Best Housing Affordability in a Decade? + The Property Flipping Trap | NZ Property Insights Ep. 6

Is it finally getting easier to buy a house in New Zealand? In Episode 6 of New Zealand Property Insights, Paul and Debbie Roberts unpack the latest data showing housing affordability is at its best level in nearly a decade. Plus, they issue a massive warning about a deceptive "get-rich-quick" scheme making a comeback in the real estate market.

In this episode, Paul and Debbie cover:

• The Affordability Equation: Why the "handbrake is off" for the property market. We break down the latest Cotality data showing it now takes an average of 9.6 years to save a deposit, down from the peak of 13.4 years. Wellington is currently the most affordable main centre with a 6.4 value-to-income ratio, while Tauranga remains the least affordable at 8.5.
• The Property Flipping Trap: A serious warning for both buyers and sellers. We expose the "contemporaneous settlement" tactics used by unlicensed property traders and "gurus" to make quick profits off unwitting vendors. We explain why these schemes leave everyday Kiwis at risk of losing their deposits or facing massive tax bills from the IRD.
• The Rental Squeeze: Tenant demand is surging, with rental enquiries up 35.5% in February. However, rents are barely budging—with Auckland up just 0.7% and Wellington actually falling by 7.4% year-on-year. We explain why we are in a highly price-sensitive renter's market and why landlords need to prioritise tenant retention over rent hikes.

Whether you are looking to buy your first home, expand your portfolio, or just want to ensure your current rentals are protected, this episode provides the factual, evidence-based insights you need.

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Transcript

Hi, welcome back to Property Insights. I'm Paul Roberts. 

And I'm Debbie Roberts. We are the owners of Property Apprentice and we are here to help you navigate the New Zealand property market with facts, not just headlines. 

Today we're looking at a word we haven't heard used positively for a long time.

Affordability, and the latest data that shows housing affordability is at the best level in nearly a decade, and the handbrake on the market has officially been released. 

We'll also be issuing a major warning about property flippers who are making money from unwitting vendors, and we look at a bizarre dynamic in the rental market where tenant demand is through the roof, but rents aren't budging.

It's an episode heavily focused on the fundamentals of the market, where the real value lies in how to protect yourself.

So we are starting today by having a look at the affordability equation. Are houses actually cheap? Some interesting data released today by totality. The headline is that housing affordability is at its best level since 2016. That's the best in a decade. So we'll have a look at some of the facts. The value to income ratio:

the national median house price value has fallen to 7.2 times the annual median household income. Aside from a brief dip in 2019, this is the lowest it's been since 2016 with mortgage serviceability, with interest rates having dropped significantly since their highs, and with incomes rising, albeit slowly in some cases, over the same time, the percentage of income required to cover a new home loan has dropped back to 42%, which is exactly in line with the long-term average.

And when it comes to the deposit hurdle, it now takes an average of 9.6 years to save a deposit while it's still slightly above the long-term average, it's a massive drop from the peak of the market where it took an average of 13.4 years to save the same deposit. 

Now regional extremes. Wellington is currently the most affordable main center with a 6.4 value to income ratio.

Auckland sits at 7.5 and Taronga is the least affordable main center at 8.5. The rental squeeze. While buying has become more accessible, rents currently take up 27.9% of gross household income nationwide, which can make it hard for tenants to save for that initial house deposit.

So, Cotality uh, Kelvin Davidson used a great analogy here: the hand "break is off", but we aren't necessarily stepping on the accelerator at this point, 

and that's the perfect way to look at it. Affordable doesn't mean cheap, it just means we've returned to historical norms. For a first time buyer, hearing that it takes 9.6 years to save a deposit instead of 13.4 years is a massive psychological boost.

It means home ownership is actually possible again, where a lot of people thought that it was out of their reach permanently. 

So let's look at the regions. If you're an investor, you have to follow the numbers. Absolutely. Queenstown is essentially its own country for right now. You don't buy there based on yields,

you're getting capital growth as Queenstown seems to be the, the town that goes from boom to uh, housing boom to tourism boom has and booms a tourism boom. On the flip side, Wellington is looking incredibly attractive from an affordability standpoint, but with a large number of vacant rental properties at the moment.

You do need to be careful whereabout, you are going to buy. 

And we have to talk about that rental figure. With rents eating up nearly 28% of incomes, it's gonna be good news for tenants when the economy starts to show further signs of growth. With business confidence at a 30-year high, businesses are likely to start looking at options to grow as soon as possible.

This means potential salary increases or more job opportunities available. 

So the final point here is expectations. Although we might be moving to a slower growth market where prices only rise modestly, uh, this actually is a fantastic environment for a smart investor to build a portfolio. With the RBNZ and most economists predicting a 5% increase

rather than the long-term average of 6.8, growth per year, that's still a solid growth for long-term investors to grow their wealth. Money isn't made overnight. It is made over long-term with the right financial strategy. 

Absolutely. And slower, steadier growth is also great for those Kiwis who saving for their house deposit too.

It means that they've got time to save up that house deposit before house prices get away on them like we saw in the last boom.

So segment two, the "get rich quick" trap (contemporaneous settlements and or assignments). So for our second topic today, we're issuing a massive warning. There has been a complaint to the Real Estate Authority about the practice where it appears to be making a huge comeback: property flippers making profits off unwitting vendors.

We're talking about contemporaneous settlements where a trader or flipper buys a property and on-sells it to someone else on the exact same day, pocketing a margin in the middle without ever having to actually use their own money, and with the homeowner having no idea this was gonna happen. Also, assignments where a flipper negotiates the purchase of the property and then sells the contract to another buyer for a fee.

So let's deep dive this. According to Cototality, the number of these contemporaneous sales lifted significantly last year, almost doubling the figures from 2024, and even surpassing the COVID boom times. The tactic: a flipper could put a property under contract with a long sediment and a long due diligence, like 20 days.

Sometimes 10, and then they immediately market the property to their own database, which is what sometimes makes a massive markup. 

The deception side of this is that some of these flippers are actually really deceptive. They pretend to be the actual purchaser, and when they bring their end buyers through the house, they lie to the vendor, and often the agent as well, claiming that these people are builders or valuers as part of their due diligence.

The gurus. I mean, this is being fueled by people teaching this strategy as seemingly an easy way to make money with no money down. Showing inexperienced people how to tie up contracts and flip them. Unfortunately, with seemingly no concern for their clients, if they get stung, first of all, by the Inland Revenue or two, if you do a contemporaneous settlement or assignment and the buyer you lined up pulls out.

This leaves you carrying the can. You would have to settle the property yourself or run the risk of being sued by the owner for settlement. 

And I bet you the guru won't care. And don't forget, if you are in that situation and you are being told, "Hey, you are gonna, you know, onsell this property, you are making profit, you need to pay tax on that profit."

And I bet they're not either. So the IRD will hunt you down. Um, the legal loophole, property law expert Joanna Pidgeon points out that these traders are excluded from having to comply with the Real Estate Agents Act because they're self representing. This means the consumer has none of the standard protections, and I think it would be a good thing if this changes with the REA.

Yeah, I mean, this does my head in. You know, we've spent 16 years teaching Kiwis how to invest and trade property ethically and sustainably, and some of these guru get rich quick schemes, give the entire industry a bad name. So it's really frustrating. I mean, let's look at who gets hurt here. First of all, the vendor.

If a flipper can find a, a buyer that easily, who's willing to pay tens of thousands of dollars more for the property, a week later, the vendor's being completely shortchanged. Imagine if you were the one who desperately needed to sell your home. And one of these flippers comes along with a 20 day due diligence clause, and then in 20 days, the flipper says, "oh, well, didn't find a buyer, so we're not gonna go unconditional."

You've lost that time where you could have actually been marketing your home to genuine buyers. Different story in my opinion if the vendor needs a quick sale and they know that you're gonna try and onsell it for a profit, at least in that scenario, the vendor can use a cash out clause, which can give them the option to reduce the amount of time the flipper's got the property tied up before unconditional date.

I think if you're ever in that situation, put in a cashout clause so if somebody better or a better offer comes along, you can ditch them.



Secondly, the end buyer. If you are a buyer on the database of one of these unlicensed trader and you are paying tens of thousand dollars on a property that has had no work done, you are clearly overpaying by those tens of thousands dollars. Your equity is done day one, just to line the pockets of a middleman.

Now, might not be an issue for you if you're wanting to leverage your time, but I would much rather you understand how to be a good negotiator and find these properties for yourself and you pocket that money, not just some random stranger who's paid some guru for a weekend training course. 

And thirdly, what about the person who's jumped blindly into this strategy in the hope of making a quick buck and you didn't understand the risks involved?

If you go unconditional on a sale and purchase agreement, you need to be prepared to settle the property. If the person that you are on-selling to doesn't go ahead with the deal, even if they went unconditional. If they don't settle, you are on the hook. And if you're not in a position where you can get lending.

That can leave you in some serious custard.

You also need to be prepared to pay tax on any profit. If you buy, renovate and sell, this can also trigger GST, so you need a good accountant. 

Property lawyer, Joanna Pidgeon raised a critical legal point of about deposits too. If you buy from an unlicensed trader and you don't use a proper solicitor's account, trust account, your deposit is at massive risk.

If the trader liquidates or goes bankrupt before settlement day, your money could vanish and you might even not get the house. 

Don't get me wrong, flipping properties can be a great strategy for the right person, and if it's done ethically and responsibly. It's not a good strategy for someone who's hoping that they're gonna be able to earn big bucks overnight,

just because some young guru TikTok Wannabe says, it's easy money. If it sounds like a get rich quick scheme and smells like a get rich quick scheme. Chances are 

quick scheme 

chances are the only person that's gonna get rich quick is the person who's gonna charge you tens of thousands of dollars to share their secret.

One of the things that really gets on our nose when politicians use the words speculator. When they're talking about property investors, speculators are flippers, um, traders in property. But you, but don't forget, it's a wholesale to retail transaction where the IRD will expect tax and rightly so. So anybody that is trading, flipping properties, buying them, renovating, selling them, yes, they're speculating, but they pay tax.

So if you find yourself in a situation like certain real estate agents who have been in the papers recently getting a bill from the IRD that you didn't expect because you were trying to get away without paying tax, well that won't work. You don't know what you're doing. 

Also, and this is where the Real Estate Authority comes in.

If you are acting as a real estate salesperson, you need to be licensed as a real estate salesperson. If you're the middleman in a flip and you aren't renovating the property to obtain a higher price for the onsell it's gonna be pretty hard to say that you're not acting as a real estate salesperson, and you don't wanna get caught on the wrong side of the rules

if the REA decides to use you as a test case for legal purposes. 

And if you're buying property and renovating it, before you onsell it, then it's likely to trigger not only tax on profit, but also GST. So make sure you get good tax advice before launching into this strategy. It's not quite as easy as some of those gurus want you to think.

So segment three, the rental squeeze rising Demand flat rents. Finally, we're looking at the interesting dynamic in the rental market right now. Tenant demand is surging, but rents are barely budging. 

In a normal market, when demand goes up, prices go up if supply stays stagnant. But fresh figures from Barfoot and Thompson and Trade Me show that we are firmly in a price sensitive renter's market.

So here's the facts. Uh, the demand Spike Barfoot and Thompson reported over 32,700 rental inquiries in February. That is a 35.5% increase compared to the same time last year. Rental applications also surge by nearly 28% flat prices despite the market demand. Auckland's average rent in February was $696.92 cents up, just 0.7 year-on-year. Across Northland and the Bay of Plenty. Rents move less than 0.2% month-on -month. 

And in Wellington, there's been a bit of a plunge trade Me Data shows that Wellington's median rent actually fell by 7.4% year on year in January, dropping to $625 a week.

When we're looking at tenant behavior, property managers are reporting that a huge chunk of this tenant activity is driven by people reentering the market. Specifically because the current landlord raised the rent, tenants are actively shopping around for better deals or leaving expensive cities altogether.

This confirms what we were saying at the beginning about rents eaten up 28% of household incomes, tenants simply do not have that disposable income to absorb another 50 bucks a week in rent increase , if they have another options. 

Exactly. And landlords need to tread really carefully here.

While demand is high, the cost of having your property empty for three weeks while you find a new tenant will completely wipe out any extra money you would've made from the rent increase. 

Yeah, it's all about tenant retention right now, and good tenants who pay on time, look after the property, they are worth their weight in gold.

Don't forget, a tenant is also the client of your business. So let's face it, by far, the majority of tenants in New Zealand, if you've got a good one, a $10 or $20 rent increase, or even keeping it flat for another six months is often much smarter financial decision than pushing for the maximum market rent and dealing with vacancy and letting fees as well.

Absolutely. And I think it's also important to point out that by far the majority of tenants in New Zealand are really good. So you know, landlord and tenant relationships, like over 95% of them have reported as being good relationships. But let's have a look at some of the regional shifts. Some people have been actually leaving Auckland for Northland, for example, to find cheaper housing or better lifestyles.

As an investor, you need to understand what's happening with tenant demand in the area that you're invested in, and make sure that your rents are at current market rates. 

So that wraps up episode six of NZ Property Insights. We've covered a lot today from the fact that housing an affordability is actually at its best level in years to some deceptive, "no-money-down" flippers and gurus you might wanna avoid and the realities of high price-sensitive rental market.

  📍  📍 If you are listening to this and wondering how you can actually build a portfolio and or flip properties the right way, we'd love to help you build a resilient strategy. 

We run free online events called How to Succeed With Property Investing. It's incredibly valuable session where we go much deeper into how you buy

well manage your risks and spot the deals in this flat market that we currently have. 

It's completely free and online, and you can find the link in the show notes or head to www.propertyapprentice.co.nz 

 Thanks for being with us and look forward to seeing you next time. 

Bye.

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