Investors from elsewhere are contributing to a shifting housing landscape in Dunedin, writes Shane Gilchrist.
It's called the "Auckland effect''.
The median price for a house in New Zealand's supercity is now $830,000. At 10 times the median income, it means property investors (and others looking to cash up) are eyeing places where they can get more bang for their buck.
"Investors are looking for better rental yields outside Auckland. Smaller cities and provincial centres simply offer better value. That has definitely been a phenomenon,'' says Maria Slade, a former business journalist who has recently published Buyer Beware: A New Zealand Home Buyer's Guide.
"Also, there are plenty of Aucklanders with properties worth lots of money. They might be nearing retirement or at a point in their career or business where they are contemplating selling up. Stories abound of people doing that. It makes sense.''
The Reserve Bank's introduction last year of a loan-to-value ratio (LVR) is also having an effect. The requirement for investors to have a 40% deposit has curbed the enthusiasm of some in the Auckland market, Slade says.
"If Dunedin's median is $325,500, that means an investor needs about $120,000 deposit. That's still a chunk of money, but not as much as elsewhere and we are seeing that effect.''
Otago Property Investors Association president Rhonda Schlaadt concurs.
"Investors are coming down from Auckland, as well as Central Otago. There are a lot of out-of-town investors with whom our members are competing.
"We think outside investors comprise about 40% of the investment market.''
However, she says there will always be another deal that comes along.
"Some less experienced investors, perhaps someone with one or two properties in their folio, might still buy on emotion, whereas a more experienced Dunedin investor will walk away and look for another deal.''
Schlaadt touches on private sales, a sector that is difficult to quantify given it is not part of REINZ data, although private sales do figure in QV's stats.
(Maria Slade believes the best measure for the size of the private market is Trade Me, "which claims 10% of its listings are private''.)
Schlaadt believes local investors' advantage often lies in their connections. They might even be able to buy a property before it goes on the market.
"They are listening and looking out for good deals.''
Schlaadt says the hot market extends beyond inner Dunedin, too.
"We recently organised a bus trip to Mosgiel for our members and that was a real eye-opener. The property market out there is amazing. Sections in new subdivisions are being snapped up.
"There are a lot of baby-boomers looking to downsize out there; they are wanting smaller properties and/or smaller houses. We see that as a growing market.
"A 70-year-old now is more like a 50-year-old of 30 or 40 years ago; they are thinking about their lifestyle and their future. They want modern places but are keen to free up some money to use elsewhere. They are competing in the same market as some first-home buyers looking to build.''
Buyer Beware: A New Zealand Home Buyer's Guide is published by Penguin Random House.
