Opinion: Much more independent information is needed about the New Zealand housing market

By David Hargreaves

Perhaps you wouldn't describe housing as New Zealand's national obsession. That honour probably goes to the All Blacks, sorry the 'ABs'.

But in terms of what matters to the average Kiwi, housing as a subject of importance is definitely right up there.

And yet what do we know about the current housing market? I'll ask that again. What do we really know about the housing market?

By this I mean hard information, not gossip, innuendo, speculation and opinion. Everybody has an opinion and this article is just another of those. But what about hard facts?

Who is buying houses? Where do they come from? Why are they buying the houses? Etc, etc, etc.

It seems to me we are long past the time in this country when much more specific, independent, information needs to be gathered on the housing market.

Why does it matter? Because Government policy and decisions are being made on the basis of what seems to me very incomplete information, coupled with assumptions.

Take two developments this week.

First we had the BNZ-REINZ Residential Market Survey having another crack at determining what proportion of  New Zealand homes are being bought by offshore-based buyers.

Then we had the news from last year's census that levels of home-ownership are continuing to fall, particularly among younger Kiwis.

There were these interesting comments from Finance Minister Bill English on the BNZ-REINZ survey:

English said the Government had no plans to follow the Australian example of limiting non-resident purchases to new homes or reviewing compliance with those rules.

"We're keeping an eye out for it. The [BNZ-REINZ} survey information shows it's pretty low numbers of people," he said, adding it was the only information available.

"It would be good to know a bit more about it, but we still think it's a distraction from the main issue, which drives all house prices, which is the lack of flexible supply of new housing."

So, it would be "good to know a bit more about it". Well, yes, I think you are right there, Bill.

BNZ chief economist Tony Alexander is to be applauded for what almost seems like a personal mission to find out more about the origins of those buying New Zealand houses. But, with all due respect and congratulations for making the effort, it has to be questioned just how effectively someone can hope to measure something like overseas buying when this is done through a voluntary survey, which depends on information being provided by real estate agents, who might be expected to have bigger things on their mind when selling a house than where the person buying it came from.

I'm not prepared to say that the survey's conclusion that 6.4% of houses were bought by offshore people is wrong - though what can be seen with your own eyes in Auckland might suggest it is. But the point is I don't know. And neither does anybody else. Everybody has an opinion. But that's the point. Opinions. Where are the facts?

The 'only' information

And as Bill English depressingly put it when referring to the BNZ-REINZ survey - it's the only information available. Amazing. So, the official Government line is that we won't have controls on foreign buyers because a voluntary survey through which information is gathered third-hand (IE real estate agents asking people where they are from) suggests its not a problem.

Then English goes on to say that while it would be "good to know a bit more about it", it's a distraction from the main issue, which drives all house prices, "which is the lack of flexible supply of new housing". Well, is that the reason? Backed up by which hard pieces of information exactly? It looks suspiciously like another opinion to me.

Here's yet another opinion. I think at least part of the reason why house prices have risen so strongly in Auckland over the past year is that a lot of people want to own homes as investments. So, one would-be investor goes against another would-be investor, driving prices up. Yes, as I said, that is an opinion. In fact of course we do have hard evidence through Stats NZ's building figures that Auckland has not built many new houses since the global financial crisis. That's a fact. But it is still an assumption that some perceived shortage is the whole reason why prices have gone up.

Where from?

Wouldn't it be rather useful to know, not only where buyers are coming from but specifically and unequivocally what they are buying the house for? IE are they an investor or do they want somewhere to live?

To go back to the census information on home ownership. Well, it is interesting, but what conclusions should actually be drawn from it?

The census is a fabulous piece of quantitative research that provides good, hard, statistical information.

But what's lacking in the information on home ownership - and it would be probably impossible to do this in a census - is some sense of why the levels of home ownership are falling.

The politicians again immediately climb into this as being all about affordability. Well, it might be. But to be honest I don't know that. It's an opinion again, based on an assumption.

Maybe there are other reasons why people are not buying houses. You can't just look at a figure that shows a declining trend in home ownership and say immediately that everybody wants their own home and if fewer people are buying it's because they simply can't afford it.

Foreign limits

Personally I think New Zealand needs to look at limits on foreign ownership, not just of houses but of land.

I also think the country needs to look at limits for people investing in houses.

But, further to that, I think that until as a country we've worked out independent ways of assessing levels of foreign ownership and levels of buying by investors, then there's little that can be productively done.

In the meantime, any Government action on perceived housing problems is going to be based on assumptions rather than hard facts - which is dangerous.

And, yes, that is an opinion.