With extended lockdowns and no certainty of a return to normality, New Zealand businesses are struggling. Inflation is at its highest in decades and banks are tightening up with less money available to lend to customers. Yet, the housing market, particularly in Auckland is still rocketing through the record barriers. Property Investment Mentor and Founder of Finax Mortgages & Insurance, Lucia Xiao, is concerned that the recent announcements from the New Zealand Government is sending a potentially dangerous message of confidence around a currently volatile property market.

“I have great concern about how our economy is doing. We’re seeing client mortgage applications being put on hold, due to lost or reduced income.” Xiao said. Lucia argues that there is currently insufficient support for small businesses in New Zealand and the cracks are starting to show. New Zealand’s Government have announced three new initiatives signalling a bet on property to keep our economy afloat; Immigration changes allowing 160,000 people now eligible to purchase property in New Zealand, a recycled initiative to help first home buyers in a shared ownership scheme along with an announcement, fast tracking a loosening up of council rules to encourage development of existing residential property.

“The Immigration announcement just weeks ago has sparked a fear-of-missing-out driven rise in property prices, what our clients were purchasing just a month ago for $1m, new clients need to spend another $150,000 more to secure a similar property. It’s a huge concern for me.” The First Home Partner scheme to be run by Kāinga Ora “is not a new idea” said Lucia, with The New Zealand Housing Foundation and Habitat for Humanity with initiatives already in place, Lucia feels this new scheme will only help a few people, but the confident message it sends is stronger

The most recent announcement to remove the need for resource consent for up to three dwellings and with the potential to be up to three storeys high, Lucia believes won’t solve the issues we’re currently facing.

“The reality is there are large areas of Auckland under the Unitary Plan zones that already allow for up to three dwellings without the need for land use resource consent. Although this will help a little, it won’t help on a grand scale. All these announcements are sending the message to buy property” Lucia worries that despite confidence in property, there are still a few alarming issues that can impact the property market.

“To solve the shortage of housing, we need to address the shortage of materials, shortage of skilled workers and shortage of bank funding. The market is not looking good, you have to be very, very careful to not overpay. At the moment there are crazy prices out there, like nearly $4m for a property in Panmure, what we know [as mortgage advisers], is that a lender is most likely not going to agree with that value and the purchaser will have to come up with another $2m for their deposit.”

Lucia believes the beauty of property investment however, is that you can avoid mistakes in the market as long as you stay educated.

“I encourage my clients to focus on their own goals, the beauty of property is you’re not buying the whole market, you are buying a single property. If you are mentally and financially ready, don’t hold back, but if you’re highly leveraged, be very careful.”