Evidence does not support the idea that migrant demand is pushing up house prices. The real reason is strangled supply

But "strangled supply" is a consequence of ?......Peasants who may have sold and bought to move location, take one look at ending up on the wrong end of the deals and stay put. That is a consequence of a rapidly rising property bubble.

The faster that bubble expands...the less likely peasants will sell...they expect prices to go higher.

And with the credit creation companies in command of the economy and determined to profit from a law which protects the credit they lend and promises to bail them out with money stolen from savers if they go under....it stands to reason that the property bubble will get larger.

One million dollars for the average box of Rhubarb and cement board, is but a few short years away.

How about 'the only game in town'. Everyone has been waiting to 'get rich' again, and it becomes a self-fulfilling prophesy. Till it doesn't.

Same with the Kiwisaver outfits on the other thread. They're doing 'well' because the lemmings are driving up the Dow - same nonsense. This all has to end very badly

Credit creation companies are at the root of NZ private debt issue as we compete against wealthier migrants.

Is NZ going to get wealthier sending interest payments overseas?

Auckland Council and Government continued to constrain housing supply and affordability to the detriment of our future economy.

Is there an element of distortion here? This article is talking about migration, not overseas investors. The graphs do suggest some correlation but not all of it. Can anyone answer what the total amount of property is across the country that has a registered owner not living in NZ?

A Fallacious analysis.

The argument implies there is a one-for-one, like-for-like relationship between arrivals and departures

1. Inbound arrivals

One graph shows where they are coming from

No graph showing where they are going to

2. Outbound departures

No graph showing where they are departing from

3. Home creation units

No information how many home-creation units arrived and how many departed

Using a definition of a nuclear family of 2 adults and 2 children, and a net inflow of 6000 persons for the year, that is a net additional demand of 1500 new houses (homes) for the year over the whole of new zealand.

Now, how many new houses and apartments were built in the last 12 months. And don't go getting tricky about where they were located.

Banner Headline - Strangled Supply

Really? Are you really sure about that?

Last month you reported greatest number of sales since 2007, indicating a ready supply off willing sellers willing to meet the market. Unless of course it was the same house sold 7000 times in the same month. What is the oustanding inventory of unsold houses?

Yet another half-baked headline.

Has anyone suggested that legitimate migrants are the cause?

Probably yes, in so far as they add to the supply side problem but no more than internal shifts and the fact that many (most?) Asian migrants end up just a few km from Auckland Airport.

Non-resident investors? Yes

Local investors 'stealing" the properties from prospective owner-occupiers because they have more cash clout. Also some of them are cashed up Asians who can and do invest in housing because it does not require much if any English to operate as an income source.

So again we get half a story with the usual lack of key information.

When people put the blame on "strangled supply" for rising hosue prices it always puts a smile on my face.  The evidence does not support that strangled supply is pushing up house prices!

The median rent for a 3 bedroom house in Auckland is $518 per week (being the average amount for the last three months which is appropriate given the volatility of the dataseries), whereas one year ago it was 508.  That represents only a 2% increase in rent - approximately in line with inflation. 

You can only pin rising house prices on a lack of supply when you've got both components of the aggregate housing supply rising - rented and owned houses.  Like in Christchurch where you've got rising house prices and rents.

The fact that house prices are rising 15% but rents only rising 2% suggests something else at play which we all know started out as low interest rate high lending environment which has now turned into self reinforcing bubble prompting people to panic and buy in fear of even higher house prices in the future.

What other evidence is there?  The of dwellings to population ratio in Auckland is far better than other cities/countries yet we still have higher relative house prices.  There is evidence galore to suggest the availability of land and houses doesn't put upword pressure on prices.  It does set a bit of a floor on how far they can fall but it doesnt make them go higher.

Are all the stories  from elsewhere about Chinese looking for bolt holes with their semi-laundered cash just so much fairy dust? Would we escape the contagion with our light handed approach that believes everything.

Truth is no one has any idea.. and stop headlining "rich chinese", it's everyone.. red, blue, green yellow, white etc..

David Chaston

This debate has been going on for a long time now.

Wondering why you have entered the debate with a one-dimensional article based on averages across new zealand and draw the conclusion it's not a demand problem but a strangled supply problem.

a couple of questions for you

In your research

How many auctions at B&T have you attended in the past 3 years? Have you ever contacted any auckland based home builders and land developers and obtained their views. Have you tried to obtain from the Departures and Arrivals statistics a demographic analysis. The information is gathered by customs. It must be available. Why not ask?

It is the absence of meaningful data, and the mis-use of the poor data that is available, that produces polarised debates.

Stunning! It is not even migrants we have been speaking out against. It is NON-RESIDENT foreign investors - back to the drawing board

What is David Chaston's plan for infrastructure financing.

One of the Savings Working Groups points was that waves of new migrants required new infrastructure immediatley and this has to come from the tax base of a low paid work force; the loosers are that low-paid workforce who do not reap the benefits of businesses investing in higher paying jobs.

I suppose David Chaston thinks he is smarter than the Savings Working Group.

So we gain and loose close to 90,000, ie 2% of our total poulation per year.  This seems high, compared with our birth rate of 1.3% and Death rate of 0.7%.  I wonder how that compares with other countries?  In a situation where we have a critical housing market supply failure, putting the brakes on immigration would certainly help with the shortage of houses assuming that our population outflow remains at about current levels. (if our loss decreases then our problem will get worse)   A net loss of say 40,000 people would equate to a supply of say 15-20,000 houses. very do-able, very quickly.

There is something a bit screwy about these figures that we are being given.  If we have no net gain through immigration, we are left with the demand for new house coming from only natural poulation increase, ie 0.5% per year or 22,500 people per year.  To house these people, we would need less than 10,000 house per year.  We are building houses at an historically low rate at about 15,000 dwellings per year and it apears that supply is falling behind demand.  It doesn't add up.  I would be very suspicious that we are not being told the whole story and there are a lot of people coming into the country illegally and not being counted.

Disappointing article. There is not one single reason for the housing crisis. David it is not so simplistic as being about one single factor such as 'strangled supply'. There are multiple supply and demand factors at play, including foreign buyers.

Some of it is us. Some of it isn't. Where supply is tight, it makes more of a difference.

If we broadly assume that if it was just NZ residents, then (very broadly) the value of the housing stock should be broadly proportionate to the amount of debt. If we graph it (and I did)

graph

(This is since 1990 so inflation has a fairly constant effect through the period, so I haven't adjusted the graph with any modelling for that)

From 1991 to 2002 NZ households seem to be broadly driving the value of housing stock.

From 2002 to 2007 something other than NZ households is pushing up the value of housing stock.

From 2007 to the start of 2012 it does not look like things other than NZ households are further pushing up the value of housing stock.

From 2012 to present looks like the start of another period where something is pushing up the value of NZ housing stock beyond the ability of it being explained by NZ household borrowing.

Listen to the Chatter

China's affluent skew Australian property data with big buys

by: James Glynn and Ross Kelly From: The Wall Street Journal July 05, 2013

$40 and $50 million waterfront properties - is that the end-game for Auckland?

In Australia, economists are paying increasing attention to another influence on the real estate market: Chinese immigration. Wealthy Chinese are now among the biggest buyers of real estate in Australia, spending tens of millions of dollars on properties ranging from waterfront mansions with views across Sydney Harbour to more modest homes in the suburbs.

Now, the influx of Chinese money is starting to skew Australia's real estate data, which is closely watched by policymakers including the nation's central bank.

Curbs on property speculation in China are forcing mainland Chinese investors to look internationally for assets, including in Australia

TheAustralian is paywalled - to read the full article post the URL into Google.News

http://www.theaustralian.com.au/business/wall-street-journal/chinas-affluent-skew-australian-property-data-with-big-buys/story-fnay3ubk-1226674959888

Yi Wei Lowndes #1 salesperson at Barfoots Royal Oak branch has an advert in todays NZ Herald Real Estate liftout claiming she has sold 34 properties in May and $52,000,000 worth of sales so far in 2013 within 32 different regions and suburbs. Would be a good person for interest.co.nz to interview David - maybe she can shed light on the number of sales to fly in fly out chinese buyers - on other hand with such a vested interest she may not want to say!

Yes, saw that Sunday program couple of weeks ago.

The NZ cogniescenti want you to believe it isn't happening in NZ

It's the size of it.

Following on from that and what makes it worth noting

Ordinarily this stuff gets less media coverage in AU than it does in NZ

When it does crop up it's because the impact of it is capturing the attention of the cogniescenti  

• The Wall Street Journal is sitting up and taking notice
• Wealthy Chinese now among the biggest buyers of real estate in Australia
• One of the biggest purchases this year, a Chinese buyer spent more than AUD $50 million for Altona, a home in the Sydney suburb of Point Piper
• Another Point Piper mansion sold to a Chinese buyer for more than AUD $30 million.
• Australian economists are now paying increasing attention to the Chinese immigration factor
• Policy makers including the nation's central bank RBA are taking notice.
• Economists at Citigroup Inc are retooling their computer model that churn out the bank's predictions for house prices
• Sydney-based Citigroup economist says the story of the rich Chinese businessman snapping up a A$40 million mansion in Point Piper is a trend that isn't likely to end anytime soon

What isnt explained is that even though there are restrictions on buying existing property in AU, foreign based nationals are paying $40 and $50 million for existing properties, so, if you have that sort of loot, restrictions are an obstacle that can be got around.

Read the full Wall Street Journal Article here

http://online.wsj.com/article/SB10001424127887324328204578568960003796852.html

What a shockingly bad article. Very poorly written and researched, and drawing completely irrelevant conclusions.

I can only hope none of our politicians read and accept such rubbish. Our collective children and grandchildren are struggling to get into their own homes (particularly in Auckland) because they are having to compete with a very large number of well-financed foreigners (whether residents or non-residents is immaterial). Many of those foreigners have access to cheap finance (probably courtesy of QE) and buy multiple properties.

NZ governments have failed to take their pastoral responsibilities seriously. They care more about the "market" than about the people they are elected to serve.

THE ANSWER IS SO SIMPLE : Ban the purchasing or holding of more than one residential investment property and only for resident +10 Yr Old NZ'ers.

That should take the pressure off. Our kids might even be able to afford to obtain their own.