By Bernard Hickey
The Reserve Bank has agreed with suggestions from Opposition MPs that better data collection on foreign buyers of houses would be useful, but said the bank did not have the power to collect that data and it was a decision for the Government to make.
Reserve Bank Deputy Governor Grant Spencer was asked at Parliament's Finance and Expenditure Select Committee by Green MP Julie Anne Genter whether the Government should collect data on foreign buying of houses, given debate over the anecdotal evidence put forward in Auckland and the questions around the now-defunct BNZ-REINZ survey of real estate agents.
"It would be useful to know what's happening in the market in terms of the different buyer segments," Spencer said in response.
"Our data collection powers don't extend to that. It's something that the Government would have to look at more broadly," he said.
Reserve Bank Governor Graeme Wheeler and Spencer were questioned repeatedly by New Zealand First MP Andrew Williams about foreign buyers buying properties in Auckland with cash, often over the phone at auctions.
Williams cited an example he had seen of a foreign buyer that had bought three properties in a row in Sunnynook on Auckland's North Shore for more than NZ$200,000 over market value for each of the properties. The buyer then planned to remove the houses and build six more homes, he said.
Wheeler responded by referring to the results of the BNZ-REINZ survey from March which showed that 6.4% of buyers were from overseas (including expats living overseas and those looking to shift to New Zealand), with 25% of those from China.
Spencer's comments were then subject to an exchange in Parliament between Labour Housing Spokesman Phil Twyford and Housing Minister Nick Smith.
Smith described the calls from Opposition MPs for better data collection as a "red herring" as foreign buying did not represent a significant driver of house prices. He referred to a Treasury analysis of IRD figures from 2011 that showed 11% of landlords were non-residents, which suggested that just over 1%.
Elsewhere, Spencer said small business lending had not been particularly affected by the Reserve Bank's high LVR speed limit, given most small businesses had lower LVR mortgages.
He acknowledged that demand for the 'carry trade' from Japan was currently quite strong and may strengthen further as 'retail' investors from Japan saw the gap widen between Japan's near zero interest rates and New Zealand's rising Official Cash Rate (currently 3%)
Spencer noted the bank expected banks to target high LVR growth of around 8% so they had enough of a buffer to the 10% target.
Auckland housing supply
Meanwhile, Wheeler said there was some discussion about the extent of the housing shortage in Auckland after the delivery of fresh 2013 census figures. Before the figures there had been estimates of a shortage of between 25,000 to 30,000 houses, but that the fresh figures had caused some to suggest the shortage was closer to 5,000 to 10,000. NZIER Principal Economist Shamubeel Eaqub made similar comments in this Double Shot Interview published on April 17.
Wheeler and Spencer again rejected MPs' suggestions for a regional LVR system, saying they were impractical and had not been adopted overseas.
They also rejected Williams' suggestion that a predominance of cash buyers in Auckland meant the high LVR speed limit was ineffective there.
They pointed to a significant fall in house sales volumes in Auckland since the October introduction of the limit. "The market is driven very much by credit," said Spencer.
(Updated with more details, links to video)
6 Comments
Knowing where your bread and butter is coming from would be a good idea, even if someone in Government has to learn what counts in this day and age.
Remembering who you arranged it with, would be even better, I say.
Knowing where to apply the leverage and when to stop, would be nice.
Knowing who imports what and where and why would be sensible.
Remembering legal highs and what not, would be pragmatic.
Knowing how many workers are employed in the sex industy to date,might account for some of the rentals needed. We should not have to take this unknown fact, lying down.
Remembering the family unit and how it used to be, but now split in two, might account for the rest of the rental needs as is WFF and rental and largely immigrant and student growth. This counts after all.
Remembering who made it legal and above board, classic Labour.
Not forgetting National who is carrying on the charade, implemented and suplemented.
Governments have a lot to answer for.
Especially when they are in on the act and have rentals of their own, so enjoy the capital gains and the tax evasions, sorry " legal-ised avoidance", in todays parlance.
Perhaps they could talk amongst themselves and account for a few, or are they deleveraging now?, I cannot possibly recall.
Fancy the Reserve Bank agreeing with the Opposition, maybe they are planning on being useful in future and just hedging their bets, until later in the year, around election time, I will warrant.
Also, I am sure that Customs and Excise and the IRD can count...they have to just get their facts straight. On the Customs side, they know who is resident or just visiting. On the IRD side they should actually know who owns what and who owes what to whom.
Big houses and many of them are hard to miss. Just ask them where the main account is and follow the money and their nose.
Or just ask the Banks for an estimate, they could be almost fractionally exact to a decimal place or two, in the big scheme of things.
Those who flip flipping houses and who act as rentier landlords are not totally exempt from taxes, but they are from Capital Gains, depending on perspectives and which floor they crossed in the process, or what currency they are currently using and applying.
No small wonder that there are no affordable houses, being built.
The left does not know what the right is doing. But the RBNZ, should.
It would not be in the Governments purview and memory to recall, just who benefits and who doesn't from stalling and quibbling and prevaricating.
If you do not know why by now, then what the hell is the use of the "Reserve Bank and OCR", in my estimation. Superfluous.?
Eh...Betty...Eh Deputy...Eh. RBNZ.?
Source: Statistics New Zealand
In Auckland Region, 61.5 percent of households in occupied private dwellings owned the dwelling or held it in a family trust.
For New Zealand as a whole, 64.8 percent of households in occupied private dwellings owned the dwelling or held it in a family trust.
Number of households = 469,497
So a shortfall of 25,129 owner occupied dwellings to match occupancy rate for rest of nz. 64,889 more needed for 70% owner/occupier rate.
Well short of the near 75% owner/occupier rate enjoyed back in 1991
Speaking of doing what you can with poor data, this is the current Auckland Median house price compared to volume of Foreign Exchange transactions made within New Zealand by month.
https://www.dropbox.com/s/71tlrjxyt3ztapy/AuckMedFXlocal.png
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