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The Government is finally moving in the right direction on housing and migration

The Government is finally moving in the right direction on housing and migration

By David Hargreaves

Well, if you scream for long enough they will listen, eventually.

The apparently casual remarks by Prime Minister John Key on TVNZ's Q+A programme at the weekend represent the Government's final acceptance that it really does need to do something material (via some taxation measures) about the demand issues helping to drive Auckland's house prices. It's also the clearest and most unambiguous admission from the Government that it really can't contemplate banning foreign investors - because our trade deals won't let it.

I've certainly in the past commented in favour of Australian-style foreign investment curbs. But I guess you can't have your cake and eat it. We want free trade with as many countries as possible. It's churlish to then turn around and say: "We want you to buy all our products but we'll be darned if you can buy any of our houses." I wonder though if it would still be possible to at least encourage offshore investors to buy new rather than existing houses. Perhaps that carrot could be offered through whatever taxation measures are come up with - so the buyer of new housing stock gets some advantage over those buying existing stock.

But to go back to Key's remarks. It is worth remembering - because for some reason it seemed to get overlooked in all the discussion about the 'bright-line' test and the two-year tax selling window - that the Government indicated prior to the Budget in May it would be looking at introducing withholding tax next year for offshore-based house buyers. But notwithstanding that a line in the sand had already been lightly pencilled in, Key's comments show a Government at last prepared to face up to the fact that it can no longer employ the 'look no hands' approach.

Basic and unpleasant instincts

The Government's moves toward some form of intervention have probably been assisted by the strident efforts of the Labour Party in provoking some of the more basic and unpleasant instincts among some in the community. What the Government's now seemingly about to propose looks reasonable by comparison. Stamp duty and/or land tax looks eminently more practical to me than going for a nuclear option such as only allowing New Zealand citizens to buy NZ houses.

I suppose if the Government had announced moves aimed at foreign ownership of properties two years ago (as it should have) then it might have looked more interventionist than your average National Party ever wants to look. (Investment and making money = free enterprise and therefore GOOD, but intervention and prevention = socialism and therefore BAD!)

Likewise the idea, officially announced as policy at the weekend, that migrants be encouraged to go to places other than Auckland when they arrive in the country is overdue as well, but nevertheless welcome.

Some people might say introduction of these new measures is simply too late. But I don't think anything's too late till you die. Measures that can make a positive difference can and should be tried at any time, even if as in the case of the Government coming to the party on these issues, the measures are overdue.

The door is open

All I would say is that now Key has opened the door firmly to the idea of taxation on purchase of property from offshore then so the Government should get on with it as soon as possible - even if it's only a firm indication of a likely timeframe for introduction of such measures. As mentioned earlier, there was the pre-budget announcement of a potential withholding tax. Now the PM's said what he has said, let's see something substantive put on the table as soon as possible.

Will introduction of taxes on foreign-based buyers work? You know, it is one of those questions that will never be answered satisfactorily. Once taxes and duties have been introduced we will only have the house sales patterns from that point onwards as a guide. So, if foreign investment still in future seems to be at strong levels - and bear in mind we still don't have good information on the extent of it now, no matter what Labour tries to say - then people might say the new tax rules have 'failed'. But of course the problem is, you don't have the counterfactual for comparison. Once you introduce new taxes and the like you only know what has happened not what MIGHT have happened if the taxes hadn't been introduced.

The fact of the matter is, no taxes are going to stop people investing if they want to invest and yes, people will always look for ways around taxes.

But the alternative is not and never was tenable. If other countries have taxes and duties we NEED them too. Otherwise we are advertised internationally as a soft touch for the investors - as has been happening.

Demand must be reduced

The fact of the matter is, New Zealand moving to some form of sensible taxation of offshore housing investors must help to reduce offshore demand. Let's face it our little ol' country miles away from anywhere isn't going to be uppermost in the minds of offshore investors unless we put it there by offering massive investment incentives as per the current situation.

So, get moving Government, the PM has spoken. Why not have something announced before the end of the year? This is too important to wait for next year's Budget.

Finally, on the migration measures and the policy of encouraging immigrants to go somewhere other than Auckland, well bring it on, it is potentially a win-win.

As a country we've just accepted over the years that everything gravitates to Auckland. As a long time resident of Wellington I for years (and prior to relocation to Auckland) said to anybody who would listen that I would never live in Auckland,. which just goes to show that you should never say never.

City of opportunity

But the reason people do move to Auckland is for opportunities, perceived and real.

So, encouraging migrants to live elsewhere has the twin benefit of reducing the pressure on Auckland's pressured infrastructure while at the same time giving an infusion of fresh blood, talent and ideas to regional New Zealand. It would be fantastic to see more job-creating, vibrant new enterprises growing up in the regions.

We have got ourselves into too much of a mindset of saying: "High immigration bad, high foreign investment bad" whereas the reality is we are not utilising either to our best advantage. Make both work for us. Ultimately we can control what comes across our borders whether it be people or money. And by channeling both we can stimulate the economy.

All I would say to the Government is: Boy, you took your time, but welcome to the real world anyway.

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33 Comments

What can I say other than for the past 5 years I've been saying, in the short-term, it's a demand-side problem and the solution was always going to be a demand-side solution

Note - the supply-siders have gone quiet

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I have my doubts that the government will actually introduce these measures. Just a typical case of delay, extend, and pretend. They forbidden by the FTA from enacting discriminatory legislation which only covers foreign investors. I think they are discussing it so early on, because they want to placate public concerns about what's happening in Auckland, but are gambling that the public will forget about it by the next election as they will become distracted by some other issue.

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You mean we won't see Precious Smitty clambering thru muddy back blocks clutching his damn clip board anymore - damn - I wish Billy T was still around to take the piss out of that image.

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Well in future Mr. Smith is likely going to be shepherding Chinese property speculators around on his tiki tours, rather than the NZ media.

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I'm a supply sider and I haven't gone quiet.

THE PROBLEM IS THE ARTIFICIAL AND UNNECESSARY CONSTRAINTS PREVENTING SUPPLY FROM RESPONDING TO DEMAND

Loud enough for you?

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.....ah ha..remove the constraints and we can supply the whole of China, India and the rest arriving inwaves. Brilliant.....send memo to JK ...he needs to hear this...I shoulda realised it was such an easy fix..

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Me either. Just look at AKL house prices and ask yourself how much the prospect of various taxes and restrictions has impacted the market. Zero.

Remember that the Special Housing Accord is failing miserably and AC/MBIE finally admitted it in their last progress report. And, as long as there is a such a shortfall of housing - take your pick between 20,000 and 80,000 dwellings - house prices will remain astronomical.

It just gets a bit repetitive every time the recently woken government proposes another marginal tinker to demand pointing out that the latest mad scheme won't work. Just take it as read until houses get built.

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THE PROBLEM IS THE ARTIFICIAL AND UNNECESSARY CONSTRAINTS PREVENTING SUPPLY FROM RESPONDING TO DEMAND
.......
Supply is the tortoise demand is the hare (except the hare won't go to sleep. The hare is Harcourt's Shanghai and all the other beneficiaries of our demise).

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Reduce immigration to people we need, control property investment / speculation from both here and overseas and the state to compulsory buy up land from land banker and build houses as fast as they did in the 1950s.
Problem solved! Except the Government will loose the support of the wealthy property investors, so it will never be done.

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Nothing 'churlish' at all about "We want you to buy all our products but we'll be darned if you can buy any of our houses."

It is simply common sense

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Totally agree.

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i'm good with being churlish on this issue.

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And, of course, it is so simple for us to buy houses in China.....not

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You wouldn't make an agreement where you sell your house on condition the buyer has access to your wife and neither does a free trade agreement have to involve the right to invest in housing. The government has a social contract.

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Hahaha......where's GBH....?!?!

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JK's comments on weekend morning TV is a very weak signal regards real intention. Nope, I think all we'll get to the end of this year are the 1 October measures already announced. All he really did on Q+A is acknowledge verbally what they've always known - that the demand side matters. But, as he also stated, they (the National Party/Government) welcome (i.e., encourage) this demand by overseas investors for foreign direct investment in our residential housing market, as well as in our productive land and industry.

Nothing has changed - that was simply a concession/recognition about the demand side .. which he still intends to deal with via a supply-side solution (regardless of how futile that is proving to be).

The spigot remains wide open - expect more pressure.

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who is going to police this and will we see the bad old days of morning raids to round up those moving to auckland as soon as they are in.
the new target i heard was 15 Mil for NZ not sure how you will fit the 12 to 13 in auckland to reach that

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The 15 mill figure is not justified by economics. Read treasury paper 14-10. I tend to think the government is biased towards the property sector.

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Yikes

There's a bun-fight going on over in Duncan Garner's corner of the world
http://www.radiolive.co.nz/DUNCAN-GARNER-Read-this---racism-or-realism-…

This is getting serious - they've discovered Hamilton
Read the letter and the comments before they take them down

Soon Dr Nick Smith will be known as the Dr Zachary Smith from "Lost in Space" somewhere

zipping back and forth - between Auckland and Hamilton
The dike has sprung a leak - how many fingers has he got - if true - this is now out of control

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Interesting the use of the word Jafa in the link by Icon. If I was to substitute the word "Asian" for the 2nd "a" in Jafa would I be called racist? (Yet it has been Ok to lambaste people from AKL for decades)

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Very good point.
A vexed issue I have wrestled with for some time
Have been going to put up a post about it, then it becomes too hard
One could write a thesis about it

It's about collective groupings of people or things and giving them a "collective name"
As you say Jafa's define a collective of people regardless of their origins

There are a whole bunch of them ie
Baby Boomers, Old Age pensioners, townies, cockies, yanks, kiwis, ockers, mainlanders, poms, canucks, maori, palefaces, whitefaces, pakehas, GenY, GenX, welfare recipients, State House renters

I'm sure I could come up with some more

The simple issue is this
We all know and respect someone somewhere who is chinese

It has now become a different issue when it comes to the collective
How do you refer to that collective that doesn't have connotations of the personal

I can't think of a term that denotes a room full of chinese that is considered endearing
Perhaps there is someone out there who can help us out?

Xingmowang? Chairman Moa?, Steven? Anybody?

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Here's a taste of what happened in Sydney on the weekend

SOLD in 30 minutes - 93 of 106 apartments in 24 level tower block

This was in Blacktown which was once the Otara of Sydney
http://news.domain.com.au/domain/real-estate-news/firsthome-buyers-swoo…

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At least the Australian Government has acknowledged there is a real demand problem and are trying to put in serious measures to stop Chinese speculation in housing, which is more than you could say for John Key & co.

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David. You just repeat a myth. You need to do some research. It is not true everything gravitates to Auckland. True people gravitate from Mumbai to Auckland and for good reason. But internal migration in New Zealand is out, repeat out of Auckland. People gravitate out of Auckland to the rest of New Zealand again for good reason and have been doing so some years.
http://statisticsnz.govt.nz/browse_for_stats/population/Migration/inter…
Problem with the nats latest move is the problems they have caused in Auckland, they are now proposing to spread around. No thanks.

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Houses aren't products.

if they want to buy houses we can ship them to their home country.

Capital purchases aren't trade products.
why does government and economic experts understand the difference between trade items and capital items?????

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That's what I reckon too, but there's this whole nasty "investor" stuff that scuppers that

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For what its worth I agree with you cowboy. I know its a contrary position to what I took the other day, but I was pissed at the fact that its taken the prospect that the precious diddums of "Middle New Zealand" being outpriced in the housing market to rouse them out of their smug self-satisfaction. People like me have being warning about the oncoming corporate powergrab and takeover of our country for years. We have been maligned and denigrated and told to go out and get a job rather than causing so much of a fuss. Can't help but feel a degree of schadenfreude that others will have to suffer along with those like me.

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How long until this commentator gets shut down by the Government?

http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=1…

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upon reading I have to agree seems common sense to me, so I would think we will see a couple of spin pieces refuting his points later today

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Personally I think that commentator has lost his way Mortgage Belt.

He blames the private enterprise model for failures and their desires for profit....I had trouble reading past that....

National are not a business minded party.....and that is why we are getting into trouble.....poor contracts, piss poor oversight are the problems and he can't go blaming private enterprise for that!!!

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This Government must be very concerned of losing too many votes to finally act (reluctantly) to protect ordinary NZ home buyers from Chinese investors.
Up until now we have been told it is a supply problem. The problem is that if another 20,000 houses were built and Chinese investors bought them all, then we would be worse off.

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Head down to Barfoots auction rooms at 1.30pm today and watch the Chinese feeding frenzy in action - it is great entertainment! Expect that Barfoots will soon have Mandarin and Cantonese speaking auctioneers as it is getting quite tough for Marian & Co to operate when there are few English speakers in the room.

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Head down to Barfoots auction rooms at 1.30pm today and watch the Chinese feeding frenzy in action - it is great entertainment! Expect that Barfoots will soon have Mandarin and Cantonese speaking auctioneers as it is getting quite tough for Marian & Co to operate when there are few English speakers in the room.

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