Quick-buck investors manipulating housing market

Co-ordinated effort hurts first-home buyers and some vendors.

Co-ordinated effort hurts first-home buyers and some vendors.

SOME first-home buyers in Gisborne have found themselves bumped out of the housing market by out-of-town investors who hold up sales through extended due diligence periods.

Gisborne real estate agent Sue Costello said after her company had four deals fall through in a week, her team looked closer at why.

They found strong evidence that a team of people throughout New Zealand, with one in Australia, were taking advantage of Gisborne’s affordable property market. They were putting in offers on houses at the lower end of the market, and asking for a three-week due diligence period during which time they would try to onsell them for a quick $10,000 to $20,000 profit. This delayed the sale process for the vendor, and left local buyers out of the loop.

If a seller was not found, the sale was dropped with disappointed vendors having their homes exposed to the market for longer than anticipated.

In other situations, the sale would go through and this particular team of investors would charge high rents of around $300 or more for a $160,000 home, which gave them a large percentage return. This was also having the effect of pushing rents up.

Either way it was a money-making scheme that was pushing first-home buyers out of the affordable, low-end of the Gisborne market, said Mrs Costello.

“It’s doing an injustice to our locals.”

Not illegal

Mrs Costello said what they were doing was not illegal, just deceitful, and it annoyed her that local buyers, or those from out of town who wanted to settle here, were not getting a look in.

She was able to work out what was happening after noticing there were certain people contacting her office again and again — one from Tauranga, one from Auckland and one in Australia. All had different stories each time but they used the same builder for the building inspection, who was not known to her, and out-of-town lawyers.

They were also not letting on they were connected to the other.

“Then the next one would come in and put an offer in, tying them up with due diligence.

“They are literally holding them up and each time they offer a bit lower,” said Mrs Costello.

“They obviously have a pool of investors in Auckland, and if they don’t find a buyer during that due diligence period they are letting the sale drop.

“It’s the lies and the deceit and the underhandedness.

“We have had a lot of people who have moved to Gisborne in the past 12 months and become part of the community. They are bringing their money to Gisborne and helping the economy.

“Whereas these other people are not bringing anything to the economy — their money is going out of the community.”

Former Aucklanders Nick and Anita Taewa, 32 and 27, bought their first home in Gisborne in late January. Mrs Costello said they were a good example of new people to Gisborne whose intention was to settle here and become part of the community.

Mr Taewa said the entire house price in Gisborne was the same as a deposit for one in Auckland.

“The reality was we had a look at rental options first in Gisborne and there wasn’t that much we were really keen on, and then chose to dive in once we saw how cheap it was.

“As a teacher I get paid the same in Auckland as I do anywhere else.”

Financial sense

Mr Taewa said it made financial sense, plus Gisborne ticked all the boxes in other areas too. They had family here, it was a city without being too big, and going to the supermarket was a quick trip compared to the traffic nightmare and high cost of living in Auckland.

“Everything is cheaper here, the services like haircuts, the doctors — you don’t even think about those things but everything is significantly cheaper than Auckland. That wasn’t even factored into our cost calculations, just an added bonus.”

Mr Taewa said it was their intention to settle here “for quite a while”.

The young couple were the kind of out-of-town buyers Mrs Costello loved to see move into the city — those who contribute to the economy and make a life here.

Out-of-town investors who bought up Gisborne homes at cheap prices, and rented them out to locals for high rents, were doing the community an injustice and taking opportunities away from other buyers, she said.

Some would say “a sale is a sale”, said Mrs Costello.

But to her the investors who were holding up the sales process, and taking rent money out of town, were doing nothing to contribute to Gisborne’s economy.

Mrs Costello said the other concern was these particular investors were asking whether sheds were convertible, and were particularly interested in two dwellings on one property.

She was concerned they could take advantage of the current housing crisis by quick shed conversions at high rents.

“I’ve got nothing against people making money and finding interesting ways of doing that, but not when it is to the detriment of our locals.

“It is really frustrating.”

Another real estate agent, with a large share of the market, had experienced dealings with this group but said it was a small proportion.

“We would prefer to sell to young out-of-town buyers who intend to live here and invest their energy in Gisborne at some point.

“The number of properties sold to out-of-town investors is very minimal compared to the market.

“We put a clause in that says this property is being onsold and the vendor knows that, and if they choose to go ahead then that is their prerogative.

“But I say to my team that 10-15 days due diligence is not acceptable, not in a hot market like this.”

SOME first-home buyers in Gisborne have found themselves bumped out of the housing market by out-of-town investors who hold up sales through extended due diligence periods.

Gisborne real estate agent Sue Costello said after her company had four deals fall through in a week, her team looked closer at why.

They found strong evidence that a team of people throughout New Zealand, with one in Australia, were taking advantage of Gisborne’s affordable property market. They were putting in offers on houses at the lower end of the market, and asking for a three-week due diligence period during which time they would try to onsell them for a quick $10,000 to $20,000 profit. This delayed the sale process for the vendor, and left local buyers out of the loop.

If a seller was not found, the sale was dropped with disappointed vendors having their homes exposed to the market for longer than anticipated.

In other situations, the sale would go through and this particular team of investors would charge high rents of around $300 or more for a $160,000 home, which gave them a large percentage return. This was also having the effect of pushing rents up.

Either way it was a money-making scheme that was pushing first-home buyers out of the affordable, low-end of the Gisborne market, said Mrs Costello.

“It’s doing an injustice to our locals.”

Not illegal

Mrs Costello said what they were doing was not illegal, just deceitful, and it annoyed her that local buyers, or those from out of town who wanted to settle here, were not getting a look in.

She was able to work out what was happening after noticing there were certain people contacting her office again and again — one from Tauranga, one from Auckland and one in Australia. All had different stories each time but they used the same builder for the building inspection, who was not known to her, and out-of-town lawyers.

They were also not letting on they were connected to the other.

“Then the next one would come in and put an offer in, tying them up with due diligence.

“They are literally holding them up and each time they offer a bit lower,” said Mrs Costello.

“They obviously have a pool of investors in Auckland, and if they don’t find a buyer during that due diligence period they are letting the sale drop.

“It’s the lies and the deceit and the underhandedness.

“We have had a lot of people who have moved to Gisborne in the past 12 months and become part of the community. They are bringing their money to Gisborne and helping the economy.

“Whereas these other people are not bringing anything to the economy — their money is going out of the community.”

Former Aucklanders Nick and Anita Taewa, 32 and 27, bought their first home in Gisborne in late January. Mrs Costello said they were a good example of new people to Gisborne whose intention was to settle here and become part of the community.

Mr Taewa said the entire house price in Gisborne was the same as a deposit for one in Auckland.

“The reality was we had a look at rental options first in Gisborne and there wasn’t that much we were really keen on, and then chose to dive in once we saw how cheap it was.

“As a teacher I get paid the same in Auckland as I do anywhere else.”

Financial sense

Mr Taewa said it made financial sense, plus Gisborne ticked all the boxes in other areas too. They had family here, it was a city without being too big, and going to the supermarket was a quick trip compared to the traffic nightmare and high cost of living in Auckland.

“Everything is cheaper here, the services like haircuts, the doctors — you don’t even think about those things but everything is significantly cheaper than Auckland. That wasn’t even factored into our cost calculations, just an added bonus.”

Mr Taewa said it was their intention to settle here “for quite a while”.

The young couple were the kind of out-of-town buyers Mrs Costello loved to see move into the city — those who contribute to the economy and make a life here.

Out-of-town investors who bought up Gisborne homes at cheap prices, and rented them out to locals for high rents, were doing the community an injustice and taking opportunities away from other buyers, she said.

Some would say “a sale is a sale”, said Mrs Costello.

But to her the investors who were holding up the sales process, and taking rent money out of town, were doing nothing to contribute to Gisborne’s economy.

Mrs Costello said the other concern was these particular investors were asking whether sheds were convertible, and were particularly interested in two dwellings on one property.

She was concerned they could take advantage of the current housing crisis by quick shed conversions at high rents.

“I’ve got nothing against people making money and finding interesting ways of doing that, but not when it is to the detriment of our locals.

“It is really frustrating.”

Another real estate agent, with a large share of the market, had experienced dealings with this group but said it was a small proportion.

“We would prefer to sell to young out-of-town buyers who intend to live here and invest their energy in Gisborne at some point.

“The number of properties sold to out-of-town investors is very minimal compared to the market.

“We put a clause in that says this property is being onsold and the vendor knows that, and if they choose to go ahead then that is their prerogative.

“But I say to my team that 10-15 days due diligence is not acceptable, not in a hot market like this.”

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Surfside - 2 years ago
I totally agree with Sue and congratulate her on speaking out about this issue. We are a young family trying to buy our first home here and have recently missed out yet again to out-of-town investors. The property was offered to investors and advertised on overseas websites before being advertised here. Real estate agents and vendors should prioritise locals over out-of-towners.

Joe - 2 years ago
My wife and I are a young couple who moved up to Kaikohe in the Far North. We have watched over the past year as house prices have shot up 20-30% around the district with rents following behind.
In Kaikohe, we were hoping for our first house with some DIY love needed for the mid $100,000s, which would have been easy two years ago. Now people are asking for mid $200,000s and charging $250-300 a week to rent the same properties. That is 40% of the average household's income before utility costs for rough houses, in a small town that (quite frankly) isn't performing very well economically. I've (anecdotally) been told a lot of pressure is coming from Auckland investors who have been pushed out of the Auckland market. No matter which way you slice it, this is not a stable scenario playing out around the country.

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