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Following the halo

Investors looking out of Auckland, due to the 'halo effect', should tread carefully.

Thursday, January 28th 2016, 1:00PM

by Miriam Bell

Auckland’s market may be slowing, but prices are still sky-high – and this means investors continue to look to other parts of New Zealand for better deals.

Auckland Property Investors Association president Andrew Bruce said that, in every cycle, there comes a point where it is hard to get returns in the Auckland market.

As a result, people start gravitating to outside of Auckland.

In his view, that was already happening before the Reserve Bank announced its LVR restrictions on investors in Auckland.

“But it was under the radar. And, subsequently, the new regulations have amplified the trend.”

Investors looking to buy outside of Auckland need to be aware that area selection should be demand-driven.

They should look at areas where people are actually going – and at the Statistics New Zealand population growth projections for such areas, Bruce said.

“Conversely, they should be wary of areas which are being influenced by government regulation and may not have the other necessary fundamentals.

“This is because the stroke of a pen can change the flow of people into such an area.”

It is not a good idea to invest in areas which are not growing, even if they are cheap, he said.

“Hamilton has been good to me. I think Hamilton, Tauranga and maybe Nelson are worth looking at. I’m not convinced about Whangarei though.”

Those buying out of Auckland should tread carefully, well-known Auckland property investor David Whitburn agreed.

He said it paid to remember the Auckland market’s fundamentals are still strong.

“Migration is strong and there the city is experiencing massive population growth. This is because Auckland is a desirable place to live. There are jobs, the climate is generally good, and it’s a good place to raise a family.”

However, Auckland properties are expensive and, for investors, the deposits required are higher and the yields are low, Whitburn said.

This has led to people buying in Hamilton, Tauranga, Waikato, and even Northland.

“These areas, which are close to Auckland, are now seeing more activity from Auckland investors. But for how long?”

Investors buying in such areas need to focus on cash flow which is something they can’t get in Auckland, he said.

“There’s no point in trying to go for growth in these areas because their current strong growth is only likely to be short-term. This is due to the LVR restrictions. Once they are lifted, Auckland will start to go up again.”

If buying for cash flow, as opposed to growth, investors have to think about the state of the rental market in the area they are interested in.

“Some towns are pretty stagnant, or even declining, in terms of jobs and population growth which makes for limited demand and high vacancy rates.”

Whitburn recommends that, rather than looking out of Auckland, investors should look at buying new builds in Auckland.

“They are easier to finance as they only need a 10% deposit and they get a warmer, drier property which, according to MBIE data, makes it easier to retain tenants.”

Buying new builds is a good strategy for those wanting to get into the Auckland market – which is the market that, ultimately, offers the most opportunities, he said.

Other property industry figures take a brighter view of buying outside of Auckland.

Positive Real Estate director Campbell Venning thinks the Auckland market is getting scary.

For this reason, it can pay for investors interested in seeing returns to look away from the SuperCity, he said. “It’s the old adage – it’s all about location, location, location.”

In his view, Hamilton, Tauranga, Queenstown, and even Wanaka could be good bets. “They are safe centres with growing populations and they are in the earlier stages of their cycles.”

However, investors do need to think about the sustainability of the returns in the areas they buy, Venning said.

“Some areas may offer high returns, but they may not have a big rental pool. So you might end up with a property which has the potential for 12% returns – but in an area which only has a 30% occupancy rate.”


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Lender Flt 1yr 2yr 3yr
AIA 5.35 4.49 5.25 5.55
ANZ 5.54 5.15 5.85 6.15
ANZ Blueprint to Build 2.78 - - -
ANZ Special - 4.55 5.25 5.55
ASB Bank 5.35 4.49 5.25 5.55
Avanti Finance 5.45 - - -
Basecorp Finance 6.45 - - -
Bluestone 5.29 7.49 7.59 -
BNZ - Classic - 4.55 5.25 5.45
BNZ - Mortgage One 5.55 - - -
BNZ - Rapid Repay 5.55 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 5.55 5.35 5.94 5.99
BNZ - TotalMoney 5.55 - - -
CFML Loans ▲6.45 - - -
China Construction Bank 5.50 5.40 6.14 6.40
China Construction Bank Special - 4.45 5.19 5.45
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 4.70 5.20 -
Heartland Bank - Online 4.00 3.85 4.70 4.84
Heretaunga Building Society 5.95 4.80 5.50 -
HSBC Premier 5.49 4.39 5.15 5.39
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.25 ▲4.29 ▲5.09 ▲5.35
Kainga Ora 5.43 4.57 5.58 5.85
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 5.00 5.55 6.19 6.39
Kiwibank - Offset 5.00 - - -
Kiwibank Special 5.00 4.55 5.19 5.39
Liberty 4.84 - - -
Nelson Building Society 5.95 4.95 5.85 -
Pepper Essential 3.44 - - -
Resimac 4.59 5.60 6.16 6.29
Lender Flt 1yr 2yr 3yr
SBS Bank 5.29 4.69 5.35 5.49
SBS Bank Special - 4.19 4.85 4.99
Select Home Loans 4.09 4.29 4.86 5.09
The Co-operative Bank - First Home Special - ▲4.19 - -
The Co-operative Bank - Owner Occ 5.45 ▲4.29 5.19 5.45
The Co-operative Bank - Standard 5.45 ▲4.79 5.69 5.95
TSB Bank 5.59 ▼5.14 ▼5.79 6.15
TSB Special 4.79 ▼4.34 ▼4.99 5.35
Unity 5.65 4.80 5.50 -
Wairarapa Building Society 5.24 4.55 5.20 -
Westpac 5.54 5.09 5.79 6.09
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.54 - - -
Westpac Special - 4.49 5.19 5.49
Median 5.45 4.55 5.25 5.52

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