By Bernard Hickey
The CEO of website that markets over 8,500 New Zealand homes to Chinese buyers says the investment in overseas markets has only just begun.
Simon Henry, the CEO of Juwai, told TV3's The Nation he expected a 15-20% increase in Chinese buying in each of the 2015 and 2016 years.
"We think we’re at the very beginning of the Chinese outbound property cycle," Henry said.
"And it's not just money from China. It's also money from Chinese communities around the world. We see a lot of investment in New Zealand coming from Singapore and Hong Kong," he said.
Henry didn't think the buyers from China were pushing first home buyers out of the market because the average purchase was NZ$1.4 million and he also saw the buying adding to housing supply as investors funded new developments.
His views on new supply may have been influenced by the Australian experience, where non-resident buyers are not allowed to buy existing homes, which has fuelled a rash of new apartment developments in Sydney and Melbourne.
The extra supply in Melbourne in particular has helped suppress rental growth for central city apartments, but has also raised questions about 'ghost mansions' where properties are empty. This Prosper report on Speculative Vacancies in Melbourne found 17% of central city apartments in Melbourne were empty, raising concerns of Chinese-style 'ghost towers' where speculative investors buy purely for capital gains and don't rent out the property.
Radio Live Drive Host Duncan Garner focused in this article on an example of an Auckland property sold to an Asian buyer a year ago and left empty and unkempt.
The debate around foreign buying has settled in the last week on the repeated calls for a foreign buyers' register, which an Australian Parliamentary Inquiry also called for and which the Government has not ruled out (although it remains less than enthusiastic).
Foreign buyers' register?
Henry said he agreed with calls for a foreign buyers' register, if only to show how many of the buyers were of Asian descent but were actually New Zealand residents.
"I think having the data will give more transparency to what the real market is actually doing," he said.
New Zealand First Leader Winston Peters weighed in on The Nation after Henry's interview to repeat his call for a ban and a foreigner buyers' register.
"Thank you. This is a told-you-so moment," he said with a grin.
However, Peters also appeared open to foreign-funded developments of new properties.
"That may be part of a future proposal, because you could not say in that circumstance that they were competing with a New Zealand first-home buyer or someone else," he said.
23 Comments
And give NZ residents two or three years to become citizens - then out of the market.
However the bigger problem in Auckland is the competition between FHBs and investors.
It may be that many investors have a language deficit that guides their capital into managed residential property investment. Someone should ask Barfoots and their ilk how many properties they manage on behalf of owners local or overseas who would not be able to communicate effectively with their tenants.
Henry didn't think the buyers from China were pushing first home buyers out of the market because the average purchase was NZ$1.4 million and he also saw the buying adding to housing supply as investors funded new developments.
Not strictly true about not pushing out first home buyers. It certainly influences the types of housing being constructed, e.g., Long Bay, parts of Albany, 5+ bedrooms, 3+ bathrooms, in the $1.4M vicinity. This new housing stock is being built instead of affordable new houses, so in its way it is pushing first home buyers out of the market.
The part about "investors adding to housing supply as investors funded new developments" is just fluffy spin rhetoric. Are we supposed to grateful that these $1.4M properties will be available for resale to NZers at affordable prices in years to come? Obviously, no.
He made the point that studies in Australia have shown that foreign investment had added a lot more supply to the Australian market. This is true because in Australia foreigners are only allowed to buy new houses, not pre-existing. In New Zealand they can buy pre-existing houses. So it's not really fair to say that the same happens here.
As someone that knows a little about construction and has worked on these $1.4m houses, well they won't stay $1.4m for long with the shoddy construction. A lot of this style of housing is built by imported slave labour and their workmanship is often well short of local tradesmen.
Once upon a time, not so long ago, in a galaxy far far away, in a place called Tāmaki Makau Rau, the Isthmus of a thousand lovers, a place of sparkling waters of the waitemata and the manukau .. where many people lived in many suburbs comprising state housing .. where you didnt have to lock your doors at night, where you didnt have to drive your chilren to school .. where £10 migrants arrived from Britain and Scotland and Ireland and Holland, with just a suitcase and the clothes on their backs .. worked in the local freezing works and on the wharves and the railroad or public works departments .. where on saturdays there was the sound of hand-lawn-mowers and hedge-clippers, and later on the sounds of motor-mowers, the smell of sweat as they tended their vege gardens .. the signs of residents proudly maintaining their little castles .. they kept their plots of land up to scratch in keeping with the rest of neighbourhood, where if they so aspired they could save their money and buy the state houses they lived in .. or they could later upgrade and move to a more salubrious suburb comprising less public housing and more private housing, and later again, upgrade to an even more salubrious neighbourhood comprising private housing and no public housing .. such as Remuera, Kohimarama, St Heliers, Mission Bay .. note Epsom and Herne Bay and Ponsonby didn't rate .. who would want to live anywhere near the ne'er-do-wells they would ask .. you had to have aspirations to move on up
Now, dang it all, look at what is happening, 40%, going on 50% of residential property is rented, and as would be expected, tennants don't spend the same amount of time and care tending the outside of the rented property or put the same effort into maintaining the lawns, flower gardens, shrubs, or vege gardens
Should you still cling to these lores of old and having purchased and lived in a small bungalow on the outskirts of suburbia, now no longer wishing to live amongst the commoners and strugglers (cough, cough) you decide to move up the line and choose to move into a $1,000,000 plus suburb where you imagine you will mix with a different group people who covet home-ownership.
Then go and have a look at that $1,400,000 property discussed with Duncan Garner above and think about the neighbours in the street, and how one person can drag the value of the whole street down
Is this what Tāmaki Makau Rau is de-generating into?
Those were the days. The only Chinese around town were up Greys Avenue above the Town Hall, smoking with opium pipes and playing fan-tan or some version of two-up. Possibly also some really industrious ones market gardening from Otahuhu to Mangere. And you could buy Double Happys 365 days a year up Hobson St from Mr Doo.
Those were the days, indeed.
The bigger issue seems to be investors as there are twice as many investors than first home buyers with them making up 40-45% approx of the sales. I know in the UK in September mortgages to first home buyers was 4bn versus 2.6bn to buy to let investors. So the ratio is the opposite. Reduce the investor demand with income based mortgage rules would give first home buyers a chance.
A owners register is only about 20 years too late...
If someone says it's racist I'll slap them. Living in Singapore where even the milk price, or how much you pay when you go to a hospital changes depending on your citizenship status and what color skin you have, has opened my eyes to the way the rest of the world thinks about little old NZ.
A 30% tax on residential property for non permanent residents/citizens would boost the governments coffers and also help home ownership.
Why aren't we doing this?
Some PC politician will label it "racist" and it will be over.
Sometimes NZ'ers are just too flipping PC for their own good, in this case owning their own home...
Cmon NZ, WAKE UP!
Yes, compared to most of the world our land must seem a very safe haven if you're a well heeled and risk averse international investor. Soft citizenship laws, weak oversight of land purchase, excessive respect for wealthy investors, lack of asset taxes, limited corruption and good social/economic infrastructure...makes property investment a safe no brainer for many nationalities. But why pick on the Chinese?. Anyone can easily plump their gains (ill gotten or otherwise) into NZ property. This causes a housing bubble which forces RBNZ to hold up rates even when inflation is low, and the real, productive part of the economy is battered. Many of us own property, but the country as a whole looks like it's up for rent to the highest bidder. Taxing residential property for non-NZ resident owners would be a good start for sure.
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