By Bernard Hickey
Housing Minister Nick Smith has revealed he has been briefed by the Inland Revenue Department that its data showed the level of overseas ownership of homes in New Zealand was lower than it was in Australia and not having a major impact on house prices.
"The consistent advice that I get from officials is that the level of overseas ownership of homes in New Zealand is very small, that it is having no major effect on the market," Smith told reporters in Parliament before National's weekly caucus meeting.
"I have got some additional data that has come through from the Inland Revenue Department based on those overseas properties that are being tenanted. It shows that the level of overseas ownership in New Zealand is even lower than in Australia," Smith said.
He also noted the Australian parliament was holding an inquiry into foreign ownership rules, "which are not working and are not credible."
"That reinforces to me that this is a blind alley, that we could beat our chests and have officials do a whole lot of work [but] it's not an area that is going to make housing more affordable for Kiwis and that is why I am focused on the issues that will make a difference in making housing more affordable," Smith said.
Smith said those calling for a register of foreign ownership were just wating to play politics.
"I am far more interested in gunning in on the real issues that will make a difference for affordability, and all the advice I have had across the government sector including the Productivity Commission is that the argument over overseas ownership is a complete red herring," he said.
11% of landlords are not resident
Smith then referred to an IRD analysis that was later supplied to Interest.co.nz by Smith's office.
It included an analysis by Treasury of IRD's records of non-residents reporting rental income or losses on New Zealand property. In 2011 there were just over 199,000 taxpayers reporting rental income or losses through personal tax returns. Of those, 88% were residents, 11% were non-residents and 1% were of unknown residency.
Treasury said in the briefing paper that non-residents included New Zealand citizens living overseas, including those who moved overseas but rented out their homes while overseas.
The briefing paper included a chart showing the number of non-resident landlords rose from under 10,000 to over 20,000 between 1997 and 2011, however it said the number of taxpayers with unknown residency had fallen at the same time, suggesting some or all of the growth in non-resident landlords was related to whether the landlords identified their residency.
Treasury said therefore that the data "does not provide evidence for a major shift in foreign ownership over the period."
The analysis then referred to the already well-known results from the BNZ-REINZ survey, which has since been cancelled.
In summary, Treasury said the available data suggested the level of foreign ownership of New Zealand housing remained relatively low, "but the limitations of the data mean that it is difficult to assess the extent to which foreign ownership rates are changing over time."
Budget measures on housing
59 Comments
This confirms the level of poor data. What is "relatively low"? Lower than Australia or lower than Fiji? Of the approx 20,000 retal owning taxpayers, just how many houses did they each own? And what about those rental property owners NOT paying tax?
We need an evidence base from which to draw proper conclusions.
WOW , If this statistic is correct , its scandalous .........are we saying that 11% or one in every 10 ( approx) houses in Auckland is owned by someone not ordinarily resident in NZ ( and that means for tax purposes too ) .
By definition this would not count houses owned by Companies where the shareholders are not in NZ
Quite apart from the housing shortage issue , how much Tax are we bleeding from this fiasco
National are digging this hole deeper and deeper.
"He also noted the Australian parliament was holding an inquiry into foreign ownership rules, 'which are not working and are not credible'."
They are not working because they don't stop foreign buyers, not because there isn't a foreign buyer problem in Australia! Talk about twisting the facts.
Hang on. We know from census that the number of New Zealanders that own their own house is decreasing. While the IRD may be indicating that the number of non-resident landlords that have made themselves known to the IRD has not changed much, this says nothing about home many properties are owned.
To claim negative gearing on NZ property investments an Australian would, I assume, have to declare that investment to Australian authorities in some manner. I don't know if the Australian's have an equivalent of our freedom of information act, but possibly a query from someone in Austrlalia of "How many Australians admit to the AU government to owning NZ property (and how much do they admit to owning)" could be matched to a request to NZ authorities of "How many Australians are known to the NZ government to owning NZ property (and how much are they known to own)"
"Of those, 88% were residents, 11% were non-residents and 1% were of unknown residency.
Treasury said in the briefing paper that non-residents included New Zealand citizens living overseas, including those who moved overseas but rented out their homes while overseas."
So when you take out the Kiwis living overseas for a while, and renting their houses while they're gone, you're looking at a VERY small percentage of foreign ownership.
National is getting a little bit panicky... they don't want to spook property owners who want to see their properties double in value each year or so... at the same time they realise that the growing number of non-property owners is reaching a tipping point and that creates a little bit of a conundrum for them... so the likes of Smith say silly things like... We actually don't know how many properties are owned by overseas investors, we certainly aren't going to do anything realistic to find out, but we can promise you there aren't that many... or something similar....
THIS IS 2011 DATA!!!!!
It does not tell us, how many houses are foreign owned including ones that are not rented, it does not break it down into areas, you can almost guarantee it is far more in Auckland. It does not tell us how much of this 11% has part or all of the rental paid by the govt in the form of topups and other benefits.
11% is actually quite a lot to my mind, anyway and dollars to doughnuts it will be more now, 3 years AFTER these figures.
One Thousand percent correct
If you want to minimise and gray-fade the data about an Auckland problem, use national statistics
Even on a national basis, 11% is still a lot
But why is it that the Minister can only produce 3 year old data for 2011
Again, obfuscation
Yeah, more misdirection, smoke and mirrors here from folks very determined to maintain culpable deniability. Questions arising include, number and value of properties owned, ownership by companies with foreign shareholding, origin of funding and locals/residents holding property for non-residents.
If you can be required to show photo ID to buy beer at any outlet in the country I fail to see how this would be an inconvenience when completing the screeds of paperwork for property purchase. This ID should clearly show nationality of all parties, including listing all shareholders and all directors of all companies and declaration of source of funds.
Better still this could happen as part of the foreign investment process where incoming money is vetted before it can be spent here. Only funding from legitemate sources may be cleared for property purchase. It would also allow control of the level of investment overall.
Assuming there is some credibility to the figures supplied, there may be a real problem if the number of foreign buyerrs substantuially exceeds the number of like sellers. That is the increased number of them. That increase is preventing a resident family from owning that property or is increasing the value of the stock for sale.
Similarly the number of investors as a whole is probably increasing and that means again more competition for stock where immigration numbers also add to the demand against the available supply.
We need a combination of policies that deal with demand as well as the one sided supply issue that ignores demand pressure used by the National led government
1. Deal with immigration numbers based on need and only need
2. Stop foreign buying and incentivise them to liquidate.
3. Change tax rules to balance between investors and occupiers.
You will not get any of these factors to be dealt with by the present adminisration and only a little more likely by any alternative but at least they may recognise the problems and move along rather than stay asleep as now.
Even if you accepted the validity of the calculation, which I don't, you would have to then make a judgement call on the 11% figure.
Mr Key says 11% is low.
My view is that 11% is huge, - huge.
And 11 % is more than enough to have a major influence on the whole sector
Indeed it's high... and if you were looking at Christchurch and Auckland (where most of the foreign investment is taking place - who outside NZ is going to think to invest in Bluff or Whanganui?) That figure is going be closer to 20 perecent foreign owned in our two most supply constrained cities... now tell me that's NOT a problem!
How is 11 or 12% small??? That's 1 in 8 or 1 in 9 rentals!!
We know about a third of properties are rentals so say 1.8m homes or something of that order, then 600,000 rentals means about 70,000 are owned by non residents!!
70,000 homes owned by non residents that's like the whole of Otago! That's a big number not a small one...
Your Otago population figures appear to be incorrect Chris_J.
According to this link the Otago population was estimated at 213,000.
http://en.wikipedia.org/wiki/Otago
According to the link below Dunedin's population is 126,000
http://en.wikipedia.org/wiki/Dunedin
How many people live in each house?? Something of the order 2.5 I suspect. (Hence about 1.8m homes for about 4.43m people).
As I noted, these are only back of the envelope numbers. 70,000 homes is equivalent to a population base of about 180,000 people, which was roughly Otago if Queenstown had remained in Southland (which it was in some official records until quite recently...)
This is absolutely bizarre. Presuming that their "take a stab" figure is correct, how can you say that 11% is "very small"? What then would be a "large" proportion? 50%?
Plus: What proportion of the tax claimed does this represent? These won't be cheapo rental properties in the sticks, it's million dollar houses in Auckland. This will magnify the distortion. And it raises a new issue: So we are giving generous tax breaks to foreigners for rental properties, and then not claiming a CGT on their proceeds?
National might call it piffling; I call it staggering and unacceptable.
I think a little information on property taxation is necessary. Here's the IRD link to property investors you can also view information on speculators and dealers/traders. I have also provided another link on international business. People can flick through the many links on the IRD's website.
https://www.ird.govt.nz/property/property-glossary/
http://www.ird.govt.nz/international/oswithnz/dta/
What I want to know is, while we might now have some 3 year old data on what proportion of landlords are foreign, how many actual properties are owned by them. A huge number of landlords are made up of individuals that may have one or two investment properties.
Theoretically it could be that 88% of the landlords own 50% of the property while just 11% own the other 50%.
This actually tells us nothing useful and again, IT IS 3 YEARS OLD
Oh and the one we have ALL missed.
These figures are based on just those that submitted a tax return, who is prepared to bet that EVERY single foreign landlord puts in a tax return here, then?
Smith is very very silly indeed, to expect people to fall for this, as it will be pulled to bits in the end and then some
Okay so 11% foreign property tax returns in 2011. Each return could constitute a multimillion dollar property portfolio consisting of dozens of residential houses. According to interest.co.nz (here) our accommodation supplement is projected to blow out to 2.2 Billion dollars by 2016 with a lot of that going to foreigners! Not to mention that foreign owners can claim depreciation on chattels, tax free capital gains, and other little tax minimization gimmicks. At what point does middle class New Zealand start marching in the streets because they're getting raped by rent seeking foreign capital.
At what point does middle class NZ stop cashing out to rent seeking foreign capital? Can't have one without the other. If all of these tax gimmicks weren't on offer, then maybe property wouldn't be such an attractive vehicle for investment. Ergo property prices wouldn't keep on marching upwards. Ergo middle NZ would have to find some other means to get rich quick other than constantly flicking property.
The figures also do not tell us how many houses are also actually owned by recent immigrants that continue to stream in.Auction house feedback tells us of the massive Asian presence and yes many of them are possibly Kiwis now following their nationalization but where is the benefit to New Zealand. National tells us they are helping to build the housing required by all the immigrants - well hello. No immigrants - no housing problem. Also no traffic problem, no health problem, no education problem. I really fail to see how we benefit here from the immigration going on. There is actually a revolution going on with social change in Auckland.
I am told there is a point system immigration uses but surely a major point would be how the applicant skills will fill a gap. 2$ shops, station attendants and cafes can be managed quite well by our own unemployed youths. Going through the malls these days on the Nth Shore it is quite noticeable that Asians are running a lot of the cafes and they do not seem to be employing any non-asians at all. How is that for assimilation?
Also quite noticeable is that a lot of these cafes are cash and carry with little record keeping. Asking for an invoice recently at a food hall threw the young girl into a tizzy as she did not know how to enter the bill up on the register. Little wonder that the tax take is not as high as expected.http://www.3news.co.nz/Govt-tax-revenue-up-but-less-than-expected/tabid…
I'm with you Smalltown. Talking about resident vs non-resident is not painting the full picture.
If our immigration controls are too lenient then the resident vs non-resident argument goes out the window.
A person recently immigrated who then buys a house is in my opinion in the same category as foreigners buying houses.
The immigration department needs to have housing in their scope when deciding on criteria - not just short-term gaps in labour supply.
I think an important point you are missing is that I am a non-resident for tax purposes and have multiple properties in NZ. I was born in NZ to NZ parernts and am a NZ citizen living overseas so does that mean I am a foreigner? Probably half of that 11% are Kiwi's...
Things don't look good. We've got an unproductive economy with an unprecedentedly high dollar and consequently an uncompetitive labor force. Rising unemployment which could get a lot worse. Property prices in provincial centers like Palmerston North, Gisbourne, Tauranga, etc are atrophying as are wages in those locations. It's a reflection of the endogenous deflation which is occurring because of the depression that we're in. Superimposed on that is the exogenous inflation in asset prices, primarily Auckland residential, which is indirectly caused by massive stimulus / monetary easing going on overseas. By raising the OCR, the RBNZ gave the NZ economy the "beat down" when it was already on its knees. I guess the baby boomers (aged 59-68) are deleveraging en masse and if you read Steve Keen you'll know that means a contracting money supply and reduced aggregate demand. Perhaps then massive foreign investment is a necessary evil, but surely it can be redirected somewhere other than residential property? It's not xenophobia, it's common sense. Tax cuts, austerity, government surplus, rent seeking foreign capital. Its all a guaranteed recipe for inequality and poverty. Auckland is turning into a gloriously wonderful place to be rich, but an utterly miserable place to be middle class or less.
AJ - The art of hiding the real cost.....is in the eye of the voter....
I met an Australian couple in Mt Tamborine over summer (it's very nice by the way) who bought houses in NZ, gave them a lick of paint and on-sold them to kiwis for a nice tax-free profit. This peddling of houses like stolen watches is the problem, not rentals. And what about money laundering through NZ property? Let's see some data on that Mr Smith. Crims are hardly going to declare their rental income.
It's actually incredible that the best figure they could produce was 11%. Shows how much of a problem it is. This issue is causing as much damage to the government as the corruption allegations.
Absolutely true. Being able to declare the rental income, whether the tenant exists or not, is the whole point of owning it.
There's an enormous amount of criminal proceeds money stashed in real estate. Where do people think all those methamphetamine profits generated since 1998-ish went?
Another thing about money launderers - they don't care if they overpay.
You (read we need) want up to date stats? Close to 100% of foreign owned properties would be managed by NZ property management companies and they will be paying BOND to Housing NZ. Get the paper work organized by Housing NZ via the bond payers. Make it a legal requirement. Not rocket science!
The figures that are needed are not some airy-fairy 3 year old ones that only take into account those who submit tax returns and identifies those that it can, as foreigners, but what is going on now. You don't need any huge house by house owner identification, all you need is to introduce a register where people MUST provide proof of citizenship and identify where the money for the purchase is coming from for house purchases now.
If you've been to an auction you'll know how influential 11% of the audience can be.
Its the marginal buyer that sets the price, 11% of people having more means to buy is significant.
What asian buyers are to auckland, auckland PI's are to the rest of the country. A small % is all it takes to influence an entire market, such is the way property is valued and sold (1 or 2 sales sets the price of the whole neighbourhood). This cycle a repeat of the last.
I suggest selling your Dart Energy shares I told you to buy 3 months ago (or better yet waiting until igas deal complete to get 19.1c AU) and buying a 7% yielding property in palmerston north.
Finance Minister Bill English repeated that the Government was focused on housing supply and was not taking any specific steps around foreign ownership.
...
Good luck:
M ai n F i n d i n g s
Over the last two decades New Zealand experienced a threefold increase in housing
prices. The largest surge in housing prices in recent years occurred between 1998 and
2007, a period of housing price growth in many developed economies. Since 2007,
housing price growth remained flat until 2011, and then prices once again embarked on
an upward trend. However, recent housing price growth has been concentrated in
Auckland and Christchurch.
The purpose of this report is to compare and contrast New Zealand housing trends and
policies with those of United States (US). The main findings of the report are summarized
here:
Global forces, which were heavily influenced by US monetary policies and lending
regimes, led to significant housing price increases in the US, New Zealand and many
other countries during the 1998-2007 period. Between 2008 and 2012, US housing
prices tumbled in the housing market collapse, whereas New Zealand prices were flat
during the same period.
Housing markets now appear to be recovering in the US, and prices in New Zealand
are also trending upward. However, the recent rise in prices in New Zealand is driven
by the Auckland and Christchurch markets; housing prices elsewhere are stable.
Auckland housing pressure is partially the result of international in-migration and
limitations in the ability of housing supply to quickly respond to demand.
Christchurch conditions are the result of housing supply problems resulting from the
earthquakes in 2010 and 2011.
In the US, differences in regional housing price pressures are driven by population
growth coupled with supply constraints due to terrain, bodies of water and land use
regulations.
US cities that are more similar to Auckland (high amenities, growing populations and
physical land constraints) experienced relatively high rates of housing price growth;
even if Auckland’s housing supply could quickly match demand, population growth
coupled with income-driven demand for amenities within a constrained land
environment can result in rising land values and thus housing prices.
Appropriate responses to land value increases should be a combination of increased
urban density and new development on the periphery. However, in an effort to
preserve their quality of life, existing residents often impose restrictive land-use
regulations through their local governments. This constrains housing supply and thus
exacerbates the housing affordability challenge.
WP 14/11 |
Housing Affordability: Lessons from the United States
Ok if we have 20,000 non-resident landlords that the IRD know about, 50% are ex-pat kiwis, they own an average of 5 properties each that is 50,000 houses owned by non-NZers. If only half of these owners are declaring to the IRD that could be 100,000 houses. This was calculated with the help of a couple of boffins on the back of a ciggie packet .
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