Like it or not, house prices are big news. The last few years have been focused on rapidly rising prices – particularly in Auckland – and on the growing inability of first home buyers to afford property. Immigration and Chinese investment have taken a large part of the blame for rising prices – whether or not that assessment is accurate.
Although some would say they haven’t done enough, the government has put some new rules in place in an attempt to cool the market. The Chinese government has also implemented some new regulations, which may have the side effect of cooling NZ property investment as well.
As we head towards an election in September – which could result in a new government introducing even stricter investment rules – it’s likely that many Chinese investors will be taking a cautious ‘wait and see’ approach to investment.
Recently, the Chinese government tightened up the rules around taking currency out of the country. Previously, Chinese citizens were allowed to take up to US$50,000 without facing any questions. Now, anything over US$10,000 requires a number of declaration forms explaining exactly what you plan to do with the money – which is arduous and off-putting for some people.
The introduction of stricter borrowing rules is one of the ways the current New Zealand government has attempted to cool the housing market. Most borrowers are now required to have a 20% deposit in a New Zealand bank, and to show proof of income before they can even bid at auction.
These changes, combined with the currency cap introduced by the Chinese government, are an obstacle for many Chinese buyers. If you have recently immigrated to New Zealand, or if you’re looking to invest in property here, it can be difficult to prove you have the funds for a deposit if you can’t access your cash in China. If you’re just entering the country and have just started working, it can also be hard to show that you have on going income to meet mortgage payments.
Cautious and careful
If you have the funds to buy a house, but are prevented by borrowing rules or currency caps, it can be very frustrating. It’s also enough to give people pause when it comes to investing in New Zealand property – the cooling market means a return on your investment isn’t assured, and there’s always the possibility of new rules or caps preventing you from investing or profiting off your investment.
That may be why, according to property website Hougarden.com, 46% of potential Chinese buyers are taking a ‘wait and see’ approach to investing in property. As the market continues to cool, and the government potentially changes, that approach may change too – we’ll have to wait and see.