By Bernard Hickey
Finance Minister Bill English has denied demand from non-resident investors is a major cause of house price inflation, instead arguing that 'anti-sprawl' planning policies supported by the Green Party were more to blame than buying from China.
English was asked in Parliamentary question time by Green Party Co-Leader Russel Norman about a recent BNZ REINZ survey showing non-resident buying was responsible for up to 10% of purchases and that buying from China had risen to become 25% of non-resident buying.
"The BNZ survey I saw said it was about 6 houses in every 100 that are foreign purchased, and about a quarter of those are being purchased by Chinese, which means one and a half houses in every 100 may be being purchased by people that real estate agents think are residents of China," English said.
Norman asked at what proportion of sales the Government would consider foreign buying to be a problem.
"We don't have the same problem about them being foreign as the Greens do. What we have a problem with is the very high cost of housing in New Zealand to New Zealanders and all the analysis shows that the fundamental driver of the high cost of housing is not the Greens' friends from China, it is the Greens' friends in the planning departments of our City Councils who insist on blocking new development of new housing," English said.
"So the Greens are a much bigger enemy of affordability of housing in New Zealand than the Chinese have ever been," he said.
Norman then asked if increasing demand from foreign home buyers increased prices "or is this a special kind of market where a big increase in demand has no effect on prices?"
English said it was not clear there had been an increase in demand from foreign buyers.
"It's not obvious that there's a big increase in demand from offshore buyers. There's some anecdotal evidence that that is the case and I know it's certainly believed by some people, but it's yet to be established," English said.
"The fundamental driver of the increase in housing is the restrictive planning policy, which means that when there's more demand, whether it's foreign, or in this case New Zealanders who have stopped migrating and are staying home, and more people who are arriving in New Zealand as migrants, when those factors of demand are rising, the supply cannot react to it," he said.
"All around the world more restrictive planning mean higher prices and more volatile prices and the Greens back that kind of policy. They should be backing the Government on getting rid of that kind of policy if they're really concerned about locking low and middle income New Zealanders out of the housing market."
Norman then asked English if he agreed with Auckland real estate agent Adam Wang that "ambiguous laws" around capital gains taxes were helping drive an increase in foreign buying.
English said he couldn't understand why Green policies supported policies that "have the effect of driving the value of leafy suburbs at the expense of middle income and low income New Zealanders."
56 Comments
How slippery can you get
If you dont ask the right questions you never get the right answers
What a bunch of stupid questions from Russel Norman
What a bunch of snotty replies from Bill English
Questions should have been as follows
Q: How many houses were sold to non-residents in the last year
A: don't know, we dont have the data
Q: How many residential properties are currently owned by non-residents
A: Don't know, we don't have the data
Q: In what regions were the purchases by non-residents located
A: dont know, we dont have the data
Q: How much over GV were each of the purchases transacted at
A: Dont know, we dont have the data
Q: Well, if you dont know, how can you possibly govern
The australian policy of only allowing foreign buyers to buy new houses seems a sensible policy to take the heat out of this issue and reduce the impact on new home owners and other New Zealanders. The intensification of housing in the inner areas of cities such as Auckland is both desirable and inevitable and can be accomplished in ways that enhance the community. Modern urban planning has learnt a great deal from the mistakes of the past. Look to cities like Amsterdam for good models.
Australian policy has had little effect Apple tree, see below.
http://www.macrobusiness.com.au/2014/03/how-foreign-purchasers-side-ste…
Fact: Liverpool UK has been shrinking in population for 30 years, has a green belt, and still has unaffordable housing (median multiple between 5 and 6) in spite of its small average house size.
Houston, Dallas, Austin, Atlanta, Charlotte and Raleigh have been growing between 20% and 25% per decade without their house prices going much above a median multiple of 3; and the housing is large.
Bill English is 100% right. The people still denying this in the face of undeniable evidence need to get a conscience about the effects on the young and renters.
Hang on, are you sure about your Liverpool example?
While the population is down compared to the late 80s/early 90s, it has been going up in recent years, and simultaneously with the period where the population is increasing (the last few years) house prices have been dropping, and dropping faster than in other areas.
FACT (I think) : Houston, Dallas, Austin, Atlanta, Charlotte and Raleigh don't have green belts and have different building act type laws compared to Liverpool. Everything in America is cheaper - maybe if people want affordable they need to go to the US or the provinces, either way it is really difficult for working.
I blame the Green Chinese , or should that be the Chinese Greens .... heck , you gotta cover all the bases ...
... and for once , I'm making no less sense than the Right Honourable Wild Bill ...
Ah Bill ... Billy Boy .... youse lot been in charge since 2008 .... you've had 5 and a half years to get busy on the property bubble which erupted in 2002 .. ... WAKEY WAKEY !!!
I think Hugh feels strongly that restricting house sales to foreigners will make no difference to house prices so shouldn't be done (and apparently the Greens plan to also build a whole lot of $300000 homes doesn't meet with Hugh's approval either).
Boatman, given all his all caps posting on what he would vote for over the past couple of months, will presumably be voting Green though.
I wrote to the Press thanking David Killick for his article and giving my thoughts....
I think the plans are a cover up. They basically mean very little except for zoning (or the lack of it) which comes from LG and the NZTA plans, road funding assistance to LG and RoNS which is the stick that Wellington uses to influence LG. Most areas have some sort of battle with Wellington re wanting more infrastructure, for example Ashburton with its bridge/SH1 bypass. Mostly they want Wellington to do more, they never seem to ask to keep more of their taxes so they can do it themselves.
I think Christchurch has made little progress since the earthquakes because the government has prioritised upholding property values especially CBD ones over allowing people freedom to rebuild as they see fit. I could think of dozens of better things to spend $165million on rather than the Green Frame (see the list below). Also National have an aversion to raising taxes, even local ones. So LG gets no benefit taxation wise from the insurance spend. Thirdly the rebuild was/is a lower priority than getting the government books back into surplus. National have a 'rock star economy' story to sell to the whole country and they will not let 'facts on the ground' in Christchurch interfere with this.
I see you got a lot of criticism for being negative and this happens to me a lot. In particular my father tells me this.
I am not sure how to handle this or even what it means.
Often when I describe and give examples of how some things are better overseas they will agree with me, although frequently the response is a feeble excuse, population and distance are popular ones. I use Finland to counter these arguments because Finland has the same population density as NZ.
If I get past these hurdles then often I am exposed to some random left field re-invent wheel solution. Recently I was discussing transport with a friend who has a Phd in engineering and suddenly he was spouting off about needing a road tax for travelling every metre of every road. No thought on if this had been tried anywhere in the world...
Michael Bassett from the NZ Initiative made the same mistake in their third housing affordability report. After going around the world and looking at best practices their concluding report had recommendations that weren't used anywhere (for good reason too because they had obvious flaws).
So suggesting something that works overseas and has good theoretical backing usually results in no one in NZ agreeing with me.
For transport we could easily give a few cents PAYE to LG to fund more transport infrastructure, the purpose of this being to increase mobility and housing affordability (by accessing new areas with cheaper properties). CG could monitor and publish data on medium household incomes and house values. How much of the urban area was accessible in under 30 mins (a desirable commuting time) and under 60 mins (maximum acceptable amount). Plus other transport statistics.
Transport wise voters decide what they want. In Christchurch we could....
1. Install commuter rail on the existing tracks, possibly double lane them.
2. Put another bridge over the Waimakariri and creating a bypass for the city, relieving pressure on existing roads, also shortening the distance from Rolleston to Rangiora. Good place for the below satellite town.
3. Put a satellite town with road and possible public transport right of way somewhere.
4. Create a cycle friendly urban housing area -say around TaiTapu to Lincoln area.
5. Buy up a huge block around Canterbury University large enough to rehouse the red-zone and replacing the traditional housing with high density apartment and terrace housing. Prof Susan Krumdieck's plan.
The good thing about this approach is it is evolutionary and self correcting. It is adaptive not prescriptive.
Voters would be aware that other urban areas are also improving their infrastructure too, so if housing affordability and mobility improve more elsewhere then it is likely that those areas will attract more people and their tax dollars. Voters get two chances to influence the decision makers, once in the polling booth, secondly with their feet.
My sister in law from Finland who went with my wife today to ChCh's CBD from Amberley leaving at 7am. It took an hour and a half. Slow the last 20km (pretty much all the motorway and then residential roads were stop start). This is quite standard as a neighbour was telling me. Thankfully I work shifts so not so bad for me and my wife mainly works from home. Anyway my sister in law understood straight away how this system would make Canterbury a more attractive place to live. Of course well funded LG is a familiar and expected institution for Northern Europeans.
Why is this idea so hard to sell to kiwis?
Well, they were formally giving confidence and supply to the 1999-2002 (when there wasn't a housing boom) government in return for some spending to encourage energy efficiency, and that is almost the same thing as being in charge of the country when there has been a housing boom.
In fact, the Green Party may well also be responsible for the 1920's depression, the adoption of slavery in the U.S. colonies, and the Black Death.
To continue to belt on about the low proportion of non-resident home ownership is sneaky. What about the proportion of home ownership by recent arrivals? i.e. people that have recently gained residency and bought a house.
The point is that these 2 categories are essentially the same - both buy properties in the domestic market (non-tradable) using income earned in a foreign market. This is not a level playing field for kiwis.
When setting the rules on NZ residency, does the government factor in this enormous social cost? Housing is a fundamental need.
What is the average house price in Auckland? $600k? (I don't know). At $600k, you need a deposit of $120k. How long does that take on the average wage in Auckland? And can you then afford repayments on a $480k loan on the average wage in Auckland?
Dear Hugh
I acknowledge that you have devoted huge energy and time to the issue of housing and that you are advocating for afforadable housing which is very important from a variety of reasons.
I fully support the idea to reduce land cost and the complaince costs and council regualtions.
it seems that you have become preoccupied with a rather narrow narrative of land supply and town planning and tend to ignore many relevant systemic issues that are as important as the issue you focus on. I wish you could broaden your view to include factors such as;
Non residents inflating markets
Hot money pouring in NZ via residenst / non residents and commercail entities
Monoply/Duoploy of contruction materials
Tax incentives for property
energy costs
vested interest of the banks to inflate assesst prices
Current Govt s tendency to blame it on others and abdicate their own responsibilty in this matter and their political expediency to appease local and foriegn intersts over national interests. finger pointing to past adminstration and Greens is just lame.
failure of past and current Govt. to collect essential data about housing
kind regards
Well saidNomad.
Hugh never comments on many of the factors you mention. Tunnel vision, I suspect.
Start by reducing immigration to longer term levels and the Auckland housing deficit would disappear and prices would correct over time. Immigration other than for specific need should be stopped dead for the next few years. Auckland gets 60%+ of immigration flow. It does not matter where they originate except that returning New Zealanders do have family connections that make it easier to move closer to where their roots are. Others still want to be close to an international airport either because they want easy access to their source country or they intend to use us as a staging point to get to Oz?
Did you know that a bad case of gout can be remedied with fringe sprawl housing and infrastructure funding? This is also the remedy for pretty much every type of carpet stain. Is your car burning oil? Fix it with fringe sprawl housing and subsidised infrastructure. Fringe sprawl housing and infrastructure will also fix insomnia and rodent infestations.
but wait, there's more. my sore back was getting me down. i just didn't have that pep and mobility to live a fulfilled life. i'd tried all those fads and quack cures. but then fringe sprawl and infrastructure funding came along and now i'm good as new, taller. and i became a world champion gymnast in both pommel horse and rings. thank you fringe sprawl and infrastructure funding.
Hugh,
I do respect your opinions and back up research.
However there is little ,if any, reference to the major influence on Auckland prices and supply.
That factor is immigration and/or overseas speculators.
Take away the speed of incoming population and you have a different ball game.
Add in the facts that there are significant empty properties owned from overseas and you have more potential for altering supply imbalance.
Cheers Basel
Maybe thus article from today will help given some context,
http://www.thewire.com/global/2014/03/worlds-youngest-billionaire-appears-be-human-tax-dodge/359395/
Won't work Hugh
You can have all the regulations and controls in the world and they will still be circumvented
Australia has some of the toughest rules for foreigners to buy residential property but industry insiders say rorting is prevalent. The House Economics Committee has released the terms of reference for its inquiry into foreign buyers, which was launched in response to fears that locals are being priced out of the market by cashed-up foreigners. The head of financial services at global law firm Baker MacKenzie, says Australia has greater restrictions than many comparable countries. "If we compare ourselves to our peers in places like New Zealand, the US, Canada, UK ... those countries have very little restrictions". By contrast, if you want to buy an established property you have to be a resident" He says he always asks whether paperwork is in order and "the main answer to that is they say 'Well, we'll take care of that, that's not a problem'". Mr Fuggle says buyers can easily circumvent the rules by getting a resident to buy property on their behalf. That would be very difficult to detect and I think it would be quite difficult to police ... anecdotally it seems to be a relatively prevalent activity.
The big 4 Australian Banks offer products which facilitate foreign nationals to circumvent the rules. Read how it's done
http://au.finance.yahoo.com/news/rorting-australias-tough-foreign-prope…
The market may soon solve the problem
"And once the Hong Kong liquidation frenzy is over, and leaves the city in a state of shock, watch as the great Chinese selling horde stampedes from Los Angeles, to New York, to London, Zurich and Geneva, and leave not a single 50% off sign in its wake."
How long before the liquidation reaches Sydney, Vancover, Auckland?
Not that sort of "oh" Ive said for a long time it was make believe....no one was buying chinese goods, so they build empty cities out of town...
Funny but they built like mad, just like you wanted to.
"oh..." as in is that what tips us over into a greater depression...
regards
Where exactly in Auckland are these "'anti-sprawl planning policies supported by the Green Party'?
Dealing with this on a daily basis all I come across in the District Plans, outside a few select areas, is pro-sprawl planning policy. We can't build cheap sprawl houses because they don't sell (the new $400K plus 'affordable' houses in Weymouth are surrounded by $300K properties). We can easily sell affordable apartments in more central areas, but aren't allowed to build them. Basically because the (frequently) National Party supporters who all ready live there object.
The sad truth is that the expansion outlet, caused directly by the restrictive MUL/RUB squiggles on maps, is of course the lifestyle blocks.
Chewing up roods, perches and whole square miles of good country soil, at very low densities, all to grow ponies and thistles, and to spend hours in traffic queues on the associated commutes for groceries, schools and work.
Consequences are such a bother, eh? Especially as the MUL land value multiple is, according to the Productivity Commish, summat in the region of 10 times: rural landtops out round $50K/ha. Urban, just over that sqiggle on the map, same paddock, is $500K.
Truly, as the Greenish like to say, everything Is connected to everything else...
Just not perhaps in the way they'd Imagined.
I used to consider Waymad had the smarts - but the snail has retracted into his shell, obviously. Recoiled back to familiar, comfortable ground. Understandable - but wrong.
Past-peak (and the only thing that has changed since 2005 is that we have used a further 260 billion barrels of the key finite resource) the need is to be sustainable past the bottleneck/crash point.
Intense urbanising doesn't do that, neither does sprawl, nor Big Ag.
So your lower limit of section-size has to be that which can cope with drainage/effluent, and either the section has space for food-production, or there need to be allotment/commons at close hubs.
Lifestyle-block sizes are capable of being self-sufficient, and closer to sustainable, than any other option - and they have the aqdvantage of enforcing population limits. Not that mother nature won't do that anyway.
So Bill wants to sprawl but little bro Connor wants to build up:
http://tvnz.co.nz/national-news/nz-must-stop-urban-sprawl-protect-farml…
Family dinners must be interesting...
My fingers tremble as I write this but for once I agree with the Greens. If we gobble up all our productive land to house people the time will come when we don't earn enough foreign exchange to fund the imports necessary to run the country. The obvious solution is to reduce the population and cut the cake into larger pieces but orthodox economics is hell bent on bigger is better.
Also note that apart from Chch there isnt a huge amount of solid evidence that building more houses will see them occupied. On top of that just look at China today and the US in the past for empty lots never occupied and the outcomes...
"Cut the cake into larger pieces", well take Saudi, today I think the wealth per capita has fallen to $6000US against $26k some decades ago, and they face an arab sping. So how has having more ppl fixed things long term? at best it was can kicking. Eqypt, no longer exports oil, is now broke and in danger of collapse, too many mouths to feed.
So yes I agree...
regards
A simple multichoice question for you Mr Hugh " Govt must focus on fringe land supply and infrastructure financing" P:
Which is more expensive:
a - 3000 metres of infrastructure (roads & reserves, comms, water, sewerage etc.)
b - 300 metres of infrastructure?
No need for links or long spiels about Houston - just say which you think is cheaper?
Tell me Hugh - which generates more traffic?:
(a) 100 sprawl houses, each with 2-4 cars (200-400 cars) where every occupant must drive to get anywhere
(b) 100 dwellings with 80 carparks and easy walking access to public transport, shops, schools, parks and workplaces.
Traffic is worst going into/through the CBD including arterial roads.
Only 25% of Auckland's jobs are in the CBD. So, assuming no public transport or car sharing and everyone works your 2-4 sprawl cars will add .5-1 cars to CBD traffic.
Anyone living in the CBD will definitely add to CBD traffic everytime they leave the house.
The question is which generates more traffic. I'll give you a clue - it's (a). You can confirm this by talking to Traffic Design Group or a similar consulting firm who send people out to sit there and count car trips.
You might be suprised to learn that someone living in the CBD without a car does not "definitely add to CBD traffic everytime they leave the house" because it is possible/preferrable to leave the dwelling without using a car. you may also be suprised that traffic generation in sprawlville is not exclusivly related to people getting to their jobs.
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