BNZ chief economist Tony Alexander is suggesting it would be a good idea to conduct a study into just who is buying Auckland houses - and where the buyers come from.
In his latest weekly newsletter Alexander again addresses the increasingly vexed subject of offshore-based buyers.
Anecdotal evidence is suggesting large numbers of offshore buyers, particularly Chinese, snapping up houses - particularly in Auckland.
However, Alexander's efforts to quantify such activity through the monthly BNZ-REINZ Housing Survey have come up with a result that nationwide only about 3.6% of buyers are people based offshore not intending to live in New Zealand, with the Auckland figure a slightly higher percentage.
"The social media has been ablaze over the issue of perceived massive house buying by Asians in Auckland," Alexander said.
"No-one has professed an ability to distinguish Kiwi-Asians from true foreigners let alone one Asian-type from another - so that clearly clouds the issue.
"But nonetheless there is growing societal discord at the perception that mainland Chinese in particular are outbidding hard-working Kiwis in the Auckland housing market."
Alexander has previously robustly defended the results from the BNZ-REINZ survey, whilst also saying that he favours Australian-like restrictions on offshore-based buying of existing homes.
In a recent newsletter Alexander put out an eight-point plan to tackle the problems in the housing market. An interest.co.nz poll on the plan showed that among readers responding, banning offshore-based investors from buying existing homes was the most popular option.
In the latest newsletter Alexander said the data from the BNZ-REINZ surveys did not support the anecdotes about numbers of offshore buyers.
"Nevertheless, the weight of disbelief about the data for Auckland raises the issue of whether the survey is not truly capturing sales to Chinese...
"...Which of course raises the issue – which does one believe? The data or what one sees in the auction rooms? One must always take anecdotes with a grain of salt, especially as there will be an upward bias to the proportion of sales attributed to Chinese caused by inability to distinguish foreign from Kiwi Chinese, and inability to classify all the non-Asians in the room into any other group than non-Asian."
However, he conceded that more work needed to be done on the question of offshore house buying.
"Clearly the issue needs to be more deeply investigated given the societal concern in play and the clear risk that as this concern deepens in coming years yet our trade dependence upon China grows, we risk either kowtowing to keep exports up, or installing foreign property purchase controls and suffering a backlash from China.
"One avenue for investigation would be someone funding a study into all Auckland dwelling sales over a six month period (about 16,000) to see exactly who the end buyers are."
Meanwhile Alexander's comments on the whole issue of foreign house buying have attracted interest offshore.
In his newsletter Alexander said he had received a string of questions from a Chinese newspaper journalist regarding the buying of houses in New Zealand by Chinese nationals.
Included among the 14 questions were: "It is reported the local people are not so happy about the fact that a lot of Chinese people come to purchase a lot of houses. So, is it true? Could you please tell me an exact example of the local people’s view?" And also:It is reported that the government will issue a new law of housing restriction policy. So, as you see, what will the housing restriction policy be like? Please answer this question in detail."
Alexander included in his answer that: "The government has made no policy pronouncement regarding foreign house purchasing and I am not aware of any work being undertaken on development of any particular policy. There is zero chance that if a policy were developed regarding foreign house buying in New Zealand that it would be targeted toward Chinese. It would apply equally to all groups though may exclude Australians just as New Zealanders may freely purchase property in Australia (to the best of my knowledge).
"...With regard to Chinese buying of houses – I have yet to find a single person in New Zealand who agrees with the [BNZ-REINZ] survey results. Everyone believes that the true level of Chinese house buying in Auckland in particular is much higher than my survey suggests. The issue is rarely mentioned with regard to any other part of New Zealand.
"...My concern is that although I believe the level of Chinese house buying in New Zealand is not as high as the anecdotes suggest, the issue is causing societal discord and has potential to worsen in coming years and threaten the very good trade relationship between New Zealand and China.
"I advocate that the NZ government move quickly to introduce legislation influencing foreign house buying in New Zealand with that legislation applying equally to all foreigners. I hope these comments help clarify my position and make it clear that although there is high concern in Auckland about buying of property by Chinese, there is little if any support for a foreign purchase policy which targets only Chinese buyers."
24 Comments
Pure logic says that if a restriction is made on foreign ownership, then it should closely follow the Australian rules and should cover existing ownership with a future date to apply so that existing owners can liquidate in an orderly manner.
Any rules should include land banking also with a tight schedule for release
Bonus may be a drop in the dollar as the cash exits.
I must confess to being absolutely astonished that we do already do this .
Where in the world (can anyone name just one developed country) can you buy fixed property ( real estate) without the records being kept of who you are , where you come from , your residency status , whether or not you are a citizen , even your marital status , your Social security number or your identity number , or a myriad of other complaince requirements .
Once again ,like anti money laundering laws , and talking- while- using- your -cellphone- laws , New Zealand seemingly lags the world by decades.
So on the one hand we have ppl complaining that such things as the above need to be law and regulated, and on the hand, other ppl complaining there is too much regulation.
I suppose the Q is, why do we need this data? There is a record of births, deaths and marriages, that costs money to run. So we need something equiv. (centralised) and to pay for that, so do we really need it? I'd suggest not. The councils record who pays the rates, why do I have to tell the council or anyone else if I as the house owner am married or not?
regards
Ah yes, indeed, well we could, but I'll take the Libertarian (ish) view, (in this instance) that why does the Govn need to be in my business of what is essentially a private transaction?
I suppose we'd link it into census data and electoral role maybe so its updated as well, I suppose the next Q is, who pays the millions to do it?
regards
Yes, it is surprising that there is an abundance of data that is not used. In australia the federal-tax office (ATO), centrelink (WINZ), state-revenue-office (SRO), register of lands and deeds, and customs, all use electronic, computerised data-matching, they have all the data they need, and if you travel overseas, they have your passport number, nationality etc etc etc. Dont think they bother with Local body rates details. But the SRO has all the names and details of beneficiaries of land owned in the name of a "trust"
Q1. do you own the home you reside in?
Q2. what is your nationality?
Q3. Do you rent?
Q4. If not, what is your relationship to the owner?
Q5. How long have you lived in new zealand?
Then couple that up with the population demographics and household ownership statistics - of course people can and do lie
Meanwhile on the other side..
"The Reserve Bank of Australia (RBA) has been counting on low rates to help revive the housing market, particularly for building, and support the economy as a long boom in mining cools.The central bank cut rates to a record low of 2.75 per cent in May and most analysts still expect at least more easing before year end.."
Aussie is still our biggest importer and highest number of visitors to NZ. When they get the squeeze, we will feel it too.
If anyone have time, google "Ghost Cities in China:" and watch the doco. It's only a matter of time when the developers there have to pay back their loans..
The whole debate if non-resident ownership is 1% or 20% and how that impacts supply and demand sort of misses the point.
To some extent house prices have been decoupled from fundamentals like wages & rents because they are very liquid and readily financed and in a globalised market have a degree of intrinsic value. Investors and immigrants from London, Tokyo, New York, and Shanghai (amongst others) perceive NZ to be relatively less expensive and their capital flows to our shores. Whether non-resident buyers are 20% or 5% of new house sales doesn't matter - their interest levels are high enough to have a disproportionate impact on the housing market by setting a floor price. Why would I sell my house to a Kiwi if there someone more wealthy to sell my house to? I don't - I sell it to the highest price. Fortunately (or unfortunately as it may be the case) Kiwi's are able to leverage themselves up to compete on price.
Taking away non-resident's ability to buy houses will certainly take a stimulant out of the market. Slowing migration flows will help greatly too - NZ is a highly desirable place to live by global standards and as we are seeing migrants are willing to pay a premium to reside here which is helping to further imbalance the market from fundamentals such as wages and rents.
From the viewpoint of a home seeker the imbalance is between landlords and owner-occupiers.
(How many people are living under bridges? They may be crowded but they have a rented roof over their heads)
Coincidental to the above, it is probably true that overseas investors are aggravating this balance as are locals (citizens and recent residents alike) who are grabbing the available stock ahead of new home owners.
Hence we would help restore a balance (without any new building) by:
1. Stopping overseas ownership
2. Changing the investment incentives for second investment property
In regard to new builds
1. Make land bankers release land - overseas owned property made taxable and a time limit to sell up.
2. Incentivise lower cost builds if necessary but as a last resort.
There is a simple desk-test that can be done to give some substance to the debate.
Take two sheets of paper, give one a heading of "supply" and the other a heading of "demand"
On the "supply" sheet draw a line down the middle
On the right hand side list the 5 topmost impediments to increasing supply
On the left hand side list the 5 topmost (potential) drivers of supply
On the "demand" sheet draw a line down the middle
On the left hand side list 5 topmost factors that are driving increased demand
On the right hand side list the 5 topmost (potential) suppressors to reduce demand
Then examine the 4 lists and assess which factors can be changed and or implemented ASAP that can equalise the two sides of he equation.
Of course, if 10 people did the task you would get 10 different sets of lists
Bernard, someone resident in Auckland could easily sit in at Barfoots auction rooms and note for each auction:
1. The ethnicity of the buyer and sale price
2. The ethnicity of each underbidder and their highest price
3. If the buyer is Asian, whether they have an agent or translator with them, or whether the bidder is on the phone on behalf of someone else.
Easy work.
So why not employ a couple of students on minimum wage and prepare a report for us!!
I suspect (from recent Auckland auctions attended) that 50% of the buyers will be Asian, and about half of them will be with an Asian agent (translating) or on the phone.
The other thing that would be interesting to know is what percentage of propery is sold at auction? And these stats would be most helpful if broken down by the old Auckland council boundaries.
This SuperCity has distorted any number of Auckland-related issues I fear - likely to the determent of those living and working outside the old Auckland City boundaries.
At a couple of recent North Shore Barfoots auctions I have attended the crowd is approx 80% Asian - they have the money - LVR restrictions and interest rate increases are not going to bother them. It's actually quite entertaining watching the Asians bidding frantically against each other and pushing prices up!
Thankfully comentators on this site have dropped the issue of Capital Gains Tax , and are now focussing on asking the sensible questions about the housing market on steroids
Demand from Migrants
Cheap easy money ( Low Interest rates )
Demand from younger buyers
Demand fro Chch relocators
Land supply contstraints
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