Earlier this week Nigel Latta tackled the long-standing issue of the struggling New Zealand economy.
For decades the country has been focused on working harder and producing more stuff rather than working smarter and making better stuff.
We’ve been a big fan of Latta in the past, particularly his documentaries on sugar and inequality.
This latest documentary on the economy got a lot right, but when it came to the issue of poor investment he overlooked the elephant in the room; our obsession with housing. We need to invest in productive businesses, we simply can’t get rich by buying and selling houses off each other.
What Latta got right
The show covered all the right things. Latta was ably assisted by Shamubeel Eaqub who pointed out that our problems of inequality and poor economic performance are linked because we fail to sufficiently invest in our young people. Making sure all our kids grow up healthy and educated is an investment that benefits all society in the long run. The alternative is raising kids that fail to achieve their potential and end up as a burden on the state.
Latta was also correct in pointing out that our economy is anemic, suffering from a lack of investment. Hence we tend to focus on producing a greater quantity of commodities rather than adding value or producing more knowledge intensive goods.
This is a problem that successive governments have pondered and fiddled with, but like Latta none have been brave enough to face up to the elephant in the room. The fact is that we can’t invest in business because currently most of our money goes into housing.
Most of our money is in housing
More than half of our national wealth is tied up in housing, which is relatively high internationally. And of course this investment in housing has largely been funded by debt. As a result our privately held net foreign debt is also relatively high, which opens our economy to risks if international lenders decide they don’t want to lend their money to New Zealand any more.
All this money tied up in housing can’t be invested in productive businesses. Our businesses are starved of the capital they need to invest, innovate and ultimately make the expensive step into overseas markets. That is why so many of our promising businesses are bought out by foreign multinationals when they are ready to take on the world. It is quite simply a lot easier to expand when you have ready access to existing overseas networks for raising finance and distributing products.
Housing obsession has a good reason – tax breaks
Of course our obsession with investing in housing and land is not a recent phenomenon – it has been decades in the making and exists for a reason. In other words the obsession is rational, and exists because of the tax benefits afforded to the owners of housing and land. New Zealand has some of the lowest rates of taxation of property (and indeed wealth generally) in the world, which explains why we have so much of our wealth tied up in these assets compared to the others.
Dealing with the supply side as the Government is proposing will only solve half of our housing problem. By international standards our housing stock has been unaffordable for decades now; long before the current crisis in Queenstown and Auckland took hold. Housing is now a key driver of inequality. We simply have to quell the demand for housing as an investment, rather than shelter. Housing should be viewed as a key part of our nation’s infrastructure, rather than a get rich quick scheme.
A Capital Gains Tax won’t solve the problem – this policy is used widely overseas, and causes large distortions with limited effect on housing speculation. That is because capital gain is but one of the tax benefits of investing in housing and land; imputed rental and write offs are other drivers.
The Morgan Foundation has suggested a Comprehensive Capital Income Tax as a way of putting housing on a level playing field with other investments. That would ensure that businesses start getting a fair go when it comes to finance.
Geoff Simmons is an economist working at the Morgan Foundation. This article is here with permission and first appeared here.
81 Comments
“Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.” Friedman
A corollary might be: House price inflation is always a product of the credit that the banking system allows us to throw at it. If we can borrow more than the elasticity of supply of the market can bear, prices will inevitably get out of whack with underlying value.
The elasticity of the NZ housing market is very low (<0.7), credit should be regulated very carefully else the system will be inherently unstable.
Even with the new LVR limits to be introduced from October 1st, obtaining credit (particularly for "investors") is still far too easy relative to the low elasticity of supply of the housing market.
Excellent perspective.
However, can we argue a pure Chicago perspective with so much non monetary distortion in the market?
We also can't advocate a Friedman perspective and then propose further restrictive measures into a market (LVRs, "credit should be regulated very carefully"), can we?
My opinion of Friedman would be that he would advocate for a reduction in the market distortions as a primary mechanism and that would then flow through to a reduced demand for credit..
Ideally we would then converge (long term) to an equivalency point of zero inflation (effective taxation) and an economic indifference position between purchasing and life time renting.
Excellent perspective you say? Strange as you fail to even understand monetary inflation via credit and the huge relationship it has in regard to houseprice inflation!
Your opinion reads like complete economic gibberish we have come to know from the likes of the RBNZ!
I say excellent on the basis that it actually represents forethough and understanding. You could do a lot for yourself to emulate this commentator.
I have never failed to understand how inflation works. Nor how rampant it is in the housing market.
I have however always advocated that in the case of NZ/Auckland it is not a failing of the domestic monetary policy regime and associated management.
All I have advocated for is understanding the root cause of the issue and addressing that - something that all you other armchair commentators have no interest in, unless it involves bagging the RBNZ.
How you cannot see that the fundamental root issues do not lie with the RBNZ is just bewildering.
nymad.... since the mid 1980s' the compounded growth rate in M3 has been about 6%. Over that same time the compound growth rate of the value in total NZ housing stock has been about 6%.
I'd be curious to hear your view on this..... Is there a correlation..?? If so why...???
Does that mean House prices might be a better proxy of the effects of Monetary inflation than the CPI..??
essentially, what Friedman says is true... in my view... growth in money supply "underwrites" inflation...ie.. general rises in prices...
The problem is .... the effects of Money supply growth , in the economy, can manifest in manifold ways... continually changing as an economy evolves..
This takes us back to your assertion that the "Inflation targeting policy framework" ..is all hunky dory.., and working perfectly..
my view is that inflation targeting is myopic, and was a "snapshot" solution to the way things were back in the 1980s'.... before Globalization and other paradigm shifting influences...etc..
I still remember the Head of the Canadian Central bank, famously saying... " We didn't abandon the Monetary aggregates.... the Monetary aggregates abandoned us"..
Don't you find it kinda ironic...that while we have Stable and low CPI ... we are in an incredibly fragile financial environment..
You lay the Blame with Govt.... BUT.... the truth is that the unbelievable growth in the Global FIRE economy ( which is NOT productive), over the last 40yrs, has only been able to happen with the unfettered growth in Money Supply, .... which falls within the sphere of influence of Central Banks.... ie.. Central Banks have allowed it to happen..
At some point in the Future NZ will have its own version of the GFC.... What will u say then ...??? Will u still assert that the Inflation policy framework is hunky dory, and a great success.
Even -ve interest rates is a twisted , corrupt bastardization of all the economic first principles I hold true.
AND... It is the Central Banks that doing all this... in their great wisdom.!!
"Our businesses are starved of the capital they need to invest, innovate and ultimately make the expensive step into overseas markets."
This is debatable, and it would be useful to see some evidence to support the argument. Couldn't it also be the case that, with exceptions, our businesses are simply content not to invest, not to innovate and not to expand into overseas markets? I mean, compared to many other places in the world, the living is easy in NZ, so why not just grow the business only to a size that will afford you the bach, the boat and the time to play golf?
I tend to agree that working until some self-defined lifestyle or income limit is hit, then sitting back, is a definite factor. This is of course exacerbated by the business expansion barriers which tend to lock in the self-employed to a very small business size, beyond which the additional costs and overheads simply don't make the extra income worthwhile. This is a type of 'marginal tax rate' if tax is defined to include compliance, regulatory restrictions, administrative overheads and the like.
Truly, the road to serfdom is paved with Good Intentions......
In actual business you cannot make fast money as you can do in house speculation and also current government is enjoying the speculative environment that has been created by them.
Many people have left business and are now in tax free property business - take advantage of all the loopholes.
Key Will go for sure but the margins have to be humiliating as am sure will build up till the time of election as arrogance and ego have blinded them.
The story being told in 'Star Wars' is a classic one. Every few hundred years, the story is retold because we have a tendency to do the same things over and over again. Power corrupts, and when you're in charge, you start doing things that you think are right, but they're actually not. George Lucas
My partner and I are now onto our 5th small business since 2000. Why? I don't know, some sort of masochistic streak i suspect. We often lament that fork in the road in 2002 when we passed up on property investment and instead went into our 2nd small business. The returns we've seen pale in comparison to those who went into property, while the the risk, effort and enduring obligations (aka personal guarantees) double that negative affect.
So tell me again why other more sane minded people should follow suit?
It might look good in economic theory text books (which incidentally seem to be the same ones that led us towards the GFC - but that's another topic) , but i would suggest that there are many more structural issues than just take breaks that need to be addressed. Off the top of my head 1) bank funding requirements for small business including the value based pricing applied to their lending 2) the requirements for personal guarantees 3) tax - provisional tax is a crazy idea.
Incidentally there was no way we could have done that without leveraging up our property for capital which possibly supports your thesis.
This article makes a lot of sense. Ever since arriving in New Zealand 14 years ago I have looked for alternatives to housing for my personal investment portfolio. It has been difficult - the tremendous advantage that NZ investment property has over alternatives (local and international) looms over every investment decision that I make.
Over the last decade I've done the exact opposite - stayed away from housing because of all the disadvantages i.e. -
- risks from bad tenants,
- meth labs,
- having your money stuck for years,
- ongoing maintenance and wear and tear to the property.
- 3am call outs for a plumbing emergency
- eggs in one basket, so zero diversification in different types of investment, different industries and different geographic locations (breaking investment rule #1 - diversify).
consumer,
I arrived in NZ 13 years ago at 58 from Scotland having retired the previous year. I then set about building a portfolio of dividend paying shares. It now provides me with a significant proportion of my income. I also have one rental property and while it has given me no problems,I know that in terms of net income,I get a better return from my shares-no insurance,rates or maintenance costs.
Nigel Latta's series started really well, until his programme on New Zealand housing.
He falsely made out Auckland's problems applied to whole country, and either misrepresented or ignored the vast majority of housing in New Zealand.
His latest programme on the economy did very little except state the obvious. Shamubeel Eaqub "wisely" advised Fontera that they should be adding value to their products, as if it's something they haven't been doing as much as possible for years.
Similarly he stated the blatantly obvious like we should be adding value to logs by processing them into products, but totally failed to mention the reason we can't get these products into countries is because of huge tariffs on processed wood (up to 39%) that will remain unless the TPPA goes through.
The NZ Wood Council says the TPPA is a huge win for New Zealand companies exporting processed wood products.
They say that even more important than removing tariffs, the TPPA removes a lot of (non-tariff) technical trade barriers that are currently an even bigger impediment.
I agree that being a nation of landlords is counter productive. But disagree on the number of Elephants in the room... surely rapid population growth has a larger part to play in this housing drama? other than lax taxation? Or is it just me??. As an aside... our family used to live in the Elephant house at AK Zoo before the Council brought it so we have previous experience when it comes to counting Elephants in rooms.
Oh, and one more thing; Latta made the enormous claim that our standard of living is lower than in the 1960s. But didn't provide the tiniest slither of evidence to back that up.
And numerous studies show decade by decade our standard of living has got better and better.
I remember 1960's NZ. Very few people had boats, even fewer had swimming pools, lots of families didn't have a car and very few had 2 cars. Mums worked in the home. The wealth in society was shared more evenly. Marijuana was considered a hard drug. One TV channel. Heating your house meant wearing socks and a cardigan.
An average 1960's lifestyle would be considered borderline poverty now.
You can't really compare the norms of yesterday with today's. Much of what we didn't have in the 60s wasn't even a consideration, take swimming pools, who needed one of them when you had access to school pools (we had a key to ours and we just about lived in it in summer, unsupervised) and rivers. Kids whose parents had more and kids with parents who had less, all did it.
As kids we did not need our parents hovering over us 24/7 so we didn't need all that stuff at home. All we were required to do was be home before the street lights came on. There are a few places where something close to that lifestyle still exists.
More people did fine, thank you very much, based on the standard of the day than now, I reckon. I used to travel quite often through Te Teko and would often see kids, 2 or 3 sometimes, bareback on a horse. Boy, did I ever feel pangs of nostalgia seeing that. I hope the people there, even though by today's standard, quite poor, realise they do actually have something very precious.
My grandfather rode horseback to school for miles, everyday, and back again. I am sure it was hideous in winter in the rain in those awful woollen garments of the time but the hardiness instilled is totally missing in kids today.
It's the old "what the eye don't see, the heart don't miss". I don't recall ever bemoaning the fact we only ever had one car, the Humber 80 I remember best. I'm not all that sure that being just short of surgically attached to a digital device is that much of an advancement, tbh. It may be all cleaner and tidier, and easier to nip down to Maccas for a feed, but it also screams boring at times.
Mind you, we didn't have much other than the fireplace (usually open, your legs fiery red on the front of them, frozen solid on the back and bar heaters. I think our parents could afford to turn them on was key, as well.
Did you ever have scrim covered walls that looked like the spinnaker of a yacht when the right wind blew.
Nowadays two indicators of living in poverty are not having two good pairs of shoes and a good coat. Most of my things growing up were second hand hand-me downs, just like most of my friends in our middle class suburb.
One person in our street bought a brand new car, which was so rare it was notable.
The idea that we had a higher average standard of living in the 60s and 70s is farcical.
We were forced to get a prescription if you wanted margarine on your toast, and banned from driving our cars one day a week, and our care of the childbirth process meant 3% of all new babies didn't survive.
Childhood poverty indicators include
- second hand clothes.
- worn out clothes
- not having two pairs of shoes
(so having one pair of worn second hand shoes fails on three factors - seven factors are needed to be living in poverty)
- not having a good coat.
- delayed replacement of appliances
- eating meat at least every second day
- a holiday away from home for at least a week
- two children in the same bedroom
- having friends over for a meal
There would be plenty of kids having a great upbringing, who could technically be classed as living in poverty.
Almost everyone I knew growing up would have at least seven factors.
The elephant in the room isn't selling houses to each other. That's what we used to do.
We have left the 'each other' out and now sell them to foreign investors and (too many) immigrants.
We need to get the foreign money out of our property market so that the prices come back to what NZers can afford
We need to be selling our houses to each other in a closed market. Working class NZers shouldn't be competing on the world market to purchase a NZ home.
Yes this will crash prices, yes there will be pain.
Foreign investors is a red herring. Foreign investors can't buy existing Sydney houses, and their prices are higher than Auckland. They are not the main reason for large house price increases.
The difference is Kiwis can get a $1m mortgage for the interest it used to cost for a $500,000 mortgage.
According to the earlier Nigel Latta programme on immigration, foreign immigrants have been steady at 1% or 45,000 for many years - the numbers haven't changed.
The immigration difference is
a/ Kiwis coming home, and
b/ Kiwis not leaving.
Something you can't change, unless you deliberately destroy the economy.
If capital gains tax and banning foreign investment in existing houses has failed in Sydney, the it magically working here is highly unlikely.
Wrong, foreign investors have rorted Australia's rules, they have only recently begun to get serious about them, Vancouver may well demonstrate how foreign investors DO muck up the market for locals, as they have been doing here for some years. It is naive to think otherwise, naive or self serving.
Even more naive (and xenophobic) is to blame it all on foreigners, while ignoring the fact that Kiwis now pay LESS interest on a million dollar mortgage than they did previously on a half a million.
And also ignoring the dozens of other reason why house prices have gone up. You are picking on just one single issue, while ignoring by far the largest factor, and every other issue. Any housing view that simplistic, will always be wrong.
Xenophobic, my rear end, that hoary old chestnut does not wash anymore. It gets dragged out by people who for some strange reason or other are quite happy to have our houses, land and businesses all owned off these shores. While foreign buyers are almost certainly not the ONLY issue, it is most definitely the issue that could be dealt with most quickly for instant results. Why anyone would not want this to occur must demonstrate that they are prejudiced against their fellow country people and don't care that they have to go into massive amounts of debt to compete with them. Interest rates are a mere bagatelle in this as in order to take advantage of such rates you have to be in a position to buy in the first rate ie have enough deposit..
We would not be the first country in the world to become alarmed about this, but, by hell, we would be utter fools to be the last.
When you totally ignore the biggest reason for house price rises (interest rates), as well as totally ignoring 20 other reasons, and bang on repeatedly with the simplistic notion that it's all the fault of foreigners, what can it be except xenophobia.
For the same interest payments Kiwis can now afford to buy million dollar houses when previously they would only have been able to afford $500,000.
Your claim that this make no real difference, is nothing less than absurd.
Again, it is not ALL the fault of foreigners, however, dealing with that aspect of it is the ONE thing that can be done to have immediate effect, it is the one aspect the government steadfastly REFUSES to even properly count. I and many like me WILL keep it to the fore until something is done about it! Start with that then the rest can be worked through.
In 10 out of 10 posts, that's who you're blaming it on, while ignoring everything else.
For example the average new house costing $60,000 more to build today, than it did just one year ago.
Or the brain drain having been reversed.
I actually agree that it is something that could be tightened up. I'm just not under the delusion that it will make any great difference.
Yes, it IS the one I focus on, mainly, no apologies, because the government is ignoring it, but there most definitely other stuff as well if you cared to look, you would definitely not like those either.
Explain this http://www.stuff.co.nz/business/84800878/real-estate-listings-gets-chin… and how Stuff business page like hougarden.com
You can twist and pick and choose what I and many others think all you like, but it will not make the truth go away.
Your paranoia does not gel with reality.
LINZ information for the last quarter (60,000 house sales) in NZ shows just 3% were sold to tax residents outside New Zealand.
Which is the same percentage that were sold BY tax residents outside of NZ.
So your claim that more and more foreigners are owning our houses, does not gel with the LINZ sales figures that show that of 60,000 sales, effectively ZERO additional houses were going into foreign ownership.
I've been waiting for you to tell me you'd been drinking that Kool Aid. You do understand that those figures do not include people here on work/student visas or trusts, don't you? There is about 30% of purchases in those figures that are are not definitive and the aforementioned are in there somewhere. Australia and Vancouver INCLUDE those numbers and they reveal something entirely different. Phil Twyford thinks foreign buyers could be about 12-15% but that still leaves a whole big part of that 30% unaccounted for, and it still could be more. 12-15% in today's market is VERY significant.
Remember LINZ said themselves those figures could not be taken as the real number of foreign purchasers.
If people work or study and live in New Zealand, there's no problem with them buying a house.
Either they have to buy a house, or someone else had to buy it and rent it to them.
And you're still looking only at one side of the ledger and ignoring sellers. (and still ignoring the elephant - interest rates)
Do you have trouble reading?
If they are living in New Zealand, it makes no difference to our housing supply if they rent or buy.
If I live in Australia, I can buy a house.
If I live in UK, I can buy a house.
If I live in USA, I can buy a house.
If I live in Spain I can buy a house.
If I live in France I can buy a house
I can even buy a house if I live in Russia.
Or China.
No one is saying they cant buy what we are saying is foreign buyers will have to pay 15% for the privlidge.
Foreigners Buying existing properties does nothing to improve housing affordability
What we have is conditions where they can buy with zero purchase tax and what has this lead to
-1m average in auckland
-250bn approx house hold debt growing 8.8% a year
- 10 to 1 price to income ratio in Auckland
- house prices up 500k under Key
It hasnt worked so time for change
Also new supply is tax exempt. We need to encourahe buyer students and temp workers to buy new builds not existing properties.
In Australia you can live & buy a house and you will be paying stamp duty as a foreign buyer for the privlidge.
In Vancouver you can live & buy a house and you will be paying stamp duty as a foreign buyer for the privlidge.
In Singapore you can live & buy a house and you will be paying stamp duty as a foreign buyer for the privlidge.
In Hong Kong you can live & buy a house and you will be paying stamp duty as a foreign buyer for the privlidge.
They are buying more than one house and frankly, they can get in line to rent behind the kiwis needing housing. Sorry, but these figures ARE used in other countries, so they should be here. And if they were only one house it might be tolerable, however evidence suggests it isn't.
And as for interest rates, I am damned sure my first thought on seeing interest rates lowered would be "Oh goody, now I can go pay twice as much for a house" Interest rates are tracking down, in tiny increments, house prices are leaping ahead and in Auckland earning more per annum than most people earn. I don't think so, nice try, but I don't think so. First home buyers cannot possibly hope to save fast enough to keep up with it all.
Next week, I will try to get onto the business of rapacious investors and the structure of our tenancy laws, I haven't had much chance to go down that track for a while.
If they are buying all these multiple houses perhaps you should give your "evidence" to LINZ (if it's not imaginary).
House price rises in Auckland are caused by a myriad of issues. Continually blaming it on one thing is simplistic nonsense.
And continually dismissing interest rates so low you can now borrow $1m for less interest than it used to cost for $500g, is willfully stupid.
Even I have to call it a night at some stage.
It is difficult to obtain hard information, the government is DELIBERATELY not seeking it, if they knew it was not an issue they would be happy to disclose EVERYTHING. I have heaps and heaps of anecdotal evidence, the best of it straight out of the mouths of clients and friends mostly. My work sees me in people's houses. I have three immediate contacts that rent ALL from foreigners not living here, they represent the MAJORITY of people I know who rent. From one of their homes I could pick up a stone, throw it and hit 2 houses owned by foreigners not living here, and I can't throw to save myself any more. I have had 3 clients sell their houses (and I do not deal with more than about 12-15 at any one time and the relationship with them is ongoing, so I am dealing with the same properties nearly all the time, some of them for more than 2 years. Of those properties that have sold, 2 of them were sold to foreigners. I currently have one client with their house on the market now, will be interesting to see who buys it. It will almost certainly be an investor.
I have close enough contact with real estate to be aware of evidence of foreign buying of multiple properties. I do not live in Auckland.
For my own satisfaction, I actually don't really care about yours to be honest, I have heard and seen enough evidence to convince me of what is going on. I cannot access formal documentation, but that does not preclude me, along with many, from figuring out what is going on.
You are never going to consider this as a truth, so it is pointless carrying on with this.
In this order are my list of to do's for the housing market
1. Deal with foreigners, as it is the ONE thing that would have results today as per Key's slip of the tongue. The reason I put that article up was to demonstrate the likelihood that Key knows full well the effect they are having on the market, but you had to go and make some remark about me trying use it as proof of multiple ownerships. That was when I had had a gutsful last night.
2. Deal with the nimbys in Auckland so the place can densify. How stupid can it be to allow large leafy lawns in inner suburbs while people are pushed out to outer limits onto 300sqm sections. The reverse is usually the norm.
3. Make sure there is plenty of land that does not have onerous covenants on it. This will have to come from govt level as the private market will never be able to do this.
4. Smash landbankers. I would exclude people who have owned particular properties for a long time and are subject to the city coming to them, but buying and landbanking is just short of evil in today's climate.
5. Massive state house building, as things have gone we have people who will need some form of controlled rentals for the rest of their lives.
6. Rewrite tenancy laws to better reflect that many, many people will have to rent for life.
7. Introduce laws to make investing in residential property less attractive and have people investing in proper businesses. The current situation is parasitic.
I bet you don't like any of that, I don't care
Oh for crying out loud, you sound exactly like Tired Immigrant. I AM but one person, but to think that you would believe that my experience is unique is outright laughable. I am leaving it at that, you stay with what you think, I will stay with what I think. Goodbye.
You're the one who claimed to have evidence of mass buying by foreigners but failed to come up with any more than the 5 of 2,000,000 houses you know about.
A few years ago we were told that it was landlords use of LACQs that were making house prices go up.
That was stopped and nothing changed.
Then we were told it was claiming depreciation was making house prices go up
That was stopped and nothing changed.
Targeting foreign buyers (while ignoring foreign sellers) is just the latest issue of many that is minor compared to the fact that Kiwis can now spend hundreds of thousands more on a house with the same interest payments that they were previously paying on a house of half the value.
It is an overly simplistic solution, that would only have a minor effect.
It is a complex problem that requires a myriad of solutions.
But none will have any major effect while interest rates are so low.
Pocket aces i wouldnt bother he has his agenda and one of those is trying to cover up what is going on.
If foreign buyers was not an issue then he would not care whether they were taxed or not as it would not impact the market.
The fact he is getting his knickers in a twist indicates that he knows that a tax would have a large impact on prices as has happened in Vancouver. .
Key said it himself.one week only 3% of buyers next week he was quoted saying any restrictions on foreign buyers would have a large effect.
Wouldn't be surprised if photomz is not one of the journalists. Has been a member for 5 years.
The current top story on Interest.com says exactly what I've been saying .
http://www.interest.co.nz/opinion/83857/bnzs-craig-ebert-says-very-low-…
As it says, every reason for house prices rises has been given.
Except for the main thing causing rises - low interest rates.
As per the chart,
$800 a week could previously buy a $520,000 house.
$800 a week today can now buy a $1,300,000 house.
Want evidence look at page 13 of the recent LINZ report...
Dont like what you see.... oh make excuses for it how something must be wrong as the figures look too high
13,500 buyers were foreign students and temp workers
29% of resident buyers were actually these foreigners
Page 13 of the report in black and white
Linz didnt like the results neither did the government or media
Q2. Asked students and temp workers if they live in their property or not
Yes
No
Combined total 13,500
LiNZ claim cant be right however i dont buy it. The fact is if you buy a property you can fil out that question correctly. 95% would. 5% may make a mistake however not everyone. Question was clear foreign student and temp workers.
Assume lawyers prob assist in this process. Please correct me if wrong
NationalPhotoNZ1 ....
Foreign buyers = Foreign Students + foreign temp workers + offshore buyers
This is how foreign buyers are measured in Canada, Singapore & Australia (ie our peers)
No one cares what the Tax residency is in these countries. Why should NZ be any different ?
- Forget tax residency focus on citizenship.
Ok now back to the evidence
- Per LINZ 13,500 buyers were STUDENTS or TEMP WORKERS (ie FOREIGN buyers)
- This equates to 1BILLION NZD a month approx. based on average Auckland prices
- This was 32% of the total RESIDENT buyers
- Your 3% completely ignores this group of buyers that are foreign buyers
- This excludes companies & Trusts with foreign beneficiaries.
NZ public are not as stupid as you think they are
LINZ
http://www.linz.govt.nz/land/land-registration/prepare-and-submit-your-…
Steps
1. Download the report "Property transfers and tax residency report: 1 April – 30 June 2016PDF | 1.09 MB"
2. Go to page 13
3. Look at the box
Q2.1 NZ or visa (resident, work or student)
Yes 41694 (82%) (includes citizens, foreign students & Temp Visa)
No 1695 (3%) (offshore only)
Corporate - Not an individual 7521 (15%)
Total Houses sold = 50,910
Q2.2* Work or student visa and intend to occupy.
Now the 41,694 is further split to show students and work Visa and whether they intend to occupy or not. No means not occupy
8751 (21%) Yes, student & temp intend to occupy
4707 (11%) No, student & temp that don't intend to occupy
= 13,458
so 13,458 / 41,694 = 32% of the Resident buyers
13,458 + 1695 = total foreign buyers = 15,153
15,153 / 50,910 = total foreign buyers / total buyers of homes = 29%
Australia (Victoria) definition of a foreign buyer
http://www.sro.vic.gov.au/foreignpurchaser
You will be a foreign purchaser if you are a foreign natural person, a foreign corporation or a trustee of a foreign trust.
Foreign natural persons
You are a foreign purchaser if you are not:
•A citizen or permanent resident of Australia,
Who said they were evil? WHat a pathetic response
Are the people that wrote that article Xenophobic or are they just stating the facts ?
What I am for is putting the housing affordability issues ahead of the foreign buyer interests.
That is nothing to do with Xenophobia and people using that label should be ashamed of them selves as they use it because of their vested interests.
What are you part of the National PR team or just another Investor trying to keep pushing prices up?
Have you no symphathy for kiwis getting priced out or the damage this is doing to the economy in general.
Facts not opinions please... facts are foreign buyers make up a large % of buyers in NZ, Canada and Australia.
Fact is Australia classify foreign Students & Temp workers as foreign buyers
Fact is NZ does not classify these two groups as foreign buyers.
I am also not calling for a ban. Let them buy however if they do they will pay 15% as a tax which can be used to
- pay for much needed infrastructure
- pay for affordable housing for the people than cant save the 100/200k deposits you need these days
This is what Vancouver is doing
This is what "Economists at Bank of America Merrill Lynch " also agree with.
This so happens to be the same bank Key worked at
http://business.financialpost.com/investing/canadians-aussies-and-kiwis…
You might have missed this one http://www.interest.co.nz/news/83557/pm-says-wary-policy-action-could-c…
Hey no argument photonz on low interest rates pushing up house prices.
Foreign money looking for an investment pushes the price that step further where it is now out of reach from a large sector of NZers.
Anyone from anywhere in the world can purchase, no questions asked, houses and land up to 5 hectares anywhere in NZ accept next to a national park or not bigger than 2000sq m (1/2 acre) if beachfront.
So if you are an American or Asian or European or Timbucktuan and your disappointed with investment returns then you can buy a house in NZ and the NZ government probably won't tax you and will top up the rent.
NZers are competing on the world market to buy a home in NZ. NZ wages just can't compete.
Wellington district council just lifted wages for cleaners and other essential laboring jobs to the living wage of $19 something an hour. Up from about $16 an hour. Whoop whoop, I bet there all buying houses now. Not.
No doubt kiwis borrowing ability is contributing to prices. On the following two conclusions however...
a+b+c = T (total immigration, and need for infrastructure etc)
To keep repeating that we can't change a or b so we can't change T is clearly not good maths.
Also we have no control case for 'Sydney Study' - who is to know if the prices are 25% lower than they would be without the tax policies you mentioned? Wouldn't 25% lower in auckland be a good start?
Capital gains tax can INCREASE prices. In Australia it has said to done that, because of the mansion effect.
CGT in Australia has led to people putting MORE of their capital into the (CGT exempt) family home, instead of into rentals and other investments. That's led to higher prices for ALL houses.
A secondary effect is people with investment property hold onto it rather than selling, leading to market shortages, and further price increases.
The problem is it's politically untenable to put CGT on family homes, but impossible to sort houses on the market into rentals and family homes. Most houses could be either.
So a CGT that leads to increases in the price of CGT-exempt family homes (65% of houses) instantly means ALL house prices go up.
FORGET CGT focus on Vancouver Tax on foreign buyers and 2nd home purchase by investors.
15% Vancouver tax is exactly what is needed.
http://business.financialpost.com/investing/canadians-aussies-and-kiwis…
Per the Article :
“Evidence of a large foreign presence is abundant,” the economists write. “For example, resale house prices fell by 19% mom in Vancouver in August, the first month of a new foreign real estate transaction tax.”
The BofAML economists lean toward taxing foreign buyers to solve the problem, as they note that higher interest rates or changes to bank loans mainly affect domestic borrowers.
“This puts the onus on measures targeting foreign buyers such as foreign real estate taxes,” the economists write.
The final scenario is one where governments are too timid on action, allowing the current real estate bubble to grow even larger. When governments are eventually forced to act because of financial stability risks and populist pushes against growing unaffordability, the result is a much more serious price correction and potential housing crash.
Try borrowing money for business from the big banks. Instead of looking at business performance they look at security, and guess what they want for security - real estate. There needs to be sea change in the way banks assess risk. Small business in New Zealand will never get the right amount of investment until that changes. One solution may be for the Government to provide guarantees to banks for businesses which can demonstrate they can potentially service a world market or develop products which have the potential to sell to an international market. Everyone recognises that as a small country with a very small population, we have to look outside our borders in order to get the economies of scale and the margins necessary to make the profits to pay people well and invest in R & D. Which government will have the courage to do that?!
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.