By Bernard Hickey
Watching the last week's debate over Chinese buyers of Auckland property was like watching a bomb go off inside the politics of our economy.
We all knew this issue was ready to go off and we all hoped it would be a controlled explosion where it was debated with good data and an exchange of considered views that built a measured policy.
Instead, Labour lit the fuse on a jury-rigged device and threw it into a shopping mall of opinions with sadly predictable results. Firstly, the thrower lost a few fingers as party members resigned and supporters understandably accused it of racial profiling and half-baked analysis. The wider damage to race relations and trade relations with China could be significant.
But it didn't have to be this way. The Government's refusal to either acknowledge the weight of non-resident capital flooding into Auckland or try to measure is at least partly to blame for the quality of the debate. It created a vacuum into which first anecdote and now information that is barely more than 'anecdata' has been sucked in.
The negligence and hypocrisy of the Government on the issue is barely believable. For years we have been asking for the Government to address the issue. It denied there was an issue, pointing to equally flawed anecdata from IRD in its defence suggesting just 2.5% of rental properties were owned by non-residents. It then attacked anyone who tried to collect their own data, including the BNZ's Tony Alexander. Yet it knew this was a major issue in overseas markets, including in Melbourne, Sydney, Singapore, Hong Kong, Vancouver and London. Governments there collected the data and have taken policy action in various forms to stem the tide of capital inflating values in their markets, including imposing buyer restrictions, stamp duties and tougher migration rules.
Anyone remotely aware of what has been going on inside parts of Auckland's housing market over the last three years will know something is going on, but until now has not been able to measure it. As flawed and as incomplete as Labour's data and analysis was, it was at least something to start a debate that was badly needed, even though the gusto with which it was thrown and the bag of nails it was wrapped in was not attractive and caused more damage than was necessary.
So now the debate has started, let's come up with some sensible policy options.
The first cab off the rank is the Australian-style restrictions that would force non-residents to buy either brand-new homes or apartments and town-houses off the plan, but not existing homes. It's certainly working to finance apartment building booms in Sydney and Melbourne with 25% of all new homes bought by non-residents in the last year, but widespread non-compliance by buyers of existing homes has forced the Government there to threaten big fines and jail sentences. It may have stemmed the flow somewhat, with Sydney house prices up 'only' 43% in the last three years. Auckland's prices have risen 54% over that time.
But such a nuanced ban may prove difficult to enforce alongside our various trade agreements. They specify that New Zealand has to treat all foreign investors the same, but our CER deal with Australia means Australians have to be allowed to invest freely, which would mean they were preferred over other non-residents. There is debate over this, but it wouldn't be easy.
Another simpler option already used in Singapore and Hong Kong is a stamp duty on non-resident buying of homes. This would apply to all non-residents, including Australians, and doesn't seem to cramp the free-trading style of Singapore and Hong Kong, who have massive trade and investment links with China. Beijing-based macroeconomic adviser Rodney Jones suggested a 20% stamp duty this week, although keeping it in line with the 15% rates used in Hong Kong and Singapore would seem sensible. Treasury made clear in its (albeit heavily redacted) advice to the Government before the Budget that taxation measures covering non-residents were exempted under Free Trade Agreements.
Another way to stem the external and internal tides of capital pushing up prices in Auckland is an 'Auckland Investor Levy', as proposed by Treasury in its frenzy of policy suggestions just before the Budget. It would see a 1% levy imposed on the capital values of rental properties, which would be worth NZ$1.25 billion a year at QV's current valuation of Auckland rental properties of NZ$125 billion. It would also be colour blind.
Treasury suggested it could be collected by Auckland Council, who could retain some of the tax and invest it directly in the infrastructure needed for new housing, including roads, rail, water and public transport. That would at least stun two birds with one stone. Such a tax would also seem an eminently sensible and fair way to suck some of the air out of the rampant demand pushing into a market that the Productivity Commission has estimated will be under-supplied to the tune of 60,000 houses by 2020.
An Auckland investor levy and/or a non-resident stamp duty are perfectly conventional policy options that no one could accuse of being racist or radical. Now that wasn't that hard was it? If only the Government had started collecting some real data three years ago this debate would have been much less painful
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A version of this article has also appeared in the Herald on Sunday. It is here with permission.
88 Comments
Bernard it has been debated sensibly.
No [more] foreign buyers.
Absolutely not from countries with out reciprocation.
Just because you don't agree with the findings doesn't make the conclusion or discuss "unsensible". Sensible is when all the available data and mechanisms have been explored (and not rejected under whatever prejudice). Perhaps in the future the local economy will be comparatively strong enough but it is not at the moment, and those spend are doing so from countries printing that money.
In rare agreement here.
Happens to be that NZ is a democracy. If New Zealanders in their majority do not want offshore buyers, then so be it. Buying NZ real estate is NOT a human right.
Bernard should suggest a referendum on the matter to evolve serious discussion. I wonder why he isnt.
>>> Bernard should suggest a referendum on the matter to evolve serious discussion.
Presumably nobody outside of Auckland really cares. Or they are not going to be in favor of anything that reduces demand nationwide. The issue only directly detrimentally affects non-home owners who aim to purchase in Auckland.
A Stamp Duty will not necessarily slow down non-NZers buying Auckland property and driving up prices. 15% = pocket change. The motivation is not conventional 'investment' - the aim is to get a stake in a free country.
Look at Sydney - still sky high prices despite limited controls.
that is the fundamemtal point DEMAND is too high in Auckland. Taxes wont don't in fact they will just become an add on and drive prices up even more. Like Mark Solomon said on the nation no one other than a NZ citizen has the rite to buy NZ land everyone else can buy the buildings plant etc for a period of time i.e 50 years, you would get rid of the offshore buyers overnight I would add one thing else to close a loophole if as a NZ citizen you have been found to be a prozy buyer for overseas owners you forfeit the land as is the law for drug dealers.
Stamp duty has worked better for Singapore than restricting foreigners to new builds has for Sydney, if I remember my Demographia median multiple facts correctly. Does anyone have the time or inclination to investigate this? To add some facts not prejudice to the debate?
This should provide an indication - as I think both Singapore and Aus had introduced their different initiatives to curb foreign purchasing prior to the time of this survey?
Thanks Kate, I had to rush to work, so didn't have time to properly do the research.
Anyway from your link median property prices to median income ratios are the following
Sydney 9.8
Melbourne 8.7
Auckland 8.2
Singapore 5.0
So it would seem that whatever Singapore is doing we should be closely examining.
Readers should also note Vancouver has a ratio of 10.6 and they are writing about their inability to confront Chinese foreign investment.
http://www.factsandopinions.com/galleries/opinion-columns/jonathan-mant…
interesting article mirrors one from the SMH, it makes me more worried about china correcting, they
have over 200 trillion of debt, they are slowing and fudging the figures to hide it.
last week their government spent 200 billion trying to stop their share market collapsing (which it still will)they are Greece but 100 times worse so when it goes it wont be pop but BANG
then watch the money spent here disappear most likely to USD
unlike Greece they have active industry and commodities to sell, including a bunch of offshore owned assets their government could buy (or seize) and sell off to cover any offshore debts.
Greece managed to crash it's "engine*" in favour of government services.
* industry, exports, internal private sector
and what change of pace is this? China, EU look to be still slow or will slow more, hence lowering the OCR to compensate for that makes sense. The USA might raise rates from an incredibly low number by not much. Wonder if they do whether we'll see the same impact on the USA as Sweden and NZ before them, a tanked economy.
Bernard, oh so coy about seeming "racist" when Kiwis are simply debating how to safeguard their children's future in the face of clear and present financial pressure exerted by people no New Zealand government is answerable to. Big deal. Dont worry too much about your sensitive Chinese darlings. If you knew a fair number of them, you would also know that more often than not they are a patriotic bunch who only scoff at people who do not take care of their own.
On the other hand, dear Bernard, you have been dishing out crude racial vilification against Germans on matters you obviously do not understand on these very pages, cheaply hiding behind one berserker Krugman to top it off.
No credibilty in your arguments. Just hypocrisy. 15%, 1%, whatever. Wont change anything, and that is why you are flogging it.
We needn't be concerned with an adverse reaction from China to any of the restrictions/taxes suggested; they do it themselves to their own citizens and within their own borders. They have a 20% tax plus additional restrictions such as health and schooling that apply to Chinese from other parts of the country:
"A national rule stipulates that to buy property, you must have lived on the mainland for one year, you can only own one property, and you must live in it. Renting it out is banned.
Foreigners are also subject to city-jurisdiction rules. In Shanghai, you must produce tax receipts to show residence for 12 of the past 24 months.
"Unmarried non-locals are prohibited from buying a home [in Shanghai]," says Dillon.
In Beijing, you must have paid social security and taxes for five years before you can buy a home.
In addition to restrictions on foreigners, there are also restrictions on locals, limiting the number of properties they can own, requiring bigger down payments for second homes than the usual 30 per cent, and setting higher interest rates for mortgages. People from Macau, Taiwan and Hong Kong are not considered foreigners for this purpose." http://www.scmp.com/business/money/markets-investing/article/1225513/ne…
This was implemented to put a brake on a rampant market but could be (and are) removed when there is a slow down.
What stage of denial are National at now? Just deal with it FFS.
Any monetary tax/disincentive won't work with overseas buyers who don't worry about the cost of investing, but are looking for a safe haven for their well/ill gotten wealth.
The best option would be to ask Aucklanders by a referendum on what is the level of non-resident investment in housing stock they are willing to accept. Could be similar to the Proposition Initiative in the US.
Or for the central government to fix such a limit, reviewable every three years.
Of course, such investment could also be taxed to some extent to generate revenue for the government.
Reckon you're right on the button to mention why it is that Chinese people are looking to exit China. In many ways they are just as much refugees as the boat people who are imprisoned on Nauru Island trying to get into Aussie, the boat people drowning in the Mediterranean trying to escape their own countries. The big difference, of course, is that Chinese refugees are cashed up, so the door is wide open for them.
The real issue is, how can the world absorb the numbers of people looking to exit their country of origin in pursuit of a better life, perfectly understandable really, but it will not solve a thing unless systems change in the countries these people are seeking to exit, including China
The issue is the number of people leaving their country of origin in pursuit of a better life
they seek a place with a social welfare system, one which is more civil, less populated and less polluted than where they come from.
and in doing so
our society becomes more like where they are from at an alarmingly rapid pace
Yep, this is the 3rd time I've used it (here) - given you full attribution first 2 times - needs to be used - probably one of the best I've seen - hope you don't mind - only got 2 thumbs-up on each of the previous 2
For plagiarism, you should see what "crowd pleaser" did to me over on NBR today
http://www.nbr.co.nz/article/smith-promises-fix-overheated-auckland-mar…
Comment number 4 - one hour later
Then see my "dark art of deception" down-thread of here at 13:12 pm
http://www.interest.co.nz/opinion/76547/bernard-hickey-argues-15-stamp-…
All good - absolutely no need for attribution - just a bit 'hard' to read it again given it was rather poignant (even if I do say so myself). Sometimes I depress even me. I wish we (meaning the collective 'we' as a human race) could find a happy place for everyone on the planet.
"Seriously Smith is trying to treat us like idiots. Surely only the most one-eyed of Nat supporter wants to be treated like this?"
Just step back and wonder how many one man bands and SMEs have rentals as tax "losses"? So a tax advantageous pension scheme aiming to make a tax free capital gain on retirement? I guess only accountants will have a clear idea but I suspect there are a hell of a lot of 'one eyed" voters out there. I would assume the IRD if it has a modern tax system could be data mined for that, but I wouldnt think National (or Labour swing voters decide the election so its a vote loser to go digging) would want to look.
"The real issue is, how can the world absorb the numbers of people looking to exit their country of origin in pursuit of a better life ..."
The obvious answer is that it cannot absorb them. And why should it? There are more than enough problems in NZ as is, look at the government's latest poverty report. There are tens of thousands of children in NZ who are malnourished and under-housed in damp huts that make them sick. And there are more than enough old people who live in precarious circumstances. Conditions in nursing homes are often tantamount to human rights violations.
And we are seriously discussing the welfare of corrupt Chinese Communist party fat cats who are scared to be caught by the Chinese justice system? Kidding. Not everyone who calls themselves "refugee" is one, whether from China or anywhere else. In any way, it is long overdue that we face realities and put behind our irrational pseudo-religious zeal falling to our knees for every group of people that has been elevated to victim status by the hypocritical loonie-left.
What bugs me about refugees is few of them are people that made any effort to fix problems in their own country. When things get tough they run somewhere better and expect others to follow. Many have trust issues because they themselves did nothing to help others back then so don't see that the culture here has only survived be people have _fought_ internally to keep it that way. Too keep the likes of modern-Key out of power, to make sure the OIO was actually doing it's job.
Chinese snap up sections
http://m.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11482300
This is the problem, Chinese migrants seem obsessed with not earning money in conventional ways (ie working) but instead making tax free capital gains on property.
Note that Chinese NZ residents pay less income tax than the general population.
The solutions to the crisis are:
1. Stop immigration - Auckland is full!
2. Introduce a foreign buyer stamp duty of 20% (which is what I first mentioned on this website about 6 years ago). But ban foreign investors totally from residential property in Auckland until the crisis is resolved.
3. Have a strict capital gains tax where property owned for more than 10 years was tax free but it was graduated from say 30% if owned for under one year reducing down by 3% for each year of ownership.
4. Have strict anti-laundering rules where cash used to buy property must be proved to be "clean". I am going to speculate that given the large number of Chinese businesses in Auckland and the relatively high Chinese wealth, that since they pay less than the general population income tax, there must be a fairly hefty amount of tax evasion going on. I wonder how much of this ends up being laundered in property transactions??
On the foreign buyer stamp duty - I'd set the percentage of purchase price of that duty based on an easily revisable and meaningful metric.
Two examples are: use the median multiple of affordability metric and change the duty at whatever percentage above that affordability measure paid. Or, calculate and charge it at the average or median of an Auckland urban property vs that of a rest-of-the-country average or median. Hence if Auckland is 50% above the rest-of-the-country median - then the stamp duty is 50% of the purchase price.
The latter example you could apply to all foreign purchases in all our markets - which means likely no stamp duty for urban properties in our struggling towns/cities.
it would slow the over bidding - but does it slow the bidders.
There is argument that the auction market is what sets the true price for the market (even that the true price is actually sale + buyers key)
Also it risks being seen as punitive aimed specifically at gaining cash profit from foreign investors, something is generally considered inappropriate even illegal at international law levels. ie you can punish people for breaking rules but it's a human rights violation for charging them extra for being a foreigner.
Obsession
Listening to a Sydney financier being interviewed last week about the Greek turmoil and he turned to property and chinese buyers and he made an interesting observation about their insatiable gambling instinct and the way they herd togerther like iron filings - if there's a $ in it
When the property boom gathered pace in China they went gangbusters buying as much as they could, then it quietened down and they went gangbusters travelling downunder buying cans of baby formula, then that lost its effervescence, then they went for bit-coin and it tripled in a week, then that lost it lustre, and the next thing they went for is the Shanghai bourse, now that's dying, wonder what they'll go after next
One thing for sure, Baby Formula is no longer the gold-du-jour
that's something we don't understand but is normal to the Chinese
they look at it as if I get in first I will make money as there will be a huge wave of people behind me, and our market is so small the numbers coming in distorts it. there is also a history of non declaring so for our authorities to not know the scale or to catch people is not surprising
Stamp Duty in NZ only applied to financial instruments such as cheques and other financial instruments. It was chicken feed that produced very little revenue. Don't think it applied to big-ticket items such as land transfers. I would be more inclined to believe it was scrapped due to lobbying by the banks, and the obsolescent use of cheques
I was in practice then. We paid stamp duty on house purchases. People hated it. As I said like death duies it was abolished as costs of collection outweighed gains for the Crown. Non residents will use residents to buy houses. They are not fixated on having property in their name like us.
But the proposal is that it such a duty only applies to foreign (non-resident NZer) purchases. Might actually pay to make that non-permanent residents and non-citizens - meaning one must produce a passport on purchase. That way finding a proxy becomes more difficult.
Stamp duty on houses was abolished around 1986. It was 1.5%.
http://www.stuff.co.nz/business/money/68788282/NZ-hands-tied-on-foreign…
Correct me if I am wrong, but stamp duties on commercial property lasted until the late 90s didn't they? (Olly should know).
In regards the FTAs, we can't be stuck with stupid FTAs that sign away sovereignty. Do FTAs help any of us? We have no manufacturing left in NZ and primary products have global prices anyway.
Do they bring us any benefit at all??
The dark art of deception
Nick Smith says only 1.2% of NZ's housing stock is owned by foreigners
Last year, Mr Smith estimated 1% to 2%
He said, what we do know is that there are 25,000, non-residents claiming either deductions for renting a house or declaring income from renting houses, so that's about 1.2% of the total housing stock
Here is the tricky bit
The 25,000 is a national figure, but in all likelihood are predominantly located in Auckland
The 1% is also calculated as a national figure. If you accept instead that the entire 25,000 are in fact located in Auckland, that figure then moves up to 7%
The numbers are supplied by the IRD and represent only houses that are acknowledged as being rented out, in other words rental housing only. That assumes all foreign-owners are honest, are tax-compliant, have IRD numbers, and file Tax returns, and play by the rules. Then there are the houses that are held empty. What proportion of the 32,000 empty Auckland houses are held by foreign owners is anybody's guess
Sufficient to say Nick smith is being deliberately deceptive - again
All contained here
http://www.nbr.co.nz/article/smith-promises-fix-overheated-auckland-mar…
What he doesn't say is what proportion of those 25,000 pay tax, and what proportion are negatively geared and get a tax-credit
All true - I have thought about that at length - it's a workable proposition, if as a kiwi, you rent out your house in Auckland and offset that income against any outgoing rent you may pay in renting in Australia - that works until you realise that the rent received in NZ is taxable while the outgoing rent in Aus is non-tax-deductible - then it all becomes problematic - unless you belong to the white shoe brigade - but then why would you be shifting to Aus? or wherever
And of course many of these possible purchases are for housing your child while studying here - in which case you don't charge rent or register to pay tax with IRD - but you do take the capital gain without tax out of the country when your child completes their education and you no longer need the local accommodation.
Way to solve this dilemma faced by these parents is to mandate that all tertiary institutes must have a number of beds in student accommodation no less than whatever their rolls of first and second year enrollments are - and similarly mandate that these first and second year students must live in university accommodation. After tha, such students should be allowed to rent privately.
how many overseas property investors are positive geared and not registered with the IRD instead using the income to just pay down any loan. How would IRD find them?
how is it that we even allow this to happen
what I am disappointed is our journalists not asking the right questions
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11478720
Not only do we need a stamp duty but it has to be higher than the others to make NZ more unattractive, so 20% is in fact a good number.
Buyers who have already bought here should be hit if they try to change in part any ownership in a transfer to another owner .
The option to prevent any buying is still preferable and seizure of the asset if proxy is used should be mandatory and be imposed.
The intention should be to rid us of all non-resident ownership within say 5 years either by sale or by the owner qualifying and electing to become a citizen.
Possibly not high enough - and any way, it is still an arbitrary number. Better to think that through using some kind of metric which ensures that you address the problem you are trying to solve (affordability), in addition to collecting tax income from foreign investment!. See my above suggestions.
The suggestion of a 1% levy on investment properties guides us to the other elephant in the room which is the unequal position of owner occupiers competing for a home to live in. Another Treasury suggestion was apparently to make only part of interest deductible for tax purposes. Ultimately by imposing that change over maybe five years would lower property prices in a controlled way that makes values more affordable to both competing interests and suppresses non-resident activity.
Many people fail to grasp the true meaning of the word “austerity”. Austerity is not eight years of spending cuts, or even the social catastrophe inflicted on Greece. It means driving the wages and living standards in the west down for decades until they meet those of the middle class in China and India on the way up.....Millions of people are beginning to realise they have been sold a dream at odds with what reality can deliver. Their response is anger – and retreat towards national forms of capitalism that can only tear the world apart. Watching these emerge, from the pro-Grexit left factions in Syriza to the Front National and the isolationism of the American right has been like watching the nightmares we had during the Lehman Brothers crisis come true.
Taxing foreign investment isn't going to do more than raise revenue for the Government. The real issue is that we have lived beyond our means for so long that we will have to sell what we have to pay our national debts.That our creditors will be the ones doing the buying shouldn't surprise us, and trying to tax them from doing so, is futile.
http://www.theguardian.com/books/2015/jul/17/postcapitalism-end-of-capi…
"Taxing foreign investment isn't going to do more than raise revenue for the Government. The real issue is that we have lived beyond our means for so long that we will have to sell what we have to pay our national debts.That our creditors will be the ones doing the buying shouldn't surprise us, and trying to tax them from doing so, is futile."
Precisely bw. Our creditors now want a concrete stake in our economy. No longer are they prepared to accept investment by proxy, through the carry trade and financing of our credit demand to trade houses with one another. I think they question our ability to service our growing debts and want to buy assets which generate tangible financial returns.
"The cumulative effect of decades of current account deficits is $336 billion of foreign claims on the New Zealand economy, or $150 billion net of New Zealand assets abroad.
The $150 billion of net liabilities is equivalent to 65.3 per cent of GDP. It is the lowest, measured against the size of the economy, that measure has been for 13 years."
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=113…
I would argue it should be measure external debt relative to our exports which is all that can service our external accounts. A larger economy - more prisons, leaky homes, rest homes is not going to cut it.
While net is one measure of our indebtedness - remember we have to roll over our gross figure which is where the real risk lies.
Our external debts / assets are also driven by exchange rates. Whilst the crown debts are all in NZ $'s to our credit the same can not be said of all our foreign obligations where we could well have substantial downside from a lower NZ $.
New export figures with current and maybe worse dairy prices is going to be a shocker. Low oil prices and interest rates are are all that is saving us today from a current account meltdown.
I see a pretty a dark road ahead notaneconomist. Its not a matter of East vs West, but one of globe spanning bureaucratic elites who have been constructing an institutional matrix of the most hideous fusion of Big Business and State. Its what the Marxists call State Capitalism or the Catholic distributist C.K Chesterton in the 1930s called "Business Government", a governance regime where all public activities are subordinated to commercial imperatives. For these soulless, passionless automatons trade and exchange are everything. Everything must be commodified and monetised, imagination, art, nature ("ecosystem services") and even personal relationships (social media). They're even exploiting some of the most vulnerable people in our society, such as those who suffer mental illness through investment vehicles such as "social impact bonds".
Off topic but many thanks for posting the Guardian article BW, most thought provoking and well worth a follow up on Interest.co. IMHO
What are the implications of the new economy and how will the status quo corporations react? Big business appears to have written the TPPA to protect their interests against this new people power with massive extensions to patent and copyright law for example. This is the start of the coming war: big business out to kneecap a sharing/free/small/independant/fast moving/freedom based new world. I wonder which side "our" current representatives are on? http://www.theguardian.com/books/2015/jul/17/postcapitalism-end-of-capi…
National are unlikely to add any change to their new requirement of the tax number, bank account, and capital gains tax within 2 years. They desire foreign purchasing of houses, land, property, farms & businsses.
This is in line with their new corporate/global philosophy which shrugs off traditional 'national' building/ownership of businesses and citizen-based ownership - that's so old world and parochial. Easier to just find buyers for everything.
The banks sure don't want all the foreign buyers drying up. Their assets will devalue.
Why stop at Auckland. - lets market all our houses in provincial cities as well ....
Why stop foreign buyers:
http://www.stuff.co.nz/the-press/opinion/70200118/mike-yardley-housing-…
Guangzhou-based landlord
What happens in 20 years time when 50% of rentals are owned by offshore investors only interested in capital gains who leave the houses to deteriorate and leave half the (by then) 60% of Aucklanders who rent, living in sh#t hole rentals that have had no money spent on them since they were last renovated by the former owner occuppiers in 2005 (ie 30 years earlier).
really? and "investors only interested in capital gains who leave the houses to deteriorate and leave half the (by then) 60% of Aucklanders who rent, living in sh#t hole rentals that have had no money spent on them since they were last renovated by the former owner occuppiers in 2005"
NZ "investors" differ how? you could tar many NZers with the same brush from what I can see. ie Buy it rent it out until it needs work, flick it on and buy something(s) else.
Too much liquidity pushed into a small country by a financial superpower is a form of financial terrorism, that is destroying the NZ economy ( not unlike what the Germans have done to Greece). And our great government has encouraged it ( selling us out for beads and blankets). I wonder if at some point in the future our government will be held to account in criminal courts for some of the things they are doing.
We need more information about these Free Trade Agreements
On one hand you echo Nick Smith that
various trade agreements specify that New Zealand has to treat all foreign investors the same
Here is a list of NZ Free Trade Agreements
https://en.wikipedia.org/wiki/New_Zealand_free_trade_agreements
That includes
Australia - 1983
Singapore 2001
China - 2008
Hong Kong - 2011
NZ does not have FTA's with India, UK, USA, Canada, or EU countries
Yet, on the other hand
in 2014 Hong Kong and Singapore both introduced a Sales Tax Stamp Duty of 15% on purchase of properties by Foreign buyers, and
in 2011 China banned non-residents from buying property in its 2 largest cities
Did New Zealand object?
Based on that NZ could
(a) impose a 20% stamp duty on those it doesn't have FTA's, and
(b) ban all investors and migrants, (including China, Hong Kong, Singapore) from buying in Auckland
Does the FTA with China define "foreign investment", what was the intent, was it aimed at investment in, and encouraging businesses, or was it open, allowing purchase of property (exclusively) to be considered an acceptable form of investment?
Last week the People's Bank of China (Reserve Bank) introduced a foreign investor register.
Overseas institutions should be long-term investors and conduct business in China based on the need to preserve and increase the value of assets," said the PBOC, saying speculators aren't welcome and we want to keep an eye on what you are doing with your money.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=114…
Why only 1% annual tax on the CV. Why not just deem that all properties earn say 7% per year and tax them at the highest marginal tax rate (33%) IE a bit over 2% of the CV per year. If they end up in a situation where the investors have to pay tax on their rental income then the two taxes can be rebated against each other (on a ring fenced basis only) All Property investors should be charged this, not just foreigners. Is this that different from FBT addressing a loop hole that we all know existed. If rental properties are not earning at least 7% then we should be steering investors in the direction of investments that do and are make a far more meaningful contribution to the economy.
But we cant stop there because we are still not addressing the milking of inflation by investors borrowing a large part of the equity and letting inflation paying it off. To address this as one of the working groups on taxation recommended, we should remove the tax deductibility of the inflation proportion of interest on borrowings and correspondingly make the inflation proportion of interest earned tax deductible.
Nett effect of all this would
-Increase the incentive to save and provide a larger pool of NZ sourced capital
-Decrease the incentive to borrow just to milk inflation
- Direct capital to more productive investments.
15% won't make any difference. Given the offshore engineroom for the Auckland problem.
NZ has no responsibility to cater for offshore generated demand.
What would make a difference is that only citizens, not including residents, can be buyers.
Time we got proud of our country and who we are.
I was born in the USA, but am now a NZ citizen. I am absolutely opposed to any USA Americans buying property in NZ if they are not NZ resident or citizens. How is it good for Chinese born Kiwi citizens/residents to have outsiders, (from anywhere) buying up our housing stock? The only people benefiting from this are aliens (non Kiwi citizens, non kiwi residents, from all over the World). All NZ citizens/permanent residents, no matter where we were born (here or somewhere else), must stand together on this issue. The issue is so simple and affects all of us detrimentally.
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