Friday's Top 10 with NZ Mint: 'Asian buyers pricing NZ developers out of Auckland market'; A NZ$1 mln 'do-up' in Sandringham; Most Kiwis want controls on foreign buying of rentals; China's Debt Bomb; A flash mob with guns; Dilbert; Clarke and Dawe

Here's my Top 10 links from around the Internet at midday in association with NZ Mint.

As always, we welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.

See all previous Top 10s here.

My must read today is #5 on the debt bomb that has gone off inside China and why it's a problem for China's future growth rate (and therefore for us and Australia). 

1. Time for a Hong Kong style stamp duty - The noise around non-resident purchases of 'gold bar' properties in Auckland is now building and getting onto the political radar.

BNZ's Tony Alexander has an excellent commentary overnight on feedback from his contacts about the sort of buying of development properties in Auckland.

Alexander has also started asking real estate agents what proportion of properties are being bought by foreign buyers in his monthly survey.

He says we should have more detail in a few weeks, which will be important given the lack of data around exactly who is buying in Auckland.

This is heating up as a political topic too with the Greens arguing for a ban on non-resident purchases.

Another option is a Hong Kong-style stamp duty on non-resident purchases.

Here's what Alexander is hearing:

Here is one of the emails on the issue received this week: “We build housing in Auckland both for developer clients and for our own developments. We recently put in a tender for a development plot. Spent many days working numbers and taking advice from various consultants and put in what we considered was a price at the higher end of what it was worth as a viable development. There were numerous tenders received that far exceeded our tender price and from what I am told they were all from Asian investors. Every developer we talk to is complaining of being consistently outbid by Asian investors on development land. Fair competition perhaps?

"There is a lot of speculation that these investors are using the purchase of development land to gain entry to the country under the investment route somehow (either directly or through an already established development business), and if that was the case it would not only be unfair competition (they are paying a premium for the land to purchase residency), but also has implications to the housing market and surely won’t be helping affordability?”

2. Most voters favour restrictions on foreign buying - Patrick Gower over at 3News (he's also in the office next to me in the Parliamentary Press Gallery) has this report on a 3 News/Reid Research poll showing 63% of those surveyed favoured restrictions on non-resident buying of investment properties.

Gower quotes Key as saying he doesn't think foreign buying is pushing house prices out of the reach of locals.

Key refers to the Shania Twain case. But that's not the problem area. Regular houses in Auckland are being snapped up by fly-in fly-out buyers.

Here's Paddy:

Asked, if to make houses more affordable the Government should put restrictions in place to stop foreigners from buying up investment properties here, 63 percent said yes, 30 percent no and the rest didn't know. Under law, in Australia non-residents cannot buy established dwellings as investment properties. The Greens want a similar ban here - at least on investment properties - but the Prime Minister won't go there.

“I don't think foreigners buying the odd house in New Zealand is what's driving the escalation of prices,” says John Key.

3. A million dollar do-up in Sandringham - Here's the NZHerald with a couple of examples of the issue. An ex-state house in Sandringham that needs to be (and might well be) bowled has sold for over NZ$1 mln. This is nuts. The buyers in this case are residents. But there are plenty who are not.

A packed Bayleys auction room included several bidders yesterday morning, with 94 Haverstock selling for $1.05 million - $350,000 or 50 per cent above its valuation of $700,000.

Both homes sold to Chinese buyers planning to renovate and live in them. The listing for number 94, a four-bedroom 1950s weatherboard house sitting on a 938sq m section, said the property was "screaming out to be saved by you".

It was sold to a couple - a doctor at Auckland City Hospital and an IT worker - with two children. They told the Herald they plan to subdivide the section, letting the house and building a new one for themselves behind it. They live nearby in Euston Rd and plan to keep and let their present house.

4. Aussie dollar 4-15% over-valued - David has linked to this one too in his 90@9, but it's too good to not repeat. Bloomberg reports the Reserve Bank of Australia has found 15 central banks are holding Australian dollars as reserves and the Aussie dollar is up to 15% over-valued.

I wonder if the same is happening for New Zealand.

The central banks of Slovakia and Slovenia were recent additions in a list of 16 economies that publicly hold the Australian currency, according to papers prepared in the second half of 2012 and released today under a Freedom of Information Act request by Bloomberg News. Newcomers on a list of 18 possible holders included China, France, India, South Korea, Thailand and South Africa. 

“Most models -- including the staff’s internal models and the IMF’s models suggest the exchange rate is overvalued by 4-15 percent,” a document for the RBA’s September board meeting showed.

5. China's credit boom - Morgan Stanley' Ruchir Sharma writes at WSJ about how Chinese credit has quadrupled since 2007 and about the risks that has created.

Last year, roughly half of the new loans came from the "shadow banking system," private lenders and credit suppliers outside formal lending channels. These outfits lend to borrowers—often local governments pushing increasingly low-quality infrastructure projects—who have run into trouble paying their bank loans.

Since 2008, China's total public and private debt has exploded to more than 200% of GDP—an unprecedented level for any developing country. Yet the overwhelming consensus still sees little risk to the financial system or to economic growth in China.

That view ignores the strong evidence of studies launched since 2008 in a belated attempt by the major global financial institutions to understand the origin of financial crises. The key, more than the level of debt, is the rate of increase in debt—particularly private debt.

On the most important measures of this rate, China is now in the flashing-red zone. The first measure comes from the Bank of International Settlements, which found that if private debt as a share of GDP accelerates to a level 6% higher than its trend over the previous decade, the acceleration is an early warning of serious financial distress. In China, private debt as a share of GDP is now 12% above its previous trend, and above the peak levels seen before credit crises hit Japan in 1989, Korea in 1997, the U.S. in 2007 and Spain in 2008.

The second measure comes from the International Monetary Fund, which found that if private credit grows faster than the economy for three to five years, the increasing ratio of private credit to GDP usually signals financial distress. In China, private credit has been growing much faster than the economy since 2008, and the ratio of private credit to GDP has risen by 50 percentage points to 180%, an increase similar to what the U.S. and Japan witnessed before their most recent financial woes.

6. The amazing OREO seperator machine - A physicist has way too much time on his hands, a very dry sense of humour and an entirely sensible dislike for the 'cream' that holds together OREO cookies. 

7. Obama's Faustian bargain - Jeffrey Sachs writes in this FT blog that Barack Obama actually wants to slash US government spending to pay for making the Bush era tax cuts permanent.

He made a Faustian bargain. He would champion the permanent extension of the tax cuts except for a tiny number of rich Americans, and he would silently plan for deep cuts in discretionary outlays as a share of GDP to compensate for the lack of adequate budget revenues in later years. In effect, he would allow rising outlays on mandatory programmes such as Medicaid and Social Security and debt servicing to crowd out public investments that are vital for America’s long-term economic future. And indeed, on January 1, Mr Obama and Congress agreed to make the Bush-era tax cuts permanent for 99 per cent of American households.

Mr Obama probably hoped that when the moment of truth arrived, when the spending cuts started to bite, the American people would support higher taxes rather than the spending cuts long called for in his own budget proposals. And perhaps they will still do so. Yet he has never presented an alternative with more robust tax revenues in order to fund a higher sustained level of public investments and services.

8. Go on. Push the button - This is a fun twist on a flash mob. Although I suspect it was sorta scary if you weren't in on the joke/viral marketing PR.

9. Landbanking - Leith van Onselen wrote this piece a while ago at Macrobusiness.com.au on the mechanics of land-banking and why urban limits make it worse. It's all very topical now. 

Where land-use regulations restrict the amount of developable land available – such as through urban growth boundaries, restrictive zoning, or inadequate infrastructure provision – they also encourage developers to land bank not only to ensure their own continuity of supply (production), but also to make it harder for rival developers to find suitable land. In the process, rival developers can be driven out of business, reducing the overall level of competition in the development market. This is a particular problem for smaller firms lacking the capital necessary to buy-up land ahead of time.

Another consequence of land banking is that it is likely to result in greater levels of pro-cyclicality and facilitate boom/bust price cycles. During periods of strong land/house price growth, the costs of land banking are relatively low because the rate of price appreciation typically exceeds holding costs. However, when land/house prices are stable/falling, land holding costs exceed the level of capital appreciation, resulting in negative returns from land banking.

10. Totally Clarke and Dawe  on the use of stimulants by the Australian swimming team. There was a storm in a teacup.

(Updated with cartoons)