By Bernard Hickey
Finance Minister Bill English has revealed Land Information New Zealand (LINZ) has been doing some early research into the practicalities of a Foreign Buyers Register, a measure called for by Opposition politicians and already in place in Australia.
His comments followed Prime Minister John Key's disclosure yesterday that China's President Xi Jingping had asked for New Zealand's help in tracking down a number of corrupt officials and their associates who had fled to New Zealand, and had often bought assets here.
Real estate agency group Juwai said over the weekend that a 15-20% surge in Chinese investment in New Zealand real estate was likely in 2015 and 2016 as wealthy individuals sought safe, clean places for them and their families to live outside of China. Auckland's property market surged again in October and November as interest rates fell and concerns about a Capital Gains Tax and a ban on foreign buyers were removed when National won re-election.
English was asked by reporters in Parliament if a Foreign Buyers Register would help New Zealand and China track illicit capital flows into Auckland's property market. "Possibly, but there's pretty strict requirements in our banking system now with our anti-money laundering laws and you'd want to be sure that any other measures add to the effectiveness of those other existing rules," he said.
"The anti money laundering rules are pretty tight and have just been implemented over the last few years at great expense and any further measures would need to be demonstrated to increase the effectiveness. Generally, we've got a corruption free and transparent system and we want to keep it that way," he said.
Asked again if a Foreign Buyers Register should be adopted, English said: "As we said last week, we're open minded about whether there's some effective mechanism, but in the big picture, the biggest pressure on our housing market is lack of supply, and that's the bit we're focusing on because we believe that will make more difference for more New Zealanders in the long run to have more affordable housing on the ground faster, regardless of what other influences are on the market."
Asked if Treasury and LINZ were researching a Foreign Buyers Register, he said: "I gather there's some going on, but I'd need to check with the Minister of Land Information to see what they're doing. This issue has been around for a couple of years, there's nothing new about it."
A spokesman for LINZ later said: "LINZ has done some preliminary work in the area of tracking foreign ownership of residential property. We will continue to monitor developments around the world in terms of land and property registers."
The tone of English's comments towards a Foreign Buyers Register has been more conciliatory than that of Housing Minister Nick Smith in recent weeks. Key was also more open to the idea in comments at a post-cabinet news conference yesterday.
The issue has become more prominent in the last fortnight in the wake of an Australian Parliamentary report calling for tougher rules on foreign buying of Australian residential property, including a type of stamp duty on purchases by non-residents. Labour Leader Andrew Little has supported looking at such a fee, along with calling for a Foreign Buyers Register.
English agreed flows of capital from China into New Zealand's property market were expected to grow.
"I'd expect that the flows from China are going to grow, but when you look at Chinese ownership of property across New Zealand, to the extent that you can measure it, looks relatively limited compared to our traditional offshore investors of Singapore, Japan, US, Australia," he said.
"We don't know in detail the immigration status of the owner of every piece of property. These issues have been raised before in terms of how complicated it would be try to establish exactly who owns what. Australians have had one in place for a while. There's a question of the cost and complexity of getting the data and what you can use it for, other than political debate."
Key downplays China risk
Meanwhile, Key downplayed suggestions that corrupt money from China was being laundered through Auckland's property market, pumping up prices.
Key said the "vast overwhelming bulk of people buying them in Auckland are New Zealand residents or New Zealand citizens."
"That pattern could change over time. I accept that as China gets wealthier and other countries get wealthier they may look to spread their wings a bit more, and that's an issue that New Zealand like every other country has to consider both the pros and cons of that because there's a bit both ways," Key told a news conference on Monday.
Key said the Government was open minded about a foreign buyers register.
"If there's a credible register we're not afraid of such a thing, we're just saying we don't think that's the answer to the issues. All a register would give you is arguably a bit better information on what's happening and that might be of merit, but realistically for us tackling the housing issue, which we're doing effectively, still sits in that issue of release of land and speeding up the supply of new product," he said.
'Sercret register'
Labour Housing Spokesman Phil Twyford accused the Government of hiding the work on a Foreign Buyers Register.
“Last week Andrew Little called on John Key to adopt the Australian policy on foreign buyers. Bizarrely, at the same time John Key, Bill English and Nick Smith tried to claim a register was either unnecessary or not going to achieve anything," Twyford said.
“Today Land Information NZ has revealed it has been working on a register so we find out National has been developing this in secret and not telling New Zealanders. This is another example of John Key and his Government hiding the truth from Kiwis," he said.
“Clearly this register was a policy they were planning to launch as a big start to next year. Too bad their secret register has been discovered.”
Money laundering?
Meanwhile, English deflected suggestions that corrupt Chinese money was pumping up property prices in Auckland, arguing it was just as possible as corrupt local money.
"It's quite possible in the same way that some real estate auctions may be affected by New Zealanders who have got illicit money from drugs. The banks have got requirements to meet around anti-money laundering, which are pretty intensive these days. We'd expect them to be following those regulations," he said.
Donations rejected
Elsewhere, Little told reporters he had rejected two donations to the Labour Party from two Chinese donors while he was Labour Party President from 2009 to 2011.
He said he had a hunch that he could not determine the ultimate source of the funds and had therefore rejected the funds.
National Party President Peter Goodfellow told reporters in Parliament he was as confident as he could be about the source of the National Party's donations, but that National did not have the resources to do indepth investigations. He said some donations had been rejected, but none had been linked to corruption in China.
19 Comments
There doesn't seem much appetite from the government for this and they seem to only be talking about it because they are reacting to popular pressure and the fact that Australians are doing it, and, as the Ausies always do, putting some spine into enforcing some sensible rules. If the Government do put something into place it seems unlikely that they would take any positive action as a result of the statistics, so they may as well be honest and admit that they do want to know or do anything about the problem. If it were not for the possibility that a future Govt may use the information, or public can use it to apply pressure, it could well be a waste of time and money (for the next 3 years at least)
Inceedently this topics seems to be swinging back to a problem of Chineese property purchasers. It applies to all foreign purchasers and folk who concentrate on only the Chineese are displaying some zenophobia and undermining the credibility of the argument against foreign purchases.
FYI
The Australian regulator does not (currently) maintain a foreign buyers register .. it assesses each individual purchase on its merits .. providing the purchase is submitted to it .. if it is not submitted for approval .. nobody knows what happens .. it's why the senate enquiry is now demanding one .. because the law is not working as intended and is being exploited
Legislative Framework and Available Data
Australia’s foreign investment laws seek to channel foreign residential activity into new dwellings to promote local construction (and supply of houses).
The laws cover three broad groups:
** foreign developers of new residential projects;
** foreign purchases of new dwellings; and
** temporary resident purchases of new and established dwellings.
In short:
•• foreign-developed new residential projects are permitted and the resultant dwellings can be sold to either foreign or domestic buyers
•• foreign individuals and temporary residents are permitted to purchase any new dwelling
•• temporary residents with visas that allow them to stay in Australia for a continuous period of more than 12 months (such as some foreign students and people on skilled business visas) are permitted to purchase one established home provided it is used as their principal place of residence while in Australia and is sold once vacated.
Foreign investors and temporary residents require approval from the Foreign Investment Review Board (FIRB) prior to purchasing a dwelling or site for development, and most such applications are ......
Note: they may purchase 1 (and only 1) residential property
Full article here
http://www.rba.gov.au/publications/bulletin/2014/jun/pdf/bu-0614-2.pdf
If we can register cars to specific owners who are absolutely held responsible in the event of a traffic fine, why cannot the complete ownership of any parcel of realestate be clearly established by requiring the listing of all parties with interest in it. Clearly the land is registered, clearly there is money from somewhere involved, clearly any bank holding a mortgage would demand this info, clearly the more convoluted the trail the more it needs to be investigated.
As to the xenophobia, it may seem on the face to be unfair to focus on the chinese, but it is not race defining them in this issue, it is behaviour and motive. While other nationalities are likely equal or greater sources of in coming funds as they immigrate and legitimately invest, the Chinese deployment into residential, often through a proxy resident and with few other motives for being in NZ is a clear divider. Why do they not buy warehouses and leave them empty?
yes, and if they wanted to be really canny, they could even use the same software systems, not hard, (too easy) does the same job, wouldnt require a lot to set up, just port the ownership information from all the local council's databases plus the LINZ database. Could be up and running inside a month if they wanted to hop to it, and the IRD could have access to it and data match with it
Asked again if a Foreign Buyers Register should be adopted, English said: "As we said last week, we're open minded about whether there's some effective mechanism, but in the big picture, the biggest pressure on our housing market is lack of supply, and that's the bit we're focusing on because we believe that will make more difference for more New Zealanders in the long run to have more affordable housing on the ground faster, regardless of what other influences are on the market."
LOL. Is Bill blinkered or in need of specs?
A Foreign Buyers Register will be a waste of space - too easily evaded - avoided
What is needed is a totally comprehensive Property Register including nature of entity, company, trust, partnership, if an individual, then owners domicile and country of birth and current citizenship status including dual citizenships plus a yes/no if has an IRD number, passport number, or birth certificate number, or IRD number
Remember some years ago Chris_J posted a comment about a long-time Christchurch based Chinese family called Lee who own 1000+ properties in Christchurch.
It's too easy to just off-handedly say it wouldn't work and use this to deny it can, or should be done. It flies in the face of logic, with all the huge variety items in ownership which are registered in some way to a specific person, or entity controlled by a specific person or group for absolute responsibility for that item, that the same cannot be done for property.
Pets, children, motor vehicles, aircraft, boats, companies, jobs, loans, insurances, debts, registrations to professional organizations, income and tax, births, deaths and marriages.
The whole lot and more are trackable to actual people who will have a stated nationality and place of residence, about which they may lie, but it exists. The IRD does not accept your figures without performing checks, neither should a body setup to do this job.
So Nan and Pop arrive from England and buy a house with cash in their own names to live here, case closed. But there will be big flags waving over the dodgiest 22yr old student visa holder with 8 "investment properties".
Hey, I'm not dissing your register idea, I'm just sayin' if you allow the politicians enact a law that is "limited" to strictly a "foreign buyers register" only, you will eventually discover too late that thats erxactly what you will get and it will be mostly empty, because, as has been commented on here again and again, ad-infinitum, they will use cut-outs and proxies and locals and fronts and students as they do in australia
And if caught they will be subject to immediate forfeiture and it is then up to them to prove the purchase was legitimate and any agent involved who did not do their homework would be penalized as well.
Just because something is hard to do does not mean it should not be done.
The first thing that would halt would be advertising of Real Estate to foreigners which is NOT being done because they aren't buying property here.
wow if you had such a properties register... you could charge Rates off it, to everyone in the district.
principle fundamental component of property is _location_. given the daft other rules people are already complying with "too hard" does work in the foreign register idea... 'cause if you can't track the ID of the purchaser.... then just how do you think they have proof of who actually owns the property (and pays the rates) NOW??
Why bother with a register.
Just make some law and enforce it.
Make the penalties for evasion so significant that the investors, the agents and third party conspirators will fall over themselves to liquidate.
In short also include legal restrictions on ownership that not only match Australia but exceed them.
Just a thought,
There Appears to be a lot of the usual blase, relaxed sort of " nothing to look at here" rhetoric coming from John Key around the Foreign money ( particularly ex-China) filtering in to the Auckland property market, to the degree where John K and Bill English are actually playing the situation down with rather too much ' thoughtful' but attentive dismissiveness!
It displays their normal disarming manner of wooing the Press and parts of the population.
Puts both Press and Publics' minds at rest.
Makes it very obvious they have no will to create a credible foreign buyers register, similar to that of Australia.
This should raise some alarm bells when it combines with equal nonchalance regarding the money laundering question.
I wonder if we could suggest some intense scrutiny on the likelihood of money laundering ex China, through Sky City Casino, then into Bank of China ( Auckland branch of course, )
Very simple to then buy up houses and other NZ properties.
I am basing this on John Key's proposal a year or two ago that special " immigration and security" dispensations be granted " plane loads of High Rollers" from China en route straight from China to Sky City Casino.
Was this "Key" plan ever implemented?
John K appears to be walking an increasingly fraying tight rope between his need for the gambler's ( currency traders) adrenal "stimulating rush" and the slowly increasing awareness of a public beginning to ask the questions surrounding sound, ethical national governance.
Methinks China's Premier has the wisdom and patience of his ancient civilisation,
I believe President Xi Jinping is more than a match for " Cool Hand (Luke) sorry John!,"
The pressure MUST be kept up, I just hope people don't let this little bit of info lull them into a false sense of security. As far as I can see, Key has absolutely no intention, whatsoever, to do anything at all during the next 3 years, he as good as said that himself.
And on another note I wonder what his reaction will be to the news of the extent of the torture of people being held in Guantanamo Bay that has just been made known.
I'm not suggesting ring fencing foreign buyers, but a full register for all, held as so many other registers are in a non-political environment. From that you will be able to report a much improved set of data and make informed decisions. In addition to addressing the current hot topic of Chinese activity, it may show up things like drug and tax issues or potential dodgy deals done by outwardly clean looking public officials.
Most will be able to front up with their NZ passport, appropriate resident visa and residential address, or registered company/trust records with a list of directors with same and declaration of any overseas interest.
The proof of info bar raises when wholly external entities are involved and they must be clear about the source of funds and connections. In these cases a foreign investment approval should only be given when it is made clear who holds the actual interest in the property. I think we are all smart enough to see a proxy from a fair distance here.
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