Fear of outsiders is apparently a natural response.
But New Zealanders have been tolerant of foreign investment here for a long time. It came when we were a colony, and the benefits have long been obvious.
Most people seem to understand we could not have our standard of living and local services without it.
We need outside capital to build our base infrastructure. We need the skills, technology, and funding to build an economy that can compete in a globalised world.
One quick look at closed economies around the world is an instant validation for accepting foreign investment.
But that does not ease the fears. They are under the radar (except for a vocal strident minority) unless the foreigners bring their resources and ownership with a 'foreign culture', and then they bubble more vigorously. We even have a political party that trades on these fears.
Since 2001 when our total capital stock was NZ$326 bln and foreigners owned NZ$172 bln, foreign investment in New Zealand has surged by +$214 bln to an impressive $386 bln.
The absolute dollar amount of this high growth, by itself, is a worry for some. And it is a growth from when it represented 52.9% of all the country's assets.
Since then we have seen the rise of China and their aggressive acquisitiveness. They are 'buying up everything', or so it might seem.
But it is really true? All this needs to be put in the context of the overall growth of our economy and our overall capital stock.
The facts are far less worrisome.
Here is the data:
| Foreign ownership |
Total NZ capital stock |
|
| $ bln | $ bln | |
| 2001 | 172,479 | 326,011 |
| 2006 | 232,004 | 465,229 |
| 2011 | 301,228 | 576,039 |
| 2016 | 386,360 | 724,806 |
| the increase 2001 to 2016 | +213,881 | +398,795 |
| % increase | +124% | +122% |
This data is drawn from Statistics NZ National Accounts series. See SNE055AA and IIP085AA. They are published for all years ended March, and will be updated next in June this year for the year to March 2017.
This table can also be used to see the relative changes, like this:
| Foreign ownership |
Foreign share |
Total NZ capital stock |
|
| $ bln | % | $ bln | |
| 2001 | 172,479 | 52.9 | 326,011 |
| 2006 | 232,004 | 50.3 | 465,229 |
| 2011 | 301,228 | 52.3 | 576,039 |
| 2016 | 386,360 | 53.3 | 724,806 |
It reached its peak in 2009 at 53.4%.
The variances are not great, ranging +/-2% over a 15 year period, with the peak in the middle.
But there is more to this than just foreign investment in New Zealand; our investors are also active offshore. And the same data shows a steady rise.
New Zealand investment offshore is now at its highest level ever, as a proportion of our total local capital stock, at 31.4%.
At 31.4%, this is no doubt boosted and growing because of KiwiSaver. Our savings can't find marketable securities or funds locally. Our bond market is not rising fast enough to satisfy demand and our equity markets similarly cannot support the demands of funds managers. Buying companies outright, a strategy of overseas corporates, does not fit the mandates of fund managers, and does not have the marketable liquidity they need.
The bottom lines are these:
1. foreign ownership of New Zealand's economic resources is not growing; it is stable and has been at this level for at least 15 years, and probably a lot longer.
2. New Zealand ownership of offshore assets are at record levels.
Those who have a conclusion and are looking for 'evidence' to support that won't find it in the data. They will need to rely on selective anecdotes, and will find them in the churn. It is election year after all so the hunt is on for anecdotes to build the necessary anxiety of like-minded voters.
We will get an update of this data on June 14, and we will update this review after that.
And if we are going to debate 'foreign ownership' we should start knowing that the current levels have been stable for at least 15 years. There is no growth (except by us).
49 Comments
Is it really in NZs best interest to allow a foreign company/Govt-backed to buy large farms and production facilities and control their entire supply chain? Wouldn't it be better at least to lease the land to them?
Freehold land, large holdings, are worth far more to the citizens of NZ as a whole long term, than the current market dollar value.
You have to differentiate between types of foreign buyers too, from benevolent semi absentee owners, through to investors who intend to control and own an entire agri- supply chain.
Some of the most productive use of horticultural land in provincial areas was developed after being allotted via govt ballot to ex-servicemen who returned from WW2, showing how some govt intervention can kickstart NZ entrepreneurial use of rural land, though sadly these are now being bought & joined up by large corporate concerns.
Government ballots of land -dates back to the 1890s. http://www.teara.govt.nz/en/1966/land-settlement/page-6
Interesting!
Now NZ faces the same problem of large holdings by corporate entities.
"The demand from the land hungry for the breaking up of the big estates was given impetus by the larger population, by increasing unemployment, and by refrigeration which made small farming an economic proposition through opening export markets for meat and dairy products"
Would any NZ government have the courage for such a similar scheme? Or does NZ no longer have sovereign authority over its land?
There is this too
https://en.wikipedia.org/wiki/New_Zealand_Liberal_Party#Agrarianism
"In 1891 more than 60% of freehold land was held by fewer than 600 individuals or companies."
See -'Complaints of land monopoly' here
http://www.teara.govt.nz/en/land-ownership/page-4
The problem is, it won't happen again because of the threats of trade war that will be held over the government's head. The NZ government couldn't keep two French terrorists in jail in the face of similar threats...what chance against the powers that hold NZ land now?
* We need outside capital to build our base infrastructure. We need the skills, technology, and funding to build an economy that can compete in a globalised world.
* The absolute dollar amount of this high growth, by itself, is a worry for some.
See here's the rub at least Investment in to growth areas such as Tech Industry for NZ; Over inflated NZD deters investment as it's far cheaper to invest in other parts of the world that are far more cost effective.
How did the NZD become over inflated? Answer over investment in to NZ property which has hugely pushed up the NZD.
Other risks to investment in to the IT Industry; Very high cost of living in main cities Auckland and Wellington, again due to over investment in property pushing out NZ residents and making it very expensive for IT companies to recruit staff to work in the inner city areas. This can ultimately lead to these companies closing and moving their operations abroad.
Perhaps the question you should be asking is; Do we need a Foreign Buyers Tax? Yes and guess what we can put that taxation towards our infrastructure and business investment. And it will take the heat out of the NZD as property prices reduce. Win, Win!
And we still get to keep our Overseas Non Resident Investors, they just have to pay a bit of tax on property not a big issues really is it.
"Over inflated NZD deters investment .."
True to a degree, but we are still a great place to develop software.
"How did the NZD become over inflated? Answer over investment in to NZ property.."
This is overly simplistic and almost certainly not true.
"Very high cost of living in main cities .."
If you can deliver IT from anywhere, why would you choose to live there unless you wanted to?
CJ, outside capital would be great to have, but is NZ Capital really being invested properly to grow this country?
New Zealand Super Fund since 2003 has grown to $30 Billion and half of that on the back of earnings-not contributions, and has thus delivered an average return of almost 10% per year. The Super Fund is designed to grow its balance so as to meet the projected future retirement funding needs when the annual taxes collected are less than the annual payouts.
Likewise the United States government has Trust Funds that have accumulated for decades as a result of 166 million (2016 numbers) of American workers -and their employers (in many cases self employed) paying a combined tax rate of 15 %+ on wages- (up to a set limit way beyond the average income). Income Taxes are separate and apart from "payroll taxes" paid by every worker and their employer.
Currently the combined Social Security & Medicare Trust Funds carry an invested balance of over US$3000 Billion dollars and returning earnings averaging 3.6% per year.
The major differences between the two countries lies in 80 years of investments versus 14 years for NZ and where the money is invested. Critical difference but a significantly causal difference. The US method of investment is to boost the US economy and infrastructure to grow as all the money is funnelled into the General Budget to be used in Government Spending. In return an intergovernmental IOU is set up. Without this $3000 Billion having been ploughed back into the US economy over decades the country would have been forced to underfund not only Federal programs, but also grants for City & State programs as well.
New Zealand on the other hand as Liam Dann points out in his Sunday Herald article is sorely lacking in Infrastructure-a point that the Productivity Commission takes 500 pages to report on. Auckland Traffic flows are just one notable casualty of a lack of spending. Lack of funding sources seem to be the overwhelming obstacle to tackling vexing productivity enhancing investments.
The $30 Billion Superfund investments produce a 10% Return in a very good year.
Wouldn't $1 Billion of those funds borrowed locally automatically produce 15% in GST return for the taxpayer-not to mention a minimum 10% in Payee taxes for every $1 dollar that leads to new wages be gained due to the borrowings. Sounds to me like 25% return instead of 10%-and critical infrastructure fast tracked years if not decades.
For every $1 Billion the Superfund loans a city like Auckland central government could then pull of $250 million of tax produced by the investment and plough it right back into the Super Fund-or better yet guarantee the fund a no risk 10% return and invest the other 15% in pulling more Kiwis out of poverty. Not only that but not a dollar of that investment needs to by pulled from overseas bankers.
Will be interested in reading residential property charts in isolation...
I'm one of the lucky Gen-Y who bought 5 years ago (without parental help may I add!), so there is no bitterness that I've missed out. However the ease of which foreigners can buy property in NZ and lock out hard working NZers needs to be controlled. I've voted National at every election, except one where I voted Act. I consider myself to be right on the political spectrum, but will be voting Labour at the next election if National do nothing to curb immigration and make it a lot harder for foreigners to buy residential property (large stamp duty, or ban on everything except new builds).
National has taken great care to see to it, to date via the South Korean fta, that we are unable to make any law that does not apply both to locals and foreigners. They accuse Labour of having done it with the China fta, but that, in fact, is not the case, they left that door unlocked. National stuffed up by not doing the same with the SK fta and now we have to offer the same conditions to China. Key did suggest taxes, but as soon as that started to gain some traction as an idea, he began to bat it away, stating fta's as the reason.
I am not sure how Labour will get on with implementing any change, but someone needs to have a go at it.
Worrying is overseas buyer in housing market particularly in Auckland and no one believes the overseas buyer data announced by the agency ( even the agency while announcing does it with a question mark).
Will it not be good on the part of the government to bring out unmanipulated overseas data out in the public domain to clear all doubts but the government by not doing it gives rise to the belief that the perception about overseas buyer is correct and government is covering it to support its ponzi scheme.
Government if have nothing to hide why manipulate and lie.
Here is an interesting report from Vancouver about foreign investment.
Very good article Brendon, thanks. I'm glad that the Canadian's have the guts to speak out against the money laundering infiltrating and massively bloating property markets particularly for Vancouver, though of course it's spread to other areas outside of BC since the foreign buyers tax.
Interesting how Marc Cohodes (A former Wall Street Trader) points out how their local Politicians are being bought and paid for by the Real Estate industry, sound familiar.
And he also predicts that Vancouver home values will drop by over -50%.
Need strong journalism, media which is lacking in NZ. NZ is a very small country and most journalist have their favourite political party ( who is in government) and views and with government is : you scratch my back and I scratch yours otherwise how do you explain the government getting away with lies and manipulation.
Everyone knows the truth. Government can supress it for sometime but cannot hide for ever as will find its own way sooner or later- hopefully for people of the country is sooner (though people know and national will also realize that people knew after the election result as no one like being manipulated - it is bound to reflect in election)
Yeah, nothing about foreign buying of houses here? Especially Auckland? Oh well...
So this is primarily discussion of farmland and central Otago?
Although as noted above, with food security being a major concern for this century, how great an idea is it to sell parts of the most productive land to foreign public-private ownership?
How is it that the government is unable give foreign ownership statistics for residential property purchase other than through their mickey mouse "tax residence" survey, but these statistics are considered accurate?
Also it's easy to paint a pretty picture when being a "New Zealander" is also for sale.
Funny that
We have a Minister for Land Information of a Ministry that doesn't have any Land Information
He was right there on TV yesterday saying they're looking into it - in 2017
A promise they won't have to keep
Computers have been around for 70 years and NZ trumpets the IT industry
They do it by relying on their voter base either not bothering to look deeper into it or trying to pull the wool over the eyes of others who they think may not have bothered to take much interest. Given what I do I was not surprised to find someone in one of those categories who was quite taken aback when I corrected his claim of the figures we were provided with were factual. I hope if it was the former he took the time to learn the truth and if it was the latter I hoped he learned to not judge a book by its cover.
If it continue the way it is I wonder after 10 or 15 years will anything in NZ be kiwi owned as NZ is such a small island that they can buy it not once but number of time.
Defiantion of prosperity by national government.
Think and vote. Election not far away. One more chance to national and this process will be over in few year and will not even have to wait for 10 years. Mission accomplished and than national will not need 5th term.
And then you get this kind of foreign parasitic feel nothing for NZ investment.
http://www.realestate.co.nz/3035115
Brand new ... Incomplete ... never finished ... grounds not established ... marketed as a do up?
Built in 2014 ... never lived in ... financial fox-hole turned into a deep-black-hole
Get a load of the 3 metre high fence, 1 metre from the side of the house, outside one of the bedrooms
Not a great outlook ...
As for the kitchen .....
What matters most is what the price of the investment is, and I don't see any mention of that. If an investor puts his money here then can we presume that it is because it offers a higher return than elsewhere? The return to the investor is New Zealand wealth disappearing offshore again. Investment is only a benefit to New Zealand if there is a return to New Zealand over and above the yield returned to the investor. Given the investor is making a higher return than elsewhere, it means the overall yield on the investment must be extremely high to provide both New Zealand and the Investor a return. Forgive me for being sceptical, but doubt that is happening.
I do not have data now, but back some years ago I looked at the investment data in NZ, the return of FDI in NZ is three time as high as that of the return of NZ overseas investment. Of course investors always seek for higher returns but their investment also conditional on their business advantanges.
Nothing is wrong with FDI investment, many countries try to attract as much as possible. NZ is a small country, our saving is very low or negative, without foreign money we can't survive. Maybe the Chinese factor is sensitive for you commentors. Look at what we are using everyday in NZ, shopping, banking....almost owned by foreigners, Australians. Chinese investment itself is not a big deal, only one different thing is that we sell our farmland indefinitely while many other countries just lease the land up to e.g. 50 years. I think if we want modern infactructure such as hight speed trains connecting cities Auckland, Hamilton, Tuaranga, Wellington, we do need forreign investment especially from China.
The article is supposedly about 'how much of NZ is owned by Foreigners' but does not distinguish between foreign investment in business and the more emotive land, forests and housing. When there is a big difference in perception about the benefits in voters minds.
Foreign capital investment in business is needed and welcome IMHO. Some farming and forestry operations may also get over the line with voters but for land with sensitive values and housing, objectors to foreign ownership cannot be written off as a 'strident vocal minority'. The concerns are widespread. 51% of Aucklanders believe foreign ownership of housing is an issue and the scale of unease at the sensitive rural land sales process, is demonstrated by the significant response to the latest Wanaka station sale.
Mark Mitchells bumbling performance on Q&A when the best he could do was say he had heard someone was working on a process to find out how many farms were being sold to foreigners, was revealing. In other words he doesn't know. Data on the extent of foreign ownership of housing is dodgy. Admissions that the extent of defacto ownership by foreigners through mixed ownership models and trusts is not really known, is equally worrying.
Citing in this article official data that's acknowledged as being unreliable, is a flawed approach basis. You could argue that relative movement in that dodgy data over a multi year prior would still provide a trend indicator but you'd be wrong again as the data quality might have improved over that period, thus masking the real trend.
On the one hand we have some official data that might not be perfect.
On the other hand we have what sounds like a poll; "51% of Aucklanders believe foreign ownership of housing is an issue.."
Apparently your concern is Mark Mitchell and not the total absence of even "alternative" facts to support the belief systems of 51% of Aucklander's ?!?
It's not 'might not be perfect' - Mitchell and other government officials admit that is a fact. You will have no doubt followed the vigorous debate over the veracity of official data on foreign ownership of housing in NZ. There is little doubt there are serious deficiencies.
Refer last weeks stories covering surveys of Aucklander's views on the impact on house prices that foreign investors are having, for the 51% reference.
When deciding on overseas ownership we of course are unable to take any recognition of newer residents owning property either in their own name or as part of a corporate /trust means and where their dedication to the long term benefit to NZ Inc is very questionable.
All money laundered and similar purchases are not considered in overseas ownership but may as well be so.
Because of NZ's unusual tax system, there is a disincentive to invest in productive assets, either in NZ or overseas. And a subsidy if you invest in non-productive housing rental assets (& to borrow to the hilt, hence our terrible debt ratio).
Until a government has the nous and balls to reform this system, it won't get any better.
Read one interesting comment on facebook about Apple/multinational company not paying Tax in NZ :
"Apple and big multinational are making money and not paying Tax in NZ - is it not similar to overseas / non resident buyer speculating in property - making money and not paying Tax. DOUBLE STANDARD. Govt is targeting multinational but should they not be targeting Overseas buyer also who play with NZ tax and escape paying tax."
Suck it up, all you 'ye' snow-flake type buttercups! Just accept the assimilation and get on with your lives as best you can. Unless you can make a real stand, other than being a keyboard warrior, all the hot breath and whinging stands for naught. My prediction for the elections is Nats by the biggest landslide in NZ history and the wholesale sell up continues. You are already serfs in your own country, but the best way to deal with that is deny, deny and self-deny. Fait accompli it is, just continue your careers for menial wages and remember, if it aint foreign wealth it aint real wealth.
I would stick my neck out and hypothesize that our increased offshore investment is a direct result of Kiwisaver funds seeking diversification outside NZ .
I have zero emprical evidence to support this however , its just a hunch , and as a layperson what do I know ?
A level of foreign investment is good for business in NZ. It creates a more stable business environment. For example Chinese owners won't stop buying from their own businesses when the price of powdered milk crashes. Also, they will be the ones who lose capital and run up losses instead of NZ owners. Lets hope the price of milk never crashes, but realistically one day it will.
If we actually use land sale figures that I've heard, the issue becomes a lot clearer than presented here. I believe OIO reported sales of ~400,000 hectares last year. That's roughly 2% of the total land area of NZ (26m hectares.)
If we exclude DOC's 30% it rises to ~3%. If you compare it to arable land its ~ 85% providing all the land bought was arable but only ~4% of agricultural land. Whichever way you look at it its certainly not an insignificant amount.
It would be interesting to know how much foreign land NZ residents own - but I have no idea how to find that figure.
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