There are plenty of politicians who would like to claim credit for cooling the New Zealand property market but the truth may be that the plaudits belong to the Chinese government itself.
In the past year, the Chinese Government has been clamping down on capital outflow into what it calls irrational projects.
In August this year it added property investments to a list of restrictions on investments in the likes of sports teams and movie studios.
The target was most likely commercial property investments in Europe and the US, many of which are highly leveraged.
The upshot is that the ripple down effect has served to mute positive expectations on both commercial and residential sales in Australia and New Zealand.
According to Real Capital Analytics, which tracks real estate transactions and property sales in 172 countries, capital from China bound for global offshore property and development projects over $US10 million in value fell to US$19.7 billion in the first three quarters of this year. This compares with a record US$36.8 billion for the whole of last year.
US analysts say the commercial real estate is slowing in Europe and the US and they are anticipating a rise in the number of Chinese companies selling down real estate projects as the policy starts to bite.
The rumblings in the industry are beginning to have a discernible effect across the board in both Australia and New Zealand, according to some local analysts.
In the case of New Zealand, it’s perception versus reality that is driving the residential market – nothing new in that.
Offshore investors account for less than three percent of residential sales here and the shortage of 40,000 quality residential properties remains.
Government plans to take a greater interest in decisions of the Overseas Investment Office (OIO) are more likely to have an immediate effect on both commercial and residential Asian investors than are political slogans touting “a 100,000 new homes in 10 years”.
The new centre-left government in New Zealand is expected to tighten the application of OIO regulations which “require investors to establish their business experience, that they are of good character and for sensitive land, demonstrate the benefits to New Zealand of their investment.”
One real estate agent in the Millwater residential development just north of Auckland city, and a favourite for Asian investors in new builds, told Infrastructure that “the Chinese buyers have disappeared.”
Across the ditch a recent report produced by bankers UBS says that 20 percent of foreign apartment buyers in “overbuilt” Brisbane are failing to settle due to tighter restrictions on moving money out of China.
About the writer
Mike Bishara is the publisher of Property&Build and AsiaPacific Infrastructure
