Here's my summary of the key events overnight that affect New Zealand, with news Vancouver is slapping a new property tax on foreign buyers.
But first, in the US, consumer confidence held steadier in July than economists were expecting, and new single-family home sales hit their highest level in more than eight years in June.
This is the latest data that suggests a sustained momentum in the American economy, which would allow the Federal Reserve to raise interest rates this year. The Fed's decision making process is back in focus because they have a review due tomorrow. Markets expect no change then and are not pricing much in for the rest of the year either.
And north of the border, in Vancouver, BC, Canada, they have announced an "additional property transfer tax" of 15% for foreign nationals and foreign companies. (H/T CJ099) This is on top of the graduated 1%/2%/3% tax they already have for property transfers province-wide. The provincial government says it is targeting foreign buyers because they are distorting the Vancouver markets to the disadvantage of local residents.
However, the new tax will exclude permanent residents of Canada, regardless of nationality. Rich and foreign-earning immigrants, including millionaire immigrant investors, mostly from China, have flocked to the city in their thousands. More than 60,000 millionaire migrants and family members have arrived in Vancouver since 2002. All of these will be exempt from the new tax. The local real estate agents are up in arms over the 'surprise move' which takes effect on August 2. Interestingly, the 15% tax is the same rate Hong Kong imposes on housing transfers to foreigners. Also, at this stage, no word on how this affects Canada's existing treaty obligations and whether further exemptions will flow from that.
In Australia, the head of their competition watchdog, the ACCC, has sharply criticised both state and the Federal governments for "blatantly" structuring asset sales to maximise profits at the expense of consumers. He says it has gotten to the point that further privatisations should be stopped until adequate regulation and consumer protections from the monopolies being created over there are in place.
Back in New York, UST 10yr yields are unchanged at 1.57%.
The US benchmark oil price has slipped further and is now just under US$43/barrel and the Brent benchmark is just under US$45/barrel.
But the gold price is also slightly lower, down to US$1,320/oz.
The NZ dollar will start today a little higher from this time yesterday, now just on 70.4 US¢, at 93.7 AU¢, and at 64.1 euro cents. The TWI-5 index is now at 74.3.
If you want to catch up with all the local changes yesterday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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67 Comments
NZ will get the final surge of desperate and unsophisticated bubble mania buyers, and it'll crush us like a bug. Could take generations to get over this.
Absolute minimum that even a half-competent government could do is match our policy to Australia and Canada so we don't get the overspill.
Ideological my Backside !
This is about elected representatives taking steps to protect its citizens .
The funds flowing from China are in a best case scenario tainted , and a worse case its dirty money .
Its borrowed or syndicated at between 1 and 3% interest per annum ( we Kiwis pay 5 -6 %) , and its available in unlimited quantities
The Renmimbi which is NOT a freely traded currency, is practically unconvertible , so heaven only knows how the stuff is being exchanged on such a scale ?
Simplistically , we have 1,3 million houses in New Zealand worth an average of $450k each
There are 2,6 million US $ Millionaires in China alone , so there are not enough houses for them here if they bought just one each using only half of their discretionary funds AND PAID CASH !
Japan has another 2,1 millionaires , Korea has a few hundred thousand , and Hong Kong another 60,000.
This does not include India with another 250,000 millionaires , nor Thailand , Indonesia or Malaysia or Singapore with about 200,000 millionaire households
New Zealand has under 7,000 millionaires, and its all tied up in .............. you guessed it ....... Our cold damp leaky wooden houses
We're constantly lied to and told this is a supply side problem. Whilst there are issues of supply the far greater problem, as you have illustrated Boatmen, is on the demand side with this tidal wave of funds coming from offshore.
Effective investment and tax legislation could fix this pretty quickly.
If the market crashes 30-40% it really is immaterial to owner occupiers as they still have a house to live in and the gains were only paper unearned gains in the first place. A few heavily geared investors recent to the market may have to be collateral damage but at least it will return some sanity to the market. Better that then locking a whole generation out of housing.
Also, crashing this ponzi would put an end to this behaviour for at least a generation much like the sharemarket crash of the late 80's scared people off NZ shares for a generation. We can then move on and fixate on improving the society we live in rather than "casino housing".
In the long run our society would be better for it but it's scandalous it was allowed to get like this in the first place.
That's a bit raw David. Surely, the proletariat have the right to drag our politicians over the coals, even if we personally degrade or insult them when doing so. Do you think our leaders expect anything different? Do you think we will all gaze at them endearingly and tell them him how nice their hair and skin complexion is? There is a social contract and the govt executes power with no personal negative impact, I think they should expect insults.
Whether or not you agree with the taxing of foreign buyers, at the very least it allows the BC Government to raise tax revenue from an activity that is widely accepted as being detrimental to society. These funds could be put to use in initiatives aimed at leveling the playing field.
The fact that local realtors are up in arms confirms for me that this is a good thing.
yes and i think we could apply the same argument to cap gain tax on property. It has been resisted for all sorts of reasons, one of course that it wont or doesn't stop prices rising. But at least it would carve off some of the gain for govt and then perhaps redirected back to councils for infrstructure.
"The provincial government says it is targeting foreign buyers because they are distorting the Vancouver markets to the disadvantage of local residents." Who wudda thought. A government acting when it's citizens are being messed about. We would never do that here.
I still think that we should also be charging an annual income tax on a deemed income from the property. Ie in our case 33% of say a deemed income of say 6% of the CV i.e. 2% of the CV per year.
It is the least that they should contribute as their share of the running of the country. Why should the locals subsidise the national services that support the property and it's owners. Further they should pay a premium for the privilege of property ownership in a foreign country as they contribute nothing else but add significant problems.
And while taxpayer is subsidising, diversion of more and more of collective national income into non-GST things like rent and interest must be absolutely gutting the GST take. Whether that's made up through income tax or borrowing, burden will be on taxpaying citizens. Including some not yet born who haven't had a say in this.
A country can have all those things and doesn't have to tax to get them it is nothing more than a myth that we wouldn't have these services if we didn't tax.......
If you don't have taxes then you don't have the associated bad spending that comes with having a taxation system.......
A tax on foreign buyers might breach the free trade agreements etc. we have with China and the other countries and companies which now effectively own us. They might threaten us the way China did regarding any inquiry into dumping steel, or the "influence" we suffer from tobacco companies regarding plain packaging. I'm pleased the TPPA seems to be dying.
Vancouver has left this way too late , so much so that it will make no difference whatsoever . New Zealand is close to being in the same position.
Vancouver Property prices have skyrocketed in the past 3 years , so much so that many middle class residents cannot afford to live in the city . Firemen , policemen , ambulance drivers and nurses all either rent grotty little apartments or live far from where they work in the city.
Much of Vancouver is a to all intents and purposes in Asian ownership already, with some suburbs such as Richmond and Burnaby almost totally occupied ( and I assumed owned because they hate renting ) by Chinese, either resident or non-resident .
Two words: Birth Tourism
Canada is one of the top spots to drop an anchor baby https://en.wikipedia.org/wiki/Birth_tourism
Excellent article David thank you. It will be very interesting to see what long term effect this has on Vancouver's property bubble and whether it will cause their Non-resident Investors to push in to other cities around the world?
Just looking at the comparative facts here:-
Vancouver's average property price of C$917,800 (NZ$992,803) in June 2016
Auckland's average property price is not far off at a similar rate of $975,087 NZD in June 2016.
We know that 39% of the Auckland property market is taken up by Non-resident Investors from the data collected LINZ earlier in the year.
The article below seems to indicate that Canada's BC regions have around a maximum of 14% Non-resident Investors (This includes Students and those on temporary visas). Though the Canadian data has been collected over a very short time span.
http://www.theglobeandmail.com/real-estate/the-market/real-estate-indus…
In short; I think we have a much bigger Non-resident Investor problem than Vancouver.
Do we know when the next set of LINZ figures are due to be released for New Zealand?
I seem to remember that there was a mention of September this year though please correct me if I'm wrong that date?
Boatman, We all knows that National party does not listen to anyone except their Asian friends . National Policy : Your Wish Is Our Command.
One does not have to read anything but just by seeing what is happening around should make them understand and act but You can’t wake a person who is pretending to be asleep.
Meida Plays and Important Role in Democracy and is their responsibility to make the voice of the common men heard by the people in power.
The media does play a vital role in our democracy, and if we cannot depend on journalistic ethics, the nation's in trouble. Dave Brat
"LINZ will release this data each quarter, with the next release planned for July 2016."
http://www.linz.govt.nz/news/2016-05/property-data-released-for-first-t…
Everyone knows that to solve housing crisis one has to increase supply but at the same time, is very important to act on demand side also, specially control speculation. Australia has done it and now also Canada. Supply by itself will not solve the current housing Crisis and this is government hidden agenda to let it run as they too knows that even if supply is released today will take couple of years to show result and that too is IF.
Read Toby Moore article and observation below (Nothing new but the same that has been raised by RBNZ, Bank and all other experts but is IMPORTANT as the need is to highlight the inaction of national government to act on demand - not even once have heard about controlling demand from National, only once they talked about land tax but as were not serious used faulty overseas data to hide behind it)
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=116…
Like Canada , many experts should come out on a regular basis to expose government and should not let them get away with their lie.
@Nzakl....Yes the Canadians are quick to point out the Emperor with no clothes when it comes to their delusional politicians
We Kiwis are far too controlled and polite for that as you will see from David Chaston ( who is a perfect gentleman by the way ) taking a commentator to task further up this page for his reference to Nick Smith .
I have also been on David's receiving end some years ago for calling Mayor Len Brown a Moscow -styled Communistic apparachik who drives a chauffeured car to work instead of using the train ( when he wants us all on the train) , while living on a multi million Dollar lifestyle block ( when he wants us all to move to cramped apartments )
Thou shall not criticize the leadership is rule
We are not even allowed to call Nick Smith ruddy faced on this forum ................ imagine if we called him a ruddy -faced incompetent who stood on privately owned land saying the land was State-owned and would build 50 houses there ?
That would be totally unacceptable , and the comment would be withdrawn .
The truth about Nick Smith , is that he is the wrong bloke to sort this mess out , and I don't know why John Key persists with him
There is always lots of doom and gloom on here about house prices being a ponzi scheme and that there will be a crash. I can see where people are coming from and we may see a sharp correction in some areas when there is the next global economic downturn but as the rest of the world turns to crap Auckland and New Zealand will continue to be a popular place to live, more people will want to move here and prices long term will continue to rise.
My friend was speaking with a Chinese buyer from Beijing that purchased a property in Campbells bay on the weekend. They told him that Beijing and many other parts of China are so polluted now that wealthy Chinese are all wanting to move to NZ where there is clean air, good schooling, safety and all of the other great things our country has to offer. NZ is one of the only countries in the world where Chinese and other nationalities can get permanent residency if they have a certain amount of money in the bank as well.
Just look at the state of the Middle East and the massive shift of millions of Migrants, look at the unease across Europe because of this and all of the attacks there, look at the civil unrest in the states and look at all of the countries that are dealing with droughts, pollution, wars etc People are on the move and the wealthy are heading to safe liveable international cities.
Auckland is consistently voted as one of the best cities in the world to live in and it is a beautiful reasonably safe international city so it will be a popular place for people to migrate to. The Government can't keep the doors open forever though unless they sort out our terrible transport issues, build more hospitals, schools and other infrastructure to deal with that side of things.
As for that GFC scenario i mentioned, there is a high possibility of this happening again in the next few years so all investors and home owners should tread with caution.
ADAM B NZ states - "unless they sort out our terrible transport issues, build more hospitals, schools and other infrastructure"
Who is the they you refer to? I presume you mean The Central Government
The question is - where does Central Government get the money from to provide all that stuff - taxes paid by the existing locals? - or by a levy on these wealthy newcomers
That is the source of the growing resentment
JK says that house bubble should continue for if it stabilize or correct , investors will be affected but the truth is that only Speculators will be affected as they are the people who is buying for short term capital gain and if the house price stabilize will not be able to sell fast as have been doing and will have a problem. Not Home owners staying in property and investors for genuine investors are in for long term.
Read Below article on one of the Kiwi Investor - NOT SPECULATORS
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=116…
Does anyone has any doubt now who the National is trying to protect
The Realtor in Vancouver is correct when he says "everybody wants affordable houses until they come to sell them."
Some Kiwis list with Asian agents (who hardly speak English ) because they want the Asian agent to get Asian buyers because these buyers just want there money out of China and aren't interested in the return or even to live and contribute to NZ society. It is well known in the industry that if you get an Asian and an Indian competing at an auction you might get a higher price for the property. It only takes two bidders and the prices goes stupid. Unaffordability for kiwis has come about through a willing buyer AND A WILLING SELLER.
Another daft article in the herald about somebody who has been buying like crazy and now has $12.5 million worth of property. From nothing.
It's a regularly repeated story of course. And the story always stops short of what the amount of debt is. First thing I look for in these stories, and that number is always, -- always --, missing.
Why is that ?
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=116…
Not too sure why you would want to write a book about his investing?
Would be interesting to know what his level of debt is compared to current property value, but obviously if the market turns to shite in Auckland then he could well be in trouble, as the prices are well out of kilter with the rental return,
Anyone could have made money over the past few years in Auckland.
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