities.

China has an enormous population and increasing wealth. Not much of that needs to come here to impact on our relatively small market. Expect strong Chinese interest for years to come.