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)
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