Foreign investment, COVID relocations and tax incentives are shaping the luxury real estate markets of New Zealand, Las Vegas and the Bahamas. Forbes Global Properties CEO Alex Lange looks at what is fueling housing demand in these diverse locales and offers his insights for the year ahead.
New Zealand has one of the most highly regulated housing markets globally. What are some of the finer nuances of New Zealand’s real estate market?
New Zealand is ranked as one of the most expensive markets in relation to personal income. Affordability is a major issue here as year-over-year housing costs have increased about 20%. Auckland is ranked by The Financial Times as the least affordable city. There is a lot of foreign investment coming in for tax advantages. How do you control the impact of these foreign investors pricing out the locals? This remains an ongoing issue for the New Zealand government.
The government is looking for different ways to increase affordability for New Zealand residents. In September and October, new regulations were put in place that stop these foreign investors from deducting the mortgage interest. They cannot take them as a tax shelter. It’s intended to deter foreign investment. These regulations that are kicking in will hopefully manage investment property supply and demand. There is also a 10-year development plan in the works.
It is predicted that 2021 will mark a new benchmark for sales of Las Vegas homes priced over $1 million. Where do you expect to see Las Vegas’ market go in 2022?
Las Vegas is an exciting market. As 2020 was a record year for the Las Vegas market, 2021 looks to be very similar. Agents there think 2022 will be another strong year. Las Vegas is seeing an increase in COVID relocations from California because Nevada doesn’t have state income tax and the value of the home dollar goes far compared to California. The price differential per square foot in Las Vegas compared to California is huge. There is room to grow and build there, which impacts prices.
Location makes a big difference compared to other up-and-coming markets. Las Vegas is also close enough to be near family and business for those from California. Whether flying or by car, it’s easy to go back and forth between Las Vegas and California. Las Vegas has all the options of a large city with accessibility to go anywhere from an easy-to-manage airport.
Long a popular vacation destination, the Bahamas has seen its new residential communities explode in 2020-2021, with most buyers coming from Canada, the United States and Western Europe. What are some of the benefits of being a second-home owner in the Bahamas?
The advantages of homeownership in the Bahamas are the ease of access, taxes, and a tropical and friendly place. Second home ownership in the Bahamas is the opposite of New Zealand. The Bahamas has a stable economy and a peaceful and stable government with tax advantages for international business owners and investors. The people are welcoming, and it’s close to the United States. The airport in the Bahamas handles travel well. They are excited and waiting for international flights. The prices for luxury properties are reasonable and not overly expensive for what you’re getting — a tropical island and an amazing environment.
There was a massive amount of real estate capital coming into the third quarter. What does that say about the current market and looking ahead in 2022?
A lot of this capital coming in has to do with watching the growth of the big players. The money has come in for start-ups to streamline and automate transactions. This alters the real estate landscape for the practitioner/agent, not the client.
The Fed will raise interest rates, so I think there will be a bit of a slowdown from the buying fever we have seen. Inventory will come back, and prices may be a bit better for buyers. I believe you will see a slight shift that benefits the buyer over the next couple of years.