‘Mega landlords’ effect sees couple sell home, instantly priced out of Auckland

With 38 per cent of Auckland properties now owned by investors, the Eva family are avoiding homes they might look at - but they still can’t find one. Geraden Cann

SAMUEL Eva and his wife Kristy had their first daughter in February, and sold their home in West Auckland’s Ranui in October in the hope of finding a bigger place for their growing family.

But within weeks, they found themselves priced out of taking the next step up the ladder, and they are now looking at smaller homes than the one they just sold.

The family are competing in one of the most investordominated regions of the country – nearly two-fifths of all homes in Auckland are owned by investors.

Eva is a mortgage adviser and has a good sense of the market, which is why the family are avoiding listings that might attract investors or developers, including areas marked for urban intensification or plots large enough to subdivide.

But they still cannot find a new home, and Eva says the family are repeatedly out-priced by first-home buyers so desperate to get on the ladder they will offer up to $120,000 above the asking price.

The family thought they would have enough to upgrade to a larger three-bedroom after their home set what Eva believes was a record price for the street.

They are putting in an average of an offer per week, and Eva says it’s been stressful to be repeatedly outbid.

‘‘You start measuring up your furniture and making sure everything fits and then someone goes and drops an extra $100,000 on it, and we’re back to square one,’’ he says.

‘‘We are stuck with what we’ve sold our house for, and then in the last two or three weeks we’ve seen house prices jump another $100,000.’’

In October, the Government announced new rules that will allow buildings of up to three storeys on most city sites without any need for resource consent, from August 2022. Eva says this is likely to create more investor demand in single-house zones.

The expected extension of mortgage deductibility on new builds will also likely fuel interest in anything subdividable, developable, or newly built.

Analysis conducted by property data company Valocity for Stuff and Sunday News’ Mega Landlords series reveals 38 per cent of Auckland homes are owned by investors, with similar proportions in Waikato, Bay of Plenty, and Gisborne.

All are trumped by Queenstown, however, where 48 per cent are now held by investors.

There is also a trend of more urban areas having a higher proportion of investors with more than six properties, suggesting a greater concentration of property wealth in the country’s larger towns and cities.

In Auckland, a little over 22 per cent of investors own six or more properties. In Wellington, it’s 19 per cent, in Christchurch, 21 per cent.

By comparison, in the Tasman region only 11 per cent of investors have six or more

‘We are stuck with what we’ve sold our house for, and then in the last two or three weeks we’ve seen house prices jump another $100,000.’ SAMUEL EVA

properties, in Marlborough it’s 13 per cent, and Northland it’s 14 per cent.

Rod Schubert, managing director of Rod Schubert Financial Advice, says this is down to investors seeing urban areas as yielding higher rents and the biggest sale profits.

Otago University senior research fellow Lucy Telfar Barnard says services might be more professional when landlords have larger holdings, and they might be less likely to sell a property out from under tenants.

‘‘On the other hand, the pyramid approach to property investment, where you buy something, do it up a bit, increase the value, borrow against the increased value to buy the next one, and so on, can leave investors heavily leveraged and under-capitalised, which can make them less responsive to maintenance and upgrade needs,’’ she says.

The main drawback is the concentration of wealth – particularly after recent houseprice jumps.

‘‘It means the benefit of that net wealth gain is concentrated in fewer people, and that people in those locations who don’t own property are shut out further from the benefits of home ownership.’’

Telfar Barnard says the impact of high levels of rental property don’t automatically have to be adverse. In Europe, where renters have stronger rights, renters can still feel secure and set down roots.

‘‘In Aotearoa New Zealand, it’s not so benign,’’ Telfar Barnard says.

Although the Labour Government strengthened tenants’ rights and security recently with the largest overhaul in 35 years, renters can still be given notice if an owner decides to sell – and in such a buoyant market that’s a real possibility.

‘‘When the rental market is tight, that little bit of knowledge that it will be hard to find somewhere else if you have to move just adds to the general background stress of daily life.’’

Telfar Barnard says there is anecdotal evidence that a brain drain is already happening, with stories abounding of Aucklanders and Wellingtonians eyeing up a move to Christchurch, and she’s not surprised.

‘‘If you’re in a particularly useful profession – like teaching, the trades, or any of the medical professions, then you can easily find work anywhere in the country.

‘‘So why would you stay somewhere where housing costs means you have little hope of ever owning your own home, and your rent also makes it hard to establish a sound financial base, including saving for retirement?’’

Most of Samuel Eva’s family has already left for Christchurch, and he says he would consider doing the same, but Kristy’s family are still in Auckland and she was determined to stay.

Eva has a good relationship with the developer who bought his home, and says he has been told he can stay until November next year.

‘‘That’s good, but we don’t want the market running away on us either,’’ he says.

‘‘To stay in Auckland you really have to have skin in the game, with runaway rent prices and what-not. From that aspect it’s very stressful.’’

When the Eva family have made offers, it’s actually first home buyers who were outbidding them.

Eva says investors run the numbers, and if they don’t add up they will not bid higher, but first-home buyers become emotional and fall in love with properties.

Eva says he experiences the same gutted feeling when he can’t find his clients homes.

‘‘I had a potential client ring me last week and say ‘hey, we want to buy our first home, we are both school teachers, 60k per year, but we have four kids, we need a four-bedroom, we want a half site.’’

Eva couldn’t get them any more than a $600,000 mortgage, which he said wouldn’t allow them to buy in Auckland.