By Bernard Hickey
Prime Minister John Key has rejected Winston Peters' call for a ban on non-resident buying of houses, saying he saw little evidence it was a problem, given both rents and prices were no longer rising so fast in Auckland.
Key also downplayed the need for an official inquiry or Government collection of data on the residency of foreign owners. He said such restrictions had not worked in Australia and could catch many third or fourth generation New Zealand residents with Asian or Indian sounding names.
Key said the Government did not record all the data on the residency of owners and the only data collected was not reliable.
"My understanding from talking to Tony Alexander was the way he got his data was literally to look at the surname and if it sounded Asian then he counted them as non-resident. That's a fairly heroic assumption. He himself said to me he didn't think it was a massive problem today. He just thinks it could be quite a big problem in 20 years time," Key told his weekly post-cabinet news conference in Wellington.
"Secondly, if you have a look at the most recent data from Quotable Value, residential house prices have risen by a very tiny amount in the last three months. That's probably as a result of what's happened with the LVR restrictions and if indeed the market was solely being driven by rich foreign investors buying houses and not renting them, and not living here, A, you'd see a lot of empty houses in Auckland, and I don't see a lot of evidence of that and secondly they would be unaffected by LVRs because they're very unlikely to be the sort people having to borrow enormous amounts from the bank," Key said.
"Some people may have a perception that that's a big issue, and I'm not saying some houses don't get sold to foreigners, but there's all sorts of reasons why that might happen, including quite well off parents buying an apartment for their child while they're studying in New Zealand. It could be they long term want to emigrate and they are going through the process."
Key said any restrictions could have all sorts of unintended consequences.
"Would you stop very wealthy people who might buy a high country station from making those purchases? Would that be logical because it doesn't have any impact on residential housing, say in Auckland. What would you do about someone who's been out of the country for a long time. Are they still a New Zealander or are they a non-resident for those purposes?," Key said.
Key then referred to restrictions in Australia "where it's quite challenging to buy a property unless it's new, and there's no evidence there's no evidence that it's done much to the property market."
'Not a problem at the moment'
Asked if the Government should hold an inquiry to end the debate, he said: "The indications at the moment is that it's not a problem. There may be a perception that they are a significant force in terms of buyers in the market. It's very difficult to assess that accurately for anyone. I don't think we have that data. It's one of those things that gets raised. Whether in reality makes a difference is quite a different thing."
Key said the Government had no plans for an inquiry or to legislate to get the data.
"There are some challenges to getting the data. If the house is bought in the name of a trust or a company then who actually is the beneficial owner if the directors are non-resident? It's not so straight forward."
Key said he also did not see any evidence non-resident buyers were buying properties and then leaving them un-occupied.
"Are rental prices going down in Auckland because so many houses being purchased in Auckland are not being lived in. The answer to that question is no. Have prices been continuing to gallop away and the answer to that on the most recent data is no because of some of the changes that have been made," he said.
Key said the main problem in Auckland's housing market was a lack of supply, given just 4,000 new homes had been built in the last three to four years when around 13,500 were needed to cope with natural population growth and net migration.
"It's a supply side issue. If we continue to build houses I think we'll cover it."
'Bottom line?'
Key said he would not get into bottom line negotiations with Winston Peters or anyone before the election result. Peters told TVNZ's Q+A programme that such a ban on non-resident buying was a 'bottom line' in any coalition negotiations.
"On Q+A I think he said it's always been an issue for New Zealand First, but it wasn't actually in 1996 or 2005 when we had negotiations."
Key warned that blocking foreign owners could also hurt New Zealanders.
"If you have a look at the foreign purchasers and let's say for a moment you completely take them out of the market that also has a whole set of implications. If foreigners are buying some houses then they are houses that presumably have been built by New Zealanders and created jobs. That probably supports the underlying value of their homes at the moment," Key said.
"If you really take a step back. Winston Peters is really making an argument which is about New Zealand not having international connectedness. He doesn't really want foreigners to really come to New Zealand and he doesn't want foreigners to purchase property in New Zealand and he doesn't want New Zealanders to trade with other countries. He's opposed to FTAs. He didn't sign up to the China FTA, which happens to be on most measures our largest counterpart. That's a valid proposition for someone to hold. It's just not the one I hold, because if you want New Zealand to be prosperous and successful then you need to have New Zealand engaged with the world."
Key again rejected the need for an inquiry into non-resident buying, at least for now.
'Crude analysis'
"I haven't seen any evidence to support a need for it. You can ask me what is a hypothetical question and I can't say that one day it's not something we're going to look at," Key said, referring again to BNZ Chief Economist Tony Alexander's research.
"The only person who's made a claim this is a significant issue is Tony Alexander and in the end he said he didn't have evidence to support what he was saying because no one records this data. He had to use a crude analysis of looking at someone's surname. Your surname could be an Asian sounding surname, but you might be a third generation New Zealander. Certainly even if you put restrictions on foreigners they'll then capture that person," he said, referring to New Zealand having 250,000 residents of Chinese ethnicity and over 100,000 of Indian ethnicity.
"You could get data. I'm not saying it's impossible. It's challenging because of the structure of the way that people sometimes buy houses. Secondly, it would take a long time to get that data and for it to be robust," he said.
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