Despite reports of expats fearful of catching Covid-19 overseas returning to New Zealand in droves and paying up large for homes, experts say returnees are not the reason the housing market has taken off.
However, reports of people flocking home are probably fuelling FOMO (the fear of missing out) which is spurring everyday Kiwis to buy now, says economist Tony Alexander.
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“The most significant development in regard to the expats is every man and his dog in New Zealand believes they are either coming back or they want to come back. People are aware of the numbers – there are a million Kiwi residents overseas.
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“We’re swapping these stories but what’s happening now is just a different version to what happened about ten years ago when people would swap stories to see who could have the most outrageous urban legend about Chinese buying properties.
“The winner I found was ‘I hear of a Chinese woman, she flew in on Monday, bought 32 houses and flew out on Friday.’
“What we’ve got now is an undeclared competition about who can come up with the most outrageous anecdote about expat Kiwis buying while they’re still in isolation overseas.”
Alexander says some Kiwis will return, and a recent Kea Survey indicated half of Kiwis living abroad were considering returning, but Statistics NZ data has shown they are yet to arrive in their hordes.
There is no doubt some who have returned are spending up large – such as the expats who bought a renovated villa in Grey Lynn in November for $3.55 million, more than $1 million above the CV.
Alexander, however, thinks there won’t be a massive wave of Kiwis returning.
19 Chamberlain Street, in Grey Lynn, Auckland, sold to an expat buyer. Photo / Supplied
“It’s a good story and we pay attention to it but in reality it’s not the key driver. It’s the swapping of stories about the intensity of it that is contributing to the FOMO and the determination of people to buy but actual feet on the ground or offshore purchases from the expats, in my opinion, is a very, very small driver of current market strength.
“I don’t think they can be blamed, just as technically you couldn’t blame the foreigners for their buying of 10 or 12 years ago, but it is in the mix.”
The real driver is low interest rates, Alexander says, and Brad Olsen, senior economist for Infometrics, agrees: “Everyone keeps saying there are all these returning people but the stats don’t make that out.”
Agents on the ground are reporting some sales to expats and there are stories about people buying without even looking at a house. That sort of anecdote will stick around for a while, Olsen says, but the real driver is the low interest rates. “That interest rate affect just blows everything out of the water.”
He, too, says all the talk of expats returning could have contributed to the FOMO.
“What it’s done has essentially made the psyche where people are mad keen to get into the market because they’re scared of missing out, and that’s reinforced by ‘I can get cheap lending, therefore, I don’t want to miss out on housing so I will give it a bit of a go.’
“I think there has been that stoking up of the market as interest rates have pushed people to much more seriously than otherwise consider what they’re doing with their money and realise they do want to get in before things turn around or before prices continue to spiral even crazier out of control.”
Bindi Norwell, the chief executive of REINZ, says given this country’s record of dealing with Covid-19 it is no surprise expats have looked at New Zealand as being something of a safe haven and that for those looking to return home over the last few months city-fringe suburbs have been popular due to their proximity to the CBD, good school zones and preferable land size.
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“Returning Kiwis, regardless of their situation, will be need somewhere to stay, whether that is buying, renting or staying with friends and family, which is all going to contribute to the pressure on the market,” she says.
It is important to note, though, she says, no one segment of the market can be pinpointed as pushing prices up as there are a number of contributing factors.
“The diversion of spend on overseas travel to other areas such as property, low interest rates, a shortage of listings, the removal of LVRs and an uplift in interest from investors, first-home buyers and expats are all impacting on the market at the moment.
“As more Kiwis are looking to come home from offshore destinations and with talk of LVRs returning in some degree sooner than expected, we could expect further pressure on house prices in the coming months.”
