A week ago today Labour’s spokesperson for housing, Phil Twyford, released some data which apparently showed that Chinese buyers are currently snapping up 40% of all homes on the market in Auckland, although Chinese residents in Auckland are just 9% of the population. I felt, as did a lot of people, that the way in which Twyford (and the Herald) went about this was divisive, not constructive. See here for a good roundup of commentary, or here for a review of the methodology. That second link also makes a key point: “The root problem is that Labour’s analysis doesn’t measure residency. It measures ethnicity”.
Twyford neglected to look at current immigration patterns, of course, since that didn’t suit his argument. But for the record, some quick number crunching shows that in the last year, there were nearly 12,000 “permanent and long-term arrivals” from people previously living in China, Hong Kong or Taiwan. That’s an NZ-wide figure, but my guess is that the vast majority of them would have come to Auckland. This would be more than 20% of Auckland’s immigrants in the last year, so it explains part of the discrepancy (not all).
Anyway, what Twyford really wanted to say (but stumbled over) was that foreign buyers – wherever they may come from – are having a big effect on house prices here, making it hard for Kiwis to afford homes. These are valid concerns, and worth discussing. Various commentators have suggested that the government should be collecting information on how many homes are being bought by non-New Zealand residents, which they sort of will be doing from October. Others are going further and suggesting that non-residents should only be able to buy “new” homes, not existing ones.
I’m generally in favour of open markets, so I don’t actually mind if people overseas want to buy property in New Zealand, even if that means a permanent shift to higher house prices (other people will have different views, and fair enough, and we can have civilised discussions about that). The main issue I have is the possibility that offshore demand leads to a bubble in prices.
For example, in a few years time the overseas buyers might lose interest, sell up and shift their money to a different country. Or, if it is indeed Chinese money pushing up prices in Auckland, the Chinese government might regulate to stop its citizens moving their money offshore, with the same result (however, it seems that the government is loosening the restrictions, not tightening them).
I don’t have any policy solutions here. I don’t even have particularly strong views on the “no restrictions” thing. Maybe we do need to restrict offshore buyers to only buying new homes – if only because we’re not currently building enough new homes, and this might help to boost supply. On the other hand, why would we make restrictions on houses when we don’t do it for anything else? At any rate, it’s possible to debate these things constructively, and I don’t think Labour’s move last week did that.
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Labour’s rhetoric is Sinophonic, and does a disservice to everyone else engaging in reasonable discussion.
I’d like follow Australia’s lead and ban non-residents/citizens from investing in Residential property (with the exception of new builds). This would need to be accompanied by a Robust capital gains tax on residential property to ensure that there was reduced speculation on residential property locally as well.
If people (locals and foreigners) wish to invest in the New Zealand economy, I’d much rather they were investing in more productive aspects of the economy.
Edit: In response to your comment about open markets; I think there’s a need to find a good balance between the promotion of open markets, and the need to consider the resource available to New Zealanders. There aren’t that many of us, and if we’re competing with the rest of the planet for access to a product that’s in high demand globally – we are going to miss out. If only 1% of People from other countries can afford to buy our houses, and want to buy our houses – that’s still a massive number of people – and it creates pressure on us, where we don’t necessarily want that pressure.
The thing about houses is they can’t actually remove them from the country. So they are still available to residents to live in.
Good point, one I forgot to make. And as per a previous post http://greaterakl.wpengine.com/2015/05/28/are-vacant-homes-adding-to-aucklands-housing-shortage/, there’s no evidence that homes are being left empty.
Except a lot of offshore buyers (particularly Chinese) are leaving the houses vacant and just banking the capital gains. This not only reduces housing stock but as can be seen in Vancouver actually reduces the “liveability” of the city as shops etc close due to lack of customers from vacant property.
Where’s your evidence of that, Bruce? I did an analysis of census data in the previous post linked above, and couldn’t see any evidence of that at all.
No they’re not. They are being left empty. So the housing and rental stock is being impacted.
Evidence? John has linked to analysis that says otherwise.
The Chinese government already does restrict its citizens from buying property overseas – although the regulations are regularly flouted. What’s causing some nerves is that it will be easing those restrictions in the next few months. There will be a *lot* of capital looking for places to go soon.
Keeping pace with the news – last week the Chinese government hinted it would let more money leave the country – so along with the dirty money will come a tidal wave of legit money. The buying power of the Chinese is seriously underestimated by people who have never lived in China, or Hong Kong. They have tens of thousands of millionaires and plenty of billionaires so buying up Auckland will be a breeze for them. And if anyone thinks this is a bubble – stop hoping. Our prices will continue to rise until they are on a par with similar properties in most western capitals. Long way to go yet.
“The main issue I have is the possibility that offshore demand leads to a bubble in prices.”
I agree that this is the biggest actual potential issue here. Even then it seems to be not particularly concerning. NZ credit growth has been weak and price increases are largely restricted to Auckland. Couple that with the strong position of the banking sector and it is hard to see a problem brewing.
“…price increases are largely restricted to Auckland.”
One major issue that this has is the impact on labour mobility around New Zealand. As the cost of living and buying in Auckland climbs further and further out of line with the rest of New Zealand, it makes it harder for people from outside of Auckland to be able to afford to move to Auckland for work (as selling a house outside of Auckland, even if it is owned freehold, is often only a deposit on a house in Auckland). This in turn can have impacts on employment as so many businesses continue to either relocate to Auckland or concentrate their operations there. This in turn could lead to greater economic drag on the country if people can’t afford to move where the work is through higher unemployment across the country as a whole.
I think its a bubble when even reasonably well off couples can’t afford to buy a house unless they already own one. If overseas buyers and immigration dry up (e.g. the recession that might be coming soon), there isn’t going to be many people to buy all these million dollar plus houses. Prices could plummet very quickly.
I won’t be buying shares in any of ‘our’ banks any time soon.
Stop thinking like a Kiwi – put on your global hat. Our country is for sale, there is no bubble
And no real controls.
Hmmm… have to say a kind of airy fairy don’t rock the boat opinion.
Why are you comfortable with foreign buyers fundamentally changing the property landscape and making home ownership unaffordable?
This is a generational wealth issue – people who have the housing are sitting back and picking up capital gain due to globalisation at the expense of younger generations. They didn’t have to compete with the level of foreign money flows when they bought but now they can reap the reward through nothing that they have done.
Do you think that a property owning democracy promotes a stable society?
Do you think residential property bubbles caused in large part by property speculation (much of it seemingly by foreigners) promotes an unstable society?
If even just a partial agreement to either of those questions would suggest things are not good and need serious change form the present situation.
Do you have any evidence for your assertions framed as questions?
https://en.m.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate
Switzerland and Germany are well below us together with a bunch of other seemingly stable countries.
Look at how the Qs are framed… do you think… these are not assertions, they are reasonable Qs you can think about and answer Y or N to, I knew Europe and its renting class would be brought up, not going to engage – apples and oranges.
Ok. I think your first question needs to be re written as you are conflating democracy and property ownership, i.e. Are we trying to compare a property owning democracy with a vanilla democracy or a property owning dictatorship? What type of property ownership is a good type? NZ has been a pretty stable country for a long time, we have had widely fluctuating levels of home ownership over that time. What about commercial property etc? I don’t think the stability of NZ society is under threat by these changes. However what do we mean by stability and is it a primary objective of policy makers?
The second question is more interesting. Property bubbles can cause issues. To the extent that they are caused by foreign speculation, they are less likely to be an issue. The main issue with property bubbles is financial instability. Foreign buyers aren’t generally borrowing locally. Additionally credit growth is generally a major factor in bubbles leading to financial instability, which is a cause of a locally generated bubble not a foreign investor generated bubble.
So I don’t see a ny policy relevant issues associated with your questions.
Exactly right Bruce, very succinct, regulations around residential rental (NZ v Germany / Switzerland) are… apples and oranges… so comparing their respective residential property ownership rates with NZ is moot… thank you.
My first Q has the word ‘promotes’ (or you could read it as ‘encourages’) a stable society – it is not in any way a hard and fast assumption (or a conflation) it is a… suggestion. Semantics to some perhaps but I think relevant as you seem to be attacking my sentence structure.
I kind of assumed from the blog / current political debate that residential property ownership was sort of implicit (as opposed to commercial property etc.)
I also think your second answer is interesting, you identify financial instability as the key to a bubble (surely a bad thing) and yet you question whether an objective of policy makers should be stability in your first answer?
I think we can / should ‘conflate’ the two (economic policy and financial stability) as one without the other generally isn’t logical or practical.
So quite happy with my questions (to John Polkinghorne) and don’t feel any need to rewrite them.
I can see your point regarding local credit, but when dealing with a command economy with a lot of control over individuals I think we need to be careful about a price crash – in effect a burst bubble.
If say a significant proportion of foreign investors are compelled en masse to exit our housing market due to their government’s policy beyond NZ’s control, or vice versa they are encouraged en masse to enter our housing market I think we have policy relevant issues in my opinion.
Sure, I agree financial stability is a valid policy goal, I just wasn’t sure about your definition of stability.
People are able to rent housing in NZ, there is a thriving market. Would regulations make putcomes better for renters in the aggregate over the long term? I don’t think so but if this is the case, then this really has nothing to do with foreign ownership, it’s a red herring of an argument. I.e. Your beef is with residential tenancy laws not foreign ownership laws.
Matthew I’m not making an argument for renting (I never mentioned it in my original post), YOU brought it up when you cherry picked residential property ownership rates from a wiki link that I’ve said twice now has no relation to NZ’s society.
But now that you have I actually think there is a lot around renting regulations that could improve and would be good for New Zealand, see Polkinghorne’s comment about “Generation Rent” etc.
Also I have no particular ‘beef’ with either foreign ownership or tenancy laws as I haven’t lived in NZ for most of the past five years and my interests in NZ are outside of residential property (I am a NZ born citizen though.)
I do think our laws around foreign residential property ownership and tenancy are sub optimal but you seem to be stuffing red herrings down my throat!?!
Except that the rental market there is a lot more regulated and so ownership is not desired or needed by most people. If you do however want to buy there prices are for the most part lower than here.
Hi John, I’d agree that the post is a bit “airy fairy” – I didn’t think it was strong enough for a weekday slot, hence why it’s gone up today, but I’m glad it’s generating discussion. “Why are you comfortable with foreign buyers fundamentally changing the property landscape and making home ownership unaffordable?” – I think it’s more a case of, if there is now international demand for our homes, why would we cut ourselves off from that?
“This is a generational wealth issue – people who have the housing are sitting back and picking up capital gain due to globalisation at the expense of younger generations. They didn’t have to compete with the level of foreign money flows when they bought but now they can reap the reward through nothing that they have done.” – agree, but I’m not sure what should be done differently, except that it would have been a good idea to tax the capital gains so at least the money being made is treated like other income.
“Do you think that a property owning democracy promotes a stable society?” – NZ home ownership rates are quite high by international standards (although they’re lower now than they were in the 80s). I don’t think lower rates will make us less stable. There’s a lot that can, and should be done to make renting a more viable alternative to owning in NZ. “Generation Rent” by Shamubeel and Selena Eaqub has a lot of good policy suggestions on this, and we should be doing it regardless of anything else, since there will always be a large numbner of renters.
“Do you think residential property bubbles caused in large part by property speculation (much of it seemingly by foreigners) promotes an unstable society?” – property bubbles are definitely a cause for concern, as mentioned in the post. I think there are plenty of other things contributing to high house prices in Auckland besides foreign buyers. Record high migration, and a growing undersupply, and good ol’ speculation by Kiwis will be playing a major part.
Thank you for your thoughts.
Restrictions on foreign ownership are silly. The house is going to go up in price whether a foreigner buys it or not.
There is nothing to stop a corporation such as a real estate fund from buying the houses either to circumvent the rules.
Ultimately, more houses should be built. How to do that? LAND TAX and use the revenue generated to have subsidies for construction.
I really wish someone would campaign on a land tax. Capital gains is the wrong way to go as there’s a bunch of issues with it (e.g. improvements should not be taxed). A low land tax offset against company and income taxes and split between local and central government is really how to deal with the demand side of things. It may be tricky for larger holders, however, particularly for Iwi groups, so that may need some consideration.
Then lots of encouragement for supply: Lower the artificial barriers. Greatly reduce the rules restricting density and the rules restricting sprawl, but make sure that the infrastructure costs are priced appropriately. That way everything is on an even playing field and we’ll get a lot more medium and high density growth.
I’m not sure we need subsidies for developers at this point, but happy for it to be on the table if it can radically increase supply.
This argument that its all about supply is just laughable. Yes, the fact that we have far more population coming in than we have housing supply to home IS driving prices up. But supply cant be solved anytime soon. DEMAND can. Simply change the immigration rules and stop 50,000 people coming in. That way we can start making a dent in the 32,000 deficit rather than adding to it. This is all about politics and ideology, we could change the rules tomorrow but that apparently isnt in the National Party’s interests.
A wise NZ Government would be putting the interests of those who are already here ahead of foreigners and speculators. Unfortunately we havent had wise government since the 1980s.
Why can’t supply be solved? We’d have huge restrictions on development. All it would take is the stroke of a pen.
And as for restrictions on housing development? Look no further than Denise Krum and others of her ilk who think they’re free marketeers and want to burn the RMA, but will shamelessly use it to block anything that might bring house prices down.
https://twitter.com/sudhvir/status/609826145316442112
I agree Denise et al are serious culprits in this mess. Did they cal, themselves free marketeers? I guess actions speak louder than words.
And if you want an example of this whole issue followed to a logical extreme, London is basically becoming a big hedge fund with bricks and mortar.
https://www.vice.com/en_uk/read/ed-millibands-ghost-mansion-tax-wont-stop-london-property-being-used-as-a-real-life-game-of-monopoly-by-oligarchs
http://www.standard.co.uk/news/london/londons-3bn-ghost-mansions-foreign-investors-are-using-capitals-finest-homes-as-reallife-monopoly-pieces-9128782.html
http://www.theguardian.com/uk-news/2015/jan/25/its-like-a-ghost-town-lights-go-out-as-foreign-owners-desert-london-homes
Thank you for that Kumara. I wonder if we shouldn’t employ the tax after 2 years of vacancy so that the demolition of the property does not become a charge on the ratepayers. This applies to building in commercial areas as well. The number of buildings that appear to be abandoned in commercial heart detract form the adjacent amenity and safety. I can understand the angst of the building owners during a downturn wanting to hold out for higher rents however there comes a time when it is better for the building to have a tenant than to be vacant.
We already haver a Land Tax. It is called Rates. Most of the capital value in Auckland is in the land. There was an example in this morning paper of a lady paying rates on capital value of $5.4M where the land was worth $5.2M. Manukau City had rates on land value until 2006 and it was not perceived as being fair.
Agreed, but rates are WAY too low. They need to be much higher to discourage over-investment in non-productive assets.
P you are wrong. Without the cash rich foreign buyup prices would only rise at a pace that Kiwis could match through salaries etc. What is going on now is so far out of our control that frankly we (Kiwis) are now totally irrelevant and can no longer compete. Sure people who want to keep their heads in the sand and ignore the threat will say ” but a kiwi bought a house last week at an auction”. One vs hundreds? It’s real and it’s happening out there. Find an honest central city real estate agent and ask some questions. Better still start attending central city auctions and experience it first hand.
Why not just nationalise every house owned by a foreign national who isn’t a permanent resident, transfer them to Housing NZ and use them for social housing stock
Good idea, worked for Zimbabwe!
A good number of nations restrict foreign ownership of land – including New Zealand. NZ already restricts ownership of farms and coastal land and a foreign person needs approval from the OIA in certain circumstances. So to include residential property is not that much of a change in policy and there are ways to enforce it too. I find it odd that we would want the cost of residential property to be permanently increased beyond what a market our size would normally sustain. We already have a problem with too much of our economy being directed towards housing and not enough towards the productive parts of the economy. I think houses should be seen as places to live and make homes and less as an investment – although some investment of course. I think it is important who owns the property and absentee landlords hardly ever helps the nation that suffers from it. Of course AK, and NZ, needs to build more dwellings but restricting foreign ownership will cease us becoming tenants in our own country.
Correct Tom, Auckland and any other NZ centre facing house price increases of 5% or more year on year should be termed “sensitive land”. Job done.
If the price of housing permanently increased and we were able to flog houses to foreigners indefinitely, then housing would be a productive (tradable) part of the economy.
Great, make housing financially productive and tradeable. But how about the productivity of the average kiwi wanting somewhere to live? Wages aren’t rising to match house prices, rates and rent. The more time people spend stressed worrying about where to live, the less productive they will be. The fact that many are treating housing purely as a financial investment is a big part of the problem. Stop seeing housing as a big stack of cash; houses are built to be somewhere for people to live.
It sounds like the author owns a property/ies and is quite content to enjoy the capital gains at the expense of younger generations.
A few points:
1) Overseas ownership of property here has virtually no net benefit to NZ.
2) overseas ownership is most definitely driving up house prices particularly in Auckland.
3) increased housing prices result in less discretionary money (makes it harder for local businesses), they result in huge mortgages that reduce money available for businesses to invest (particularly in measures that increase productivity meaning pay doesn’t rise much) and only serve to benefit the banks (the majority of which are foreign owned meaning the profits go offshore and are drained from the NZ economy).
4) We should be banning foreign ownership of property with a few exceptions. Particularly China as China doesn’t allow foreign buyers of their property. We should also be introducing a vacant property/undeveloped property tax, to go with a tax on existing foreign owned properties. I would estimate that there are at least 50,000 foreign owned properties in Auckland alone. If a foreign property tax was introduced that resulted in half these properties coming back on the market that would completely clear the backlog of the so called housing shortage and any new housing from there would be to accommodate the growing population.
5) it would be nice to see the author either put their name (or even username) to this piece.
Hi Bruce, no pseudonyms here – my name is right below the post title. I don’t agree with your points – why exactly should we crack down on foreign ownership of property? Why that, and not the same on businesses, farms etc? If we’re going to have an open economy, I can’t see why housing should be so different. I agree Auckland has a “housing shortage”, but that isn’t about who owns the housing. It’s about whether we’re building enough to cater for our growing population, which we’re not.
It wasn’t showing before but note that it is showing now.
Why should we crack down on foreign ownership of property? The question is why shouldn’t we? It’s not in out national interest to do so. I think it should also apply to farms and certain businesses. Obviously in an international open market most businesses need to be open to investment. There is a case to be made for certain companies to have a maximum foreign ownership at 49% for national interest reasons.
We don’t actually having a housing shortage in Auckland. What we do have is a shortage of houses available to be bought for owner occupiers. Traditionally this has been due to domestic landlords owning multiple properties (needed to a certain extent as there will always be a need for rental properties) however what has changed the dynamic is around 50,000+ (Conservatively could easily be double that!) properties being held by foreign owners with many withdrawing the houses from the rental market pool. Yes building more houses would help too.
“We don’t actually having a housing shortage in Auckland. What we do have is a shortage of houses available to be bought for owner occupiers. ”
If that is the case, there isn’t a problem that needs to be solved. The government should care about the cost of housing, but why should they care about the cost of the assets used to produce housing if it doesn’t affect the cost of housing?
“We don’t actually having a housing shortage in Auckland” if this was true why is it so hard for people to find rental properties to rent? You must be one of a very few who does not agree we have a housing shortage.
He could be right. If the few did not own the many, as in houses, then there would be more to go around. But when greed has set in and it surely has and greedy “investors” buy up big the ordinary Kiwi misses out of a home of their own!
Neil, if you read the post in full you would see that the reason why there is also a shortage of rental housing is that a lot of foreign owners have bought a house and rather than rent it they are just leaving it vacant – ie no tenants etc to worry about (but getting the capital gains in the meantime). There are something like 600,000 developed properties in Auckland (some with multiple dwellings) and around 1.5 million people which means on average there are 2.5 people per house. If there was an actual housing shortage (and most dwellings weren’t large detached houses, and we didn’t have a lot of families) then that number might be an issue however with our current situation that number would have to be 3 or even 4 for there to be an actual shortage. What we have is an availability shortage for people to buy their own home due to a combination of landlords/investors/speculators and foreign based buyers. We don’t need the foreign based buyers as they don’t really do anything for the economy (actually hurt it more likely), so we should just ban them. On the domestic front investor deposit levels should probably be raised to 40% rather than 30% the RBNZ just introduced.
John, Bruce is right – apart from a one-off lotto windfall to a Kiwi owner the foreign buyers contribute nothing. Especially if the homes are left empty and they continue to reside overseas. All they are doing is destabilizing our markets and adding zilch. No grocery / fuel / etc buying. The money doesn’t even filter through NZ banks so no employment there either. Almost forgot – Len Brown loves them as they have helped raise ‘values’ thus increasing further the rates gouge on us.
An increase in demand will promote supply if the market is at all elastic. That’s a great thing, we need more houses.
Contribute nothing except a hundreds of thousands (or millions) of dollars each to the New Zealand economy in foreign exchange.
Foreign owners pay foreign money.
That drive up prices so that we have to borrow more money offshore? It creates a vicious cycle.
Foreign owners pay foreign money, and then receive a higher value of NZ dollars when they sell and the price has shot up again
“why exactly should we crack down on foreign ownership of property? Why that, and not the same on businesses, farms etc?”
John, free markets are not the answer to everything. Would you be happy if a foreign company could buy your local high school or hospital? Maybe you would – or maybe you’d agree that health and education are human necessities, just as housing is, and are more important than money.
There’s absolutely no reason why we shouldn’t regulate our housing market to advantage New Zealander owner occupiers.
“There’s absolutely no reason why we shouldn’t regulate our housing market to advantage New Zealander owner occupiers.”
If you advantage owner occupiers, the flip side is you disadvantage renters. Given renters are on average poorer than owner occupiers, this is regressive which is not usually considered a good thing. Remember that I leveraged owner occupiers are the most tax advantages group when it comes to property investment already.
Yes I agree, but the crucial idea is to disincetivise those who’ve built up equity from the housing ladder, or other capital, from buying an investment property because it’s such low hassle, easy profit. Obviously this is a kiwi institution now, and makes sense in many ways. We just need to make it a bit harder, capture more tax revenues, and generally make other types of investment feel of equal value. One way to do that could be make it harder for landlords to pass on arbitrary costs to renters, perhaps by capping rent increases to the OCR.
I agree we need landlords to supply rental stock, but that needs to be balanced by making it a bit more of an investment on their part.
In the long run, the capital gains will still be attractive, but there should be more share of the load carried, that can’t be pushed on to tenants.
For disclosure, I own two properties, but I don’t want my two children to grow up in a city where the chasm between the propertied classes and the serfs below is absolutely and permanently unbridgeable.
Again, moving to a more regulated market in residential property makes sense, aside from purely ideological objections.
http://nypost.com/2015/07/09/soaring-vancouver-home-prices-spur-anger-toward-chinese-buyers/
http://www.straight.com/news/452316/rj-aquino-why-vancouver-needs-empty-housing-tax
and it’s happening here – as it is around the Pacific Rim in all major cities in “stable, developed economies”. There is a total of 21 trillion NZ dollars sitting in private accounts in mainland China
http://www.wsj.com/articles/SB10001424052702304834704579402573128666330
– enough to buy up Auckland 50 fold – needing to find some form of “secure” investment. Having already sold 5 years ago through B&T to an overseas purchaser – who said they were coming to reside – and haven’t – I know from personal experience that this sort of purchase does our country no favours whatsoever. There are now estimated to be 22,000 empty homes in Auckland (Why rent when the price of your real estate goes up by 100,000’s of thousands a year?
And therein lies the tidal wave of money about to hit western countries…I was looking for a link to publish.
A tidal wave of money hitting our city, sounds just awful!
It is awful because it isn’t being used for anything productive and just makes life for people living here harder.
What do you mean it’s not productive? Do the people making money selling the houses just set the cash on fire? The money comes in to New Zealand and doesn’t leave until much later, if at ever.
And what do you think is driving the apartment boom in Auckland? Those buildings wouldn’t be going up without foreign funding.
Money in = supply.
It is not productive because most people that are selling are just buying another place with the proceeds.
If they move to a cheaper area or downsize then they either squirrel that money away for retirement (sensible but not overly helpful to the economy – still ok), or they are buying the Bach, the boat, the new cars (all from overseas), the new big screen TVs (again from overseas), going on the big holiday (again overseas). I’m not criticising them for this however what I am saying is that for the most part none of these proceeds are being invested in productive assets as you imply happens with foreign investment.
Labour has highlighted problem, but I question its methodology. It is doing it by name only for a race of people that has been in New Zealand since the 1860s.
This isn’t correct. They derived ethnicity for all sales, not just Chinese. That is the one bit that is perfectly valid with their analysis. Chinese was the only ethnicity with a much larger proportion of house purchases compared to the proportion in the population. (e.g. they showed that Maori and Pacific peoples were underrepresented as house buyers.)
The bit that is dodgy is conflating ethnicity with being foreign. There’s plenty of alternate hypotheses that would explain a reasonable amount of the variation.
Currently we have the welcome mat out for foreign residents to buy property here. This seems somewhat naive. Why not instead have a stamp duty for these sales with the income going into an infrastructure fund for the region of purchase? That would probably take the surge out of this type of sale and help fund the cost of serving the new services required. I note this is what Singapore does; 15%.
Yes indeed Patrick. Apparently Vancouver Council receives about $1 billion extra each year from this. Even then though their market is out of control so I think a ban on overseas ownership and a land tax on existing foreign ownership would do wonders.
How do you police it? Won’t people just use trusts or companies to get around it?
Collaborating with the Chinese government agencies to let them in to hunt the criminals and the dirty money would be a good start – might frighten a few.
maybe a disclaimer on how many properties you own, if any? If I was writing about banning Uber, and I owned a taxi company, readers would need to know.
Well, I wasn’t talking about banning anything of course, but I own one property, the one I live in. Or part of it at least. I’d imagine the number of properties I own will stay constant at one for the rest of my working life; any other money I end up with is likely to be put into other things besides rental property.
Thanks for the clarification
Is there any move toward tenancy law changes to make renting a more stable way of life with some predictability?
What of the real estate tenancy management which seems to be another aspect of Real Estate Agencies these days? They seem to have a real incentive to be selling to those who will be sing them as property managers. Is that a good thing?
Now we have director “Honourable” Jenny Shipley involved starting up a new bank on Queen Street for Chinese investors to be all ready to take advantage of the proposed Chines financial tsunami, does that seem as though our government is interested in changing the situation?
Housing NZ really started to go downhill when it was turned into an SOE and the subsequent Governments management was “in my opinion” designed to run it down.
I find it incredible that we are still only talking about apprenticeship training for the building trades. Our young people are told that they must stay on at school and go to university so that they can start their working life with substantial mortgages. It is long past time that young people were able to find apprenticeships at say 15yo and be paid while they learn and they are able to gain additional qualifications with night school training as was done years ago. The apprentice is trained in a ratio of 1 to 5 journeymen and then they learn respect for their elders that they don’t learn in the classroom of a polytech where the ratio is 30 or so to 1 tradesman. The Building industry needs to take responsibility for it;s labour training not using overseas tradesmen on demand like turning a tap on and off.
The builders today bring in tradesmen from entirely different trade backgrounds and then manage their NZ stay, many in exploitative ways which we should be ashamed of.
@ Matthew W “The thing about houses is they can’t actually remove them from the country. So they are still available to residents to live in” Seriously? Maybe if you have the money and are a punter in this game but increasingly with this Ponzi scheme that’s not an option still available in good old low wage NZ, especially those who don’t own their own home or are trying to afford rent! We are importing foreign speculator capital to play pokies with our real estate and propelling the price out of reach of New Zealanders. What is good about that?.
Your comment is either very naive or you, you are a spokesman for National and or you are doing bloody well out of this mess. And either way anyone who has been in the buyers market knows exactly what Labour have revealed is the elephant in the room anyway.
Well renting is a lot cheaper than buying. But if renting is unnafordable, it has nothing to do with foreign owners bidding up prices. If anything it is the exact opposite, as increased demand for houses will increase the supply of housing. And even if it doesn’t (because the supply side is so broken), it still won’t have any affect that increases housing costs,and will still likely reduce costs.
The rates system is based on property value. Property value skyrockets because of the increased demand and less supply, rates go up too, regardless of what you have done with your property or services. Rates rise gets passed onto renters, rents go up, renting affordability drops. Where is the decrease? The supply is not keeping up with demand, and the rate of demand means supply is likely to be rushed, and rushing growth does not aid long-term stability and quality.
“If anything it is the exact opposite, as increased demand for houses will increase the supply of housing. And even if it doesn’t (because the supply side is so broken), it still won’t have any affect that increases housing costs,and will still likely reduce costs”
I had to read your reply several times just to be sure but was still stunned by flowing silliness of the reverse logic. It reminds me of John Key every time he opens his mouth. It’s pouring with rain and bitterly cold in July and its a beautiful summers day.
So if demand still exceeds supply things will get cheaper…………Right, defies the basic tenet of economics but who cares!
If houses are getting more expensive and they are, then rent is NOT going to get cheaper as “investors” seek to recoup their purchase prices. Unless they are so wealthy that they leave them empty to join the rest of the ghost houses for the quick buck. And wealthy oversea’s buyers are upping bidding prices so they do directly affect rents.
“If houses are getting more expensive and they are, then rent is NOT going to get cheaper as “investors” seek to recoup their purchase prices.”
You have got causation backwards. Higher house prices can’t drive higher rents. The rental market is driven by supply and demand. If the market got over excited about oil companies and the price of Shell shares went through the roof, that wouldn’t change the price of oil.
“So if demand still exceeds supply things will get cheaper…………Right, defies the basic tenet of economics but who cares!”
There are two different markets we are talking about. One is the residential property market (Oil companies) the other is the rental market (oil market). Hope that clears up your confusion.
I’m not fussed by foreign owners. The problem is anyone who is using housing for investment purposes. It doesn’t matter if they live in Auckland, Queenstown, Queensland or Beijing. They’re all fundamentally the same and will respond in the same way. I guess the really big thing to do is to stop framing this in terms of foreigners, property investors are the true enemy of residents, but I also have some other ideas.
1) Create disincentives to invest in (residential) property. A Capital Gains tax is a good first step.
2) Encourage considering other options. Land has a long history of causing problems. It mattered a lot to Maori, early immigrants generally want it, we all believe in the quarter acre paradise right now and everyone seems to believe that prices will just keep rising for ever and ever. We’re dealing with the legacies of history as well as current perceptions. In this sense, “other options” means both stocks and different living arrangements (i.e. if you’re building places like Addison, build taller and narrower houses: they already even look like they should be three stories and made of brick, but they’re not).
3) Increase refugee quotas and otherwise attempt to stimulate other areas of the country. If Auckland doesn’t look like the only place that’s jumping then it would be relatively less attractive than it is now. That should ease some of the pressure.
Can someone please explain the benefit in offshore investors buying NZ housing as far as NZ is concerned? Yes, the property investors see a rise in the value of their investment and a quick profit, but what about the average person wanting to use a house for its intended purpose; a place to live? There are at least two houses in our street which were sold this year and still sit empty, no signs of anyone intending to move in. Yet, there is a shortage of housing. And then when a foreigner sells, the profit goes off overseas without impedance, never to be seen again.
For those who rent: NZ-owned, the money stays in NZ. Foreign-owned, off it goes, unless they spend it on the upkeep of the property, which is where renting-out is not as bad.
If foreign buyers buy with the intention of living in NZ or will rent it and intend to use the rent for the benefit of those occupying the dwelling, by all means, welcome to NZ! But what is gained by allowing those who seek to buy what could be someone’s home purely to take advantage of the market and fire it off in the short-term for a quick profit, and that profit does not even stay here? There needs to be some restriction, but it will need to be very careful to ensure genuine foreign buyers who seek to improve NZ are not impacted, and also ensure NZ-based investors who leave properties empty get penalised (yes, they are a problem too. The only reason they don’t get as much attention is the money stays here. Regardless, the market impact is the same). And it needs to be non-discriminatory. A house is built to be somewhere to live; this appears to have been forgotten at some point by people without morals and those who are meant to look after the country.
One possible benefit is when foreigners buy our property at over inflated prices then the market crashes and they sell them back to us at much lower prices – assuming they don’t get loans from our banks. Maybe this is National’s grand scheme…
Another is when we build lots more houses than we need and sell them to foreigners – it is like manufacturing anything and selling it.
Otherwise I’m with you, I can’t see any advantage of foreigners owning residential property unless they build it or buy it in a very poor state of repair and improve it.
Investment will lead to increased supply of housing
But most of the investment is going into land – and we can’t increase the supply of that.
Exactly. The issues sith the supply side of the market is hampering the market from putting the capital to good use. But there is still some elasticity in supply in Akl.
And when said investment is into buying a house which sits empty, that is a decrease in supply….. the mantra of “investment solves the market” isn’t happening, it’s leaving homes which would otherwise be occupied empty
Do you have any evidence for that? The census data indicates this is not an issue.
A non-resident stamp duty is a good starting point, followed by moves to encourage regional development. Local speculators are also an issue, but they’re more powerful than the House of Lords – or should that be House of Lords of Houses? – and only a politico-economic Black Death in the form of a housing bubble burst is guaranteed to bring them back to reality.
Stamp Duty has worked well for Singapore and Hong Kong. I has the additional benefit of raising money for infrastructure development.
Possibly the greatest problem with this whole debate is that there is no reliable statistics available covering housing ownership. The residential status of purchasers, source of funding and occupancy figures are repeatedly stated as guesses.The Labour Party has released what they have partly because there is no good information available. We get ‘we don’t know’ statements far too often from government ministers. Why is this? After 7 years they should have a better response than that. I strongly suspect that the detail is not there because the govt does not want to know and has been suppressing the collection of the statistics that would show the real situation.
Agreed.
The government and real estate agents are terrified that the stats will emerge, and are suppressing them or ridiculing those who present the issue.
Exactly.
I remember going to a Reserve Bank roadshow over two years ago and asking the Governor if there were any restrictions planned for overseas buyers (‘course this is a government area). The empty house issue was beginning to come up then.
The markets will certainly correct, it’s just that in situations like this with a social aspect the correction is considered to be too painfully slow. With inelastic supply it will take another 2-3 years to correct (just in time for the elections and another government to have to try to clean up the mess).
From society’s point of view, this is market failure. Supply cannot respond quickly enough due to resource scarcity such as land, nimbyism preventing intensification, slow consent time…. So, some work must be done on the demand side, as other countries do. (I wouldn’t think it’s easy for Hong Kong or Singapore to increase their supply).
Certainly data is needed to be able to make fully informed decisions (more market failure). I know from my own research attempts how scrappy some of our data collection is. Makes us look a bit amateur.
The market is almost inelastic. Even with an accelerated build programme and more intensive housing we can’t keep up with demand, let alone improve the situation. The market has failed. Agree that renting is a more sane solution but would also like to point out the parlous state of most rental properties with minimal opportunity for tenants to improve them. Part of the reason for home ownership is to make that home ‘nice’, i.e. suited to the owner’s needs.
Regardless of the nationality of the overseas buyers, they are not the issue, the issue is that NZ is unique in the world where tax free gains can be made from purchasing real estate.
Why doesn’t the average American have the same obsession as kiwis in this regard? Because unlike NZ and LIKE the rest of the world they have a capital gains tax so there’s no more incentive than other forms of speculation e.g. playing the stock market.
Put yourself in the shoes of the Chinese in China, NZ is offering a tax free investment ….you’d be silly not to snap it up?
And don’t think the John Key and his cronies are going to doing any thing effective soon….remember they own most of the Auckland property market!!
Mention of John Key is the highly relevant thing in this discussion. He still has the brain of a money trader. New Zealand needs foreign currency, to pay for our imports. Allowing off-shore investors to buy property here brings in large amounts of foreign capital. National know this, and by their doctrine, actively want this. They deliberately don’t want a register of buyers, as they know all too well that Labour’s crudely obtained data set is correct, in that major amounts of housing in Auckland is being bought by foreigners. So why would they try to stop it?
But Key also wants lots of immigrants in those houses, as those new immigrants will be earning money and paying tax, which helps pay the benefits bills for our aged and infirm. Kiwis aren’t breeding fast enough – our rate of replacement is low – immigration is the only way that Key has to pay the future bills, but he doesn’t really want to say that out loud too much. What he really wants, is for the people buying houses, to actually come here and live as well, to grow our economy through growth of population as well as growth of money supply. Quite simply, the fate of the average (relatively poor) Aucklander is of no concern to him.
What is disappointing here, is that Auckland is not growing like Vancouver, which similarly had an influx of Chinese, but in their case in the 80s, from Hong Kong, escaping there with their cash before they became part of China. What would be worth doing is examining Vancouver’s building and immigration history more closely, as the incoming foreigners have succeeded in creating a much more vertical Vancouver than our rather horizontal Auckland. I have a feeling that this is tied in with the public transport in BC – the Sky Train or whatever it is called – I was there the week it opened in the 80s, and masses of condominium housing towers have grown up around it.
So we need to be asking – what did Vancouver do that made it such a success? Why did their city grow in that way? What were the controls in place over foreign ownership? (I’m pretty sure it was not a question of letting HK Chinese just buy property, they had to actually go and live there as well). Like the Leaky Condo problem in Vancouver, 10 years before our leaky building problem, we can learn a lot from them, instead of merely just repeating the same mistakes.
Nick Smith on Q + A this morning that the constant advice from government agency advisors is that foreign buyers are not having an impact on house prices. If that is indeed the advice you are being given I’d get new advisors. Perhaps they’re a little removed from reality down in Wellington.
This from the man who gave us leaky homes. It must be great being a politician, there’s no accountability for anything you do.
JeffT – see my answers above – Nick Smith is lying through his teeth, it’s plainly obvious. He is speaking the party line. That’s what politicians have to do.
On a side note, while I would agree he can be a complete dick, I can’t see that that he has anything whatsoever to do with causing leaky homes. He only became an MP in ’90 and as the MP for Tasman, he is surely unlikely to have caused damage to the thousands of leaky homes in Auckland. Was he in any way responsible for the changes in the Building Act?
Agree Guy. My bad, sorry Nick. Was the Bolger administration and the 1991 Building Act. Past information indicated Nick Smith was involved in the Act’s definition but this may be incorrect. Haven’t found who was the building minister at the time.