Chinese property buyers may be based here, but the money trail often leads back to Guangzhou

By Greg Ninness

I couldn't help but have a little smile the other day when I read Prime Minister John Key's reported comment about Chinese investment in the Auckland housing market that "there's not that many who get up in the morning who live in Guangzhou and say randomly, I'm going to buy a house in Auckland..."

Well of course people don't just have random thoughts about buying properties in other countries, those thoughts are probably planted in their minds by someone else.

Possibly that person could be a New Zealand real estate agent.

New Zealand real estate agencies have been promoting properties in this country to overseas buyers for years, and I don't just mean over the internet.

Some of the bigger agencies have organised regular road trips to overseas destinations, where they'll hold seminars or other promotional events to espouse the benefits of investing in New Zealand property.

Often these are organised in conjunction with affiliated companies in the countries where the events are held, who send out the invitations to their own mailing lists and liaise with the locals in return for a slice of the action.

The events can be like mini trade fairs, with glossy brochures, impressive audio-visual presentations, drinks and nibbles laid on and plenty of glad handing all around.

However they aren't a new development, they have been happening for years.

And they are not just aimed at Asian markets. I'm aware of them taking place in climes as distant as the UK.

And they do not just promote Auckland residential properties. Farms, luxury tourist lodges, lifestyle properties and even businesses in this country can all be up for grabs at such events.

On top of that there's another entire layer of overseas sales organisations that are prepared to promote New Zealand properties to potential buyers in the countries they operate in.

These groups have been popular with developers over the years, particularly for selling down multi unit residential developments such as apartment buildings or strata titled hotel projects, off the plans.

This method of selling has also been around for many years and large numbers of the so called shoe box apartments that were developed in Auckland during the last housing boom were sold to absentee investors in places such as Singapore and Malaysia through locally-based sales organisations.

I suspect that a fair number of those investors have not been to this country to actually see their investment properties or carry out a first hand investigation into the local property market.

But while there may be a reasonable number of such overseas investors who own property here, I agree with the PM when he said he believed they weren't  a "significant factor" in the Auckland housing market.

Based on my own observations at auctions and from what I hear from real estate agents and property investors, I believe that local Chinese investors make up a far bigger share of buyers in the Auckland housing market.

Both in terms of the number of properties they are buying and the prices are prepared to pay for them, as a group they are punching above their weight.

However, while the people doing the buying may be living here, much of the money they are spending is probably coming from China.

One of the things I've noticed at auctions is how impossibly young some of the Chinese buyers are, particularly at auctions of inner city apartments.

Some of them also appear to have absolutely no idea what they are doing, but fortunately there's usually a kindly salesperson at their shoulder to guide them through the process.

I suspect that in such cases, while it may be the young person who is doing the buying, it is mummy and daddy back in Shanghai, or possibly Guangzhou, who are doing the paying.

Similarly I often see Chinese family groups bidding at auction, where one of them is engaged in a running commentary on the mobile phone during the process.

There is usually a lot of discussion back and forth and it's often the person on the phone who decides whether bids can go higher or not.

My feeling is that these groups are buying investment properties for themselves, but they've also told their aunties and uncles and cousins and perhaps even their former neighbours back in China how hot the Auckland property market is, and they've decided to chip in for a piece of the action as well.

Which is why I think the the new reporting regime the government is introducing for overseas buyers is likely to be a disappointment.

It will tell us more than we know now, but probably won't tell us much as we'd like to know.

But in the end that may not matter.

I don't think that someone who comes from China, or India or Australia for that matter, will necessarily be a better or worse property owner or landlord than someone who has lived here all their life.

My concern is that those who are paying the spiralling prices being achieved for Auckland properties at the moment, regardless of their ethnicity, are probably paying too much.

And if/when there is a market correction, there will be tears.

Whether they are Chinese tears or not doesn't really matter. The effect will be the same.


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86 Comments

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18

You are absolutely spot on Greg. It is the mass of Chinese who are already here in Auckland and buying 3,4 or 5 homes for family, friends & businesses back home in China. NZ lawyers, bankers, mortgage brokers & realtors know all about who is buying but are making so much money from this Chinese explosion of Auckland house buying that they have a vested interest & will keep very quiet on it.

If you want to see how prevalant the Chinese are head down to the Barfoots auction room at 1pm today - you will think you are in little Ghangzhou!

From todays QV report ex Tony Alexander:

Not only does Alexander point out that Asia has a growing middle class but Immigration New Zealand figures also show there's been exponential growth in the numbers of migrants coming to New Zealand from Asian countries under the Investor and Investor-plus categories, particularly from China.

In 2009 when the Government loosened immigration rules for those bringing more than $1.5 million cash (Investor Category) or more than $10 million cash (Investor Plus Category) to invest in New Zealand, Chinese investors accounted for none of the 10 migrants who moved here in the following 12 months under these categories. But in the year to June, 133 Chinese migrants moved here under the Investor Categories, out of a total of 181.

These migrants can gain permanent residency by spending as few as 44 nights per year in New Zealand for three years as long as they invest their cash here.

Many are reportedly investing in the lucrative Auckland property market to take advantage of the lack of capital gains tax, land tax, and stamp duty and the fact that they can buy the land freehold. Total spending power of these migrants who moved in the past year is close to $500 million.

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15

It is pretty clear that a whole lot more than just banning foreign ownership happens and pdq. It is beginning to look like we need to restrict buying to citizens as a matter of right, those with residency having to tick some boxes before they can, certainly "residents" should be banned from owning rental properties.
I can't believe that you think it is okay that we should be renting houses off foreigners at all, on the grounds they are not worse than local ones. Well, if that is you view, landlording needs stamping on in general. For one thing I do not think a single, solitary cent of accommodation top up welfare should go to foreigners, what a bunch of idiots we are allowing it in the first place. I wonder if I can just hold my hand out across the sea and pick up welfare in Britain or Australia. Sheesh kiwis can't even pick up welfare in Aussie if they are THERE, but here's us forking it out to landlords, there, from here.
We cannot just lay down and die on this issue, we must make John Key live up to his words about us not becoming tenants in our own land!!!!
Students can allowed to buy apartments, one each only, or rent.
And we must openly, have the how many migrants is enough conversation, now. This is all the govt is relying on for "growth" it is b.s.

welcome to Generation Rent.

you rent your home.
you wont own a car, you take bike or bus
you rent your phone on a plan
you rent your electricity supply and pay daily connection fees
you even rent your software in the future

ultimate consumer...or slave...own nothing but your need for consumption and the labour you provide to your corporate owner (the Firm).

Software not so much future office36 is here and others. Indeed we have been watching the annual charges for support/rent rise and rise. No more buy it once in perpetuity with free software patches for ever. Options? none unless you go open source.
Computer hardware? not with AWS pay per hour and per Gb moved or stored....

That's a very depressing future and the outlook would be ultimate greed by the firms! How to stop it Cowboy! Revolution?

That's the old tried and trued method, so..........

Sooner or later the whole foreign buyer/investor story will boil down to a need for capital control policies, which NZ cannot afford to make no mater what.

Just saying maybe wrong. But if you look across the ditch, house price is not responsive to their policies.

It is very similar to the situation that both EU and USA subsidies heavily to their Ag/Dairy sector, but NZ cannot afford to even make a beep sound in any Doha rounds.

On the other hand, NZ really buys into TPP, which at least gets rid of tariffs.

In the wider context our money supply can't be allowed to go backwards, so facilitation must me made to keep it going forward at any cost. Since the expansion of our money supply, and economy, rides on the back of real estate, then it offshore buyers are that cost.

Yep. The side effects will be locally born and educated, never-go-overseas, stuck-with-average-wage, no-help-from-folks, live-in-AKL guys will have slimmer and slimmer chances in owning a house.

Well then, I think the cost of preventing that from happening is the one we must pay, not the other way around

But, on the other hand, 60% to 70% of AKLers (homeowner) benefit immensely from the capital inflow. And now the benefit is flowing into regions.

Ask them if they are ready to pay for the cost.

I have to admit that such benefit is akin to the high feeling after the use of drugs -- extremely good feeling in a very short period of time but have detrimental impact in long term.

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14

As an Auckland homeowner who has "made" about 70% in the last 2.5 years on his Auckland first-home, I'd much rather have made 10% and had a stable market than the situation we have now. It just means that when I come to move within Auckland I'll probably have to make a bigger leap than before finance-wise, so tying my income up more and for longer.

Seeing my friends trying to get into their first homes is pretty scary. Couples getting themselves into $800k mortgages for two decently-earning 30 year olds is manageable on paper, but then they want to have kids while they're still able and even on a decent single income, I don't see how it's manageable.

Exactly. Rising prices really only benefit those planning on downsizing soon. Friends in the US were able to move up to a much nicer house post-crash than they could have afforded at the peak. Key is to still have equity in the first home even after the drop - which may be an issue for most recent buyers.

That is about the smartest comment I have ever seen you make, take a bow sir.

What benefit?
I would rather purchase a $500k home with $200k mortgage @8% than a $700k home with a $400k mortgage @4%
Same basic interest cost but you have to find an extra $200k of capital some time in the future.
Short term feeling of wealth is not a benefit to anyone.

LOL! Not the sharpest tool in the shed eh?
400K @ 4% over 20 years = $181,400 in interest
200K @ 8% over 20 years = $201,000 in interest

Yeah right!
But you still have to find the extra $200k to pay back.
Or does it come out of a brown paper bag?

Xingmowang - You are forgetting that there will be new drivers that will occur and people will do anything they can to get to Australia or elsewhere!!

So you will have more NZ citizens departing permanently.!!! No wonder we are having the wasteful spending on a flag debate.....the Union Jack is obviously a nuisance reminder to some !!

Deflation is a bitch to deal with Scarfie, especially during Dry July....

We live in a world now with a "Property Standard" its replaced the gold standard. Not hard to get your head around, you can't make any more land (you can build up...) banks will lend on it and it has a yield, its better then gold as you don't have to secure it in a safe, its real hard to walk off with it....

Good properties in good city/suburb/street are indeed the gold of nowadays.

Unfortunately, it can be nationalised and taken as spoils of war and credit, for the very reasons you highlight - ever wondered why diamonds are a girl's best friend?

All true but it isn't transportable, or very liquid.

At least Australia has admitted there is a problem with Chinese able to pay more for houses than Australians and are doing something about it.

Excellent piece Greg. Cheers

Bernard

None of this helps to solve underlying problems.
1. The percentage of rented properties is excessive and growing.
2. Investors have an unbalanced advantage over owner occupiers.
3. High prices/ accommodation costs are costing the general economy with reduced income available to spend.
4. Tax revenue spent by Government on rent subsidies is way too much.
5. Government greed to get cash from overseas investors is costing big on loss of income to overseas investors.
Go sort that one out, Jonkey.

You have it all wrong Greg. New Zealand has never had a housing correction, and thus never will. John Key says so.

I have a friend who lived in Ireland when the correction happened there.
He told me it is an exact blueprint of what is happening here.
Foreign capital poured into housing investments, then locals all invested in housing because prices were going up, immigrants poured into Ireland for the jobs on offer.
Everyone said you cannot go wrong with property as it was the best tax effective investment you could put your money into.
Experts said the housing market would not correct because of the sheer difference between supply and demand. (The demand was caused by investment, not by owner occupier demand.)
When things crashed on their housing market, thousands of investors were left destitute.
But it will not happen here , says John Key.

An Aucklander told me about a couple of Asian's having laughs with an Ipad while someone bid over seas. Meanwhile over on the left they are saying "hold fire, hold fire" (nothing to see, nothing to see). You aren't allowed to say those people>

Lets hope they are buying(and fixing) all those leaky buildings...about all you can do it appears

If ChCh council and central govt allow the entrance of a Chinese construction company to help the rebuild, I bet ChCh would not look like the way it is right now.

Or we could let Haliburten do the work.

OR we could clear the way for NZ skills and people development to work. It's only the bureaucrats standing in the way that is the problem there.

A Chinese construction company would be as lost in the bureaucracy as a NZ one Xingmowang.......

I actually know of Australian Construction and Construction and Civil Construction Project Management Companies who did a bit of due diligence on coming to Christchurch as part of the rebuild and decided not to, based on the fact that they thought it was too corrupt to do business here......so what did they find, or what caused them to come to that opinion??

While I have an opinion on why they considered it too corrupt here based on my own findings.....I figure not even the Chinese could get round the issues.

The rebuild was always going to be a spread out affair.

I have a close friend that worked at the largest Auckland RE agency 10 years back, and is still connected to them. The money laundering was going on back then and you can't help buy wonder about the morality of the company, as they do know what they are doing.

Ofcourse they ..the fact that that guy from Barfoot and Thompson stated that the leak of data from his company was done by a member of staff who "probably had a social conscience" says it all, doesn't it?

And people would rather take it out on the ethnicity of a buyer rather than those who are doing the deals.....like RE agents and lawyers etc.....

How many headlines do we see e.g. "Disgusting Real Estate Agents Assist in Laundering Dirty Money" or "Real Estate Agents holiday Tax Free in Asia and Europe" or "Real Estate Agents show foreigners How to turn Dirty Money into Clean Stuff and get a tax advantage during the process".......

Morality and public good order and responsibility are an illusion.......I'm sure some people would sell their Grandmother off.

"Apple shares dive 8%"
How much will any asset be worth when things really get nasty!

I also see in the AFR today (page 3) a National Australia Bank survey shows 9% of all Australian residential property was bought by foreigners in the last 3 months. In Victoria that number is 16%, central Melbourne 28.3% (apartments). And this statistic excludes the young resident buyers who fly under the radar, backed with family money offshore as alluded to in this article. These statistics are compelling and there is no reason to suspect that Auckland is not being subject to the same demand patterns as Sydney, Melbourne, Singapore and LA...etc

Yes, it should be noted that NAB can produce AU data but they "dont" produce NZ data

Is it because nobody ever asks them?

This article hits it on the head nicely. I've always believed it's the indirect buying rather than direct that's having the largest impact. Unfortunately the government will only reveal the direct investment data and not the purchases of residents whom are bank rolled from relatives, friends, syndicates residing elsewhere.

As long as they _start_. no transmission gully or CHCH CBD. We want to see the hole in the dam go through as quick as ministerial payrise votes.

Stop the direct ownership.
That sends a message and if the indirect doesn't voluntarily ease off start capping and cleaning that up, because at least foreign people have had their fair notice NZ actually cares about NZ peoples' future more than keeping foreigners rich.

Alan Kohler AU's leading ABC and Business Spectator financial commentator
In response to the looming enforcement of the laws relating to overseas buying of existing property
Overseas buying in Sydney and Melbourne tanked in May and June
https://twitter.com/ABCBusinessNews/status/623437867436503040
see graph top-right-hand-corner - click it to enlarge it to see time coordinate
Don't know where they get the info from - but they have it

Where are they going? - they're going somewhere - guess - watch AKL June sales results

Contrary to John Key's claim, the threats are working

I just worked it out. John Key genuinely does not know there is a problem in Auckland.
For everybody else, it's smacking them in the eye.
He needs to get out more - or - he's out anyway.

Albany Auckland 5 bedder nz$1.2 million Melbourne Aust $320

Something gravely wrong.

Could we start with planning that we are paying millions for and getting nothing...

John key is not worried about any thing he has 300 million in cash and assets plus 3 offshore homes to escape to when it all collapses.

He already has an exit plan, why should he worry.

Plus a nice life time super and free travel.

It not JK problem he has the cash and the tax payer has the bag.

$300 mio ? Just, maybe. But even if that's right, that is likely to be a gross figure anyhow. The tax and leverage advantages of financing assets with low interest rates ensure that most New Zealanders of any means gear their personal balance sheets. If he's got it at LVR 50%, even, then a correction of that magnitude in asset classes could wipe out any net wealth in a heartbeat. Is it all at risk? Highly unlikely! But some substantial portion is likely to be. That's how the rich, get rich - by taking calculated risks.

Error, so self deleted.

300? I thought it was 50?

For good order sake:
"John Key - $55 million.....Like all MPs his major assets are listed in the Register of Pecuniary Interests"
http://www.nbr.co.nz/john-key

Haha, $300m versus the $50m in reality.

I guess you're penning your apology at the moment, or are you actually his super secret accountant, with inside knowledge?

Frankly, it's a little embarrassing to post something that is so demonstrably false as factual. Well, I would be embarrassed, but to each their own.

People getting richer off the chinese are saying it is not the chinese. People wanting to buy a house say it is the chinese causing increasing prices.

The government doesn't care, or else they'd at least be collecting the data.

This is must reading...

http://www.factsandopinions.com/galleries/opinion-columns/jonathan-manth...

Interesting article, that suggests that China is not doing as well as they would lead us to believe, hence the flood of money trying to escape. But once everyone gets all their money out , what will hold the market up then? will places like Auckland decline in population as working class people are forced to find cheaper places to live?

It may seem like a lot of money that will flood in here. But liquidity and economy are two different things. Liquidity is a cash injection as a house is sold to a foreigner, and that house sale may result in another house purchase in a cheaper area and the purchase of a new car, etc. But economy is about prices being driven by increasing incomes, and employment. I just wonder if the effect on our economy from this extra liquidity will be very great in the long run or will it just create a big spike before a crash?

Some serious money leaving China all right........the haste to convert it to something different makes me think that all is far from well inside China.......

Makes me think that Real Estate Agents are nothing more than money mules with contracts!!

well soveriegn nations themselves can't buy assets like res housing in other countries. and banks aren't supposed to compete with their customers....

so they setup trusted individuals doing it for them.

One of the ways to spot this is when a company or high level corporate start issuing decrees such as "you're paying proxies to undercut our market", "you organisation hires illegal labour".... you know they're aware of these tricks so start looking for it in -their- comapny and neighbourhood.

eg JonKey says "I see nothing wrong"....start looking for puppet masters and plausible deniability gaps.

Such things are straight from Sun Tzu, whose insights can illuminate such strategies with this tips on propoganda and infiltration.

well constructed observation in that article

For those who can, there is every reason to get out of China. And the perfect landing spot is somewhere where the people don’t ask too many questions and are easily manipulated through flattery

or promises or threats

Attention iconoclast - this complements very much that snippet of mine that you like so much.

It is indeed a sad situation. By any other name these students from mainland China whose money we so willingly accept as payment for their temporary entry are really refugees. It's just that they didn't pay for passage on a 'boat'.

Yes, thanks, I see that, it validates exactly what you had already said. Yours has more elegance, defining the wider social impact in so few words. Resonance.

RE: China: Kate, this may interest you.

This brings the cumulative capital outflow over the past five quarters to $520bn. Again, we approximate capital flow from the change in FX reserves minus the current account balance for each previous quarter to arrive at this estimate (Figure 2). Read more

Is THE play on? It seems a bit of a coincidence to me - the timing - in relation to the set up of the AIIB.

This is an interesting statement by ZH;

But what is likely the take home message for non-Chinese readers from all of this, is that while there has been latent speculation over the years that China will dump US treasuries voluntarily because it wants to (as punishment or some other reason), suddenly China is forced to liquidate US Treasury paper even though it does not want to, merely to fund a capital outflow unlike anything it has seen in history.

Why would this only be a take home message for 'non-Chinese readers' - so I don't quite "get" that. But equally as interestingly, it is couched as if they are assuming this is not part of a well executed plan. That, I'd be cautious about.

Replace Vancouver with Auckland and you have NZs story

Barfoot and Thompson in the news again - shooting itself in the foot - self-harm

Courtesy Bernard Hickey https://twitter.com/bernardchickey

Working with a Chinese colleague is an advantage, as, despite official denials, Chinese are, in our experience the largest proportion of buyers by a long way. All but two of the properties we have sold since early last year have been bought by Chinese buyers

http://www.radiolive.co.nz/DUNCAN-GARNER-Is-this-letter-the-proof-we-nee...

You'd think the Chinese Embassy would be wanting to know who all these Chinese buyers are as some will be taking way beyond the allowable currency out of China!!!

Yes, and mainland Chinese students getting paid by local real estate agents for referrals had been cited as happening in Aus. Silly to think it wasn't also going on in NZ. It's one way to pay the exorbitant fees charged to offshore students. A racket by any other name ... eh.

If NZ education was actually any good then they would be able to open branches in the likes of China and bring back some income to NZ.

Maybe the racket is selling residency or citizenship via buying education in NZ....

Exactly - as I said above - it's an alternative form of "boat".

The overseas student education industry is another complete and utter rort of the system.

This is a multi-faceted issue, which certainly requires some credible measurement by an independent body.

If the current law allows for it, which it seems to, then you can't really blame those small, select few overseas buyers for taking advantage of this. If this is such a massive issue, then clearly NZ needs to mobilise a very disenchanted voting public, which is a tough ask.

If these overseas-based buyers are comfortable paying well over the odds, versus what they can get in terms of rental yields, then it's bad investment practice at best, and fraudulent advice at worst, for which someone should be held accountable.

Beyond that, why is it a right to buy a house in Auckland? Why aren't people cutting their coat to suit their cloth? If you believe housing is overpriced, then don't buy it, surely! Don't like paying that level of rent? Move out! Jesus. Such a lot of noise for rather elementary complaints & solutions.

Why are there so many bleeding-heart stories being run in the media about how people can't afford to save a deposit, without the follow-up question --> why is that is the case?

Sure, there will be legitimate cases. But it's possible those involved will be blowing money on takeaways, consumer goods, etc. Why are we so quick to jump on the emotional bandwagon without asking for the background? The squeaky wheel gets the grease, springs to mind.

Beyond that, why aren't we taking more personal responsibility in NZ? Why must it always be the government of the day, or someone else's, fault?

So many questions, and I fear most of the answers will be unpalatable for the great majority. One only needs to look at the state of our savings, national + private debt, plus reliance on exporting raw materials for a pretty grim picture.

Why isn't there a longer-term focus, not based on colour of the party you vote for, but on the best case for NZ?

I'll give you an example from overseas. Switzerland voted *against* an extra week of holidays a while back (Google it if you need the exact when, details, etc), current minimum is 5 weeks. Could you imagine NZ making such a mature voting decision? Perhaps, perhaps not.

That said, the world is a much more connected, much more exciting place, with so many opportunities, particularly for NZers, who are geographically isolated versus the rest of the world.

This topic is nothing a pragmatic approach won't be able to find a solution for. The only concern here is the principle of democracy - where everyone gets a vote - when you consider how stupid (read: able to be misled) the average person is, then consider half of them are more stupid than that.

At least we'll get a new flag, though - anyone know how much it'll cost to replace all the flags here, letterheads, plus everywhere around the world?

#priorities

In this case it is the Key governments fault. They have let far too many moneyed up Chinese into NZ and now they are the main players in speculative activity in the housing market. The government are about to bring in the 30% deposit rule for investment property buyers - this will not be a worry for the Chinese who have easy access to cheap money but it will prevent many more Kiwis from buying. So yes fully blame the government for the consequences of their actions which are now leading to an explosion in Auckland house prices for which there is not going to be a fast enough supply response and even if there was the Chinese would continue to buy up large. This is not a racist issue - this is an economic issue of the governments creation. How crazy making the purchase of $1m of housing investments a key criteria of obtaining residency and if it is a family home how foolish it is to have a policy that says you must buy your family home within 12 months of arrival.

Read and weep: http://www.immigration.govt.nz/opsmanual/30505.htm

An interesting link, but I couldn't find any mention that $1m NZD needs to be invested in housing, perhaps you can point this out? I can only see mention that the applicant is required to make investments totalling $1m. Why is this an issue? Do we not want people with money to come here and invest, potentially creating new jobs and or investing in capital/industry?

In addition, there is stipulation that the funds come from legitimate sources. Whether this happens or not is another question, and not for me to say.

That said, I would be curious to know what you mean by "the Chinese who have access to cheap money". Do you know for sure that Chinese banks are lending to their residents in order to speculate on assets here? If so, I would be very surprised.

I get the impression from your opening statement that you have a fixed opinion and any realities/facts to the contrary will not sway you from the dogma of 'someone else's fault'.

Frankly, I'm blown away that you think it's "foolish ... to have a policy that says you must buy your family home within 12 months". What would you prefer, that they are only allowed to rent? That they come over here without surety of residence? Seems like a pretty reasonable stipulation to me.

Perhaps I've read the link wrong, but I find a glaring disparity between what you say, and what the information on the immigration link you included says.

Furthermore, if you think it's so crazy, surely you would be a rational person and you wouldn't be on the hunt for property in Auckland, where you consider it's overpriced?

With respect to your final comment, I read, and I wept but only because of the chasm between the linked text and your interpretation.

Invest - but not in blasted houses, as IS happening whether you like it or not, we have more than enough landlords, it is not a skill set we are short of and they can buy their house once we've sorted that they qualify to live here, beyond having pockets full of cash.

It may well be happening, but that's not really the point I'm arguing. You mentioned they were forced to buy property and property only, in order to come here, which is materially incorrect.

Judging by my zero thumbs up, and your two (at present), I guess these discussion sections are not a place for having a reasoned debate, based on fact and critical reasoning.

Takeaways?

The cost of housing has tripled against the long term average.

http://www.interest.co.nz/property/house-price-income-multiples

Housing is a need, not much choice.

If everyone were to become frugal and not spend any money, commerce would slow down. Extra money for the supply constrained houses will only inflate it more. Very hard to make money if nobody is spending.

The Chinese were poor until recently (most are still poor) they didn't get rich until they could get their hands on some Western consumer trade. And that one way flow is now hurting some Western economies, causing problems.

The problem is not takeaways, frothy coffees, or designer jeans, it is housing affordability.
Too much demand too little supply. Not enough building, not enough protection, too many vested interests getting rich.

Fascinating statistics. Has rent also tripled? How has that tracked against income? Are we really a poverty-stricken nation? I can't accept your one-shot answer.

Why is buying a house 'a need', versus renting? Do not buying a house and renting provide the same end result, i.e. shelter? If you're paying rent, or paying the bank interest, surely it amounts to the same thing, i.e. money in the fire?

I wager your point regarding everyone being frugal and the economy crashing into the fiery depths of non-consumer hell as a moot point. The fact our savings rate is so abysmal means we'll never know what would happen if wasteful spending was curtailed. Fools and their money are easily parted, but to each their own.

My point here was if you want something bad enough, you can surely find a way. If I can't afford to live in Auckland, perhaps I'll move cities, maybe I'll accept a longer commute? I don't know, but it's down to the individual to take responsibility, surely. Or is it easier to point the finger?

I worked in a role where I had to talk to & help people that had bitten off more than they could chew in terms of personal lending. I can guarantee you my empirical experience lines up with consumer-driven behaviour, and the statistics around us Kiwis not being able to save to, well, save ourselves.

The problem --specifically when it comes to saving a house deposit -- *is* frivilous spending, such as takeaways, coffees every day/most days, big boozy nights out chasing girls/boys, designer jeans, electronics, and so on. That is: a lifestyle that is generally not supported by the person's income.

Unless you're saying everyone is powerless to improve their lot, and it's written in the stars?

Do me a favour.

Do you a favour? Don't think so. Where is this neo nastiness coming from

I see you've not addressed any of the subject matter, but you've basically done the 'grown-up' version of calling me a meanie pants. I also enjoyed the classification of it as neo-nastiness.

If someone told you your fate was preordained, I'm sure you'd tell them to do you a favour too.

As I said above, your 4 thumbs up (at present) versus my zero, suggests that these discussion sections are more about scoring points than actually having a discussion, which I find sad, but I'll sign-off from here and leave you to wallow in perceived misery :-)

Toodle oo.

I think I heard house prices were overpriced by 60% compared to rent. So rent has merely doubled (roughly) compared to wages. And landlords will look to recover that difference at every opportunity going forward through the years.

I would say a lifelong renter in New Zealand faces a grim old age and retirement, wages start to decline in your 40’s, while rents will still inflate. There won’t be enough savings and they’ll be dependent on the state in retirement for housing. Different end result.

In NZ’s poorly regulated rental market, it’s not a good place to bring up kids, but that now looks like the reality for the majority of people coming through now. No prosperity, no security.

This new high housing cost economy is a new phenomenon, and it won’t end well. When does that property inflation stop compared to wages? It’s an unstable system and I would say we’ve passed that point for a majority of people.

Saving rate is probably abysmal because of high property costs for everybody, sucking money away from productive enterprise.

Point the finger at the real problem…. Housing affordability. The cost of housing for new entrants has tripled compared to income. (And that is with wife working and no allowance for housekeeping & childcare)

I think you are spouting the typical neo-liberal line “The underclass have only themselves to blame”

Yes we can improve our lot, but it will be through politics and the effect it is having on housing, it is the problem. Not by all becoming frugal property investors mortgaged to the neck, sitting around eating bake beans every night.

There done you a favour, hopefully you’re more enlightened.

"Why is buying a house 'a need', versus renting?"

Perhaps because a house is savings vehicle, not just shelter? Many people can't afford to pay rent AND accumulate savings. Yes one must pay interest on mortgage debt, but while they pay equity into the house, they make a capital gain, which actually may balance this. In my parents case, they are fortunate to own their home freehold, which they managed to pay off while fortune still favoured them with good pay, generous employment conditions, and prudent financial management. Sadly they suffered a reversal of fortune once my father was made redundant from the railways in the "enterprises" perennial restructuring episodes. Now that they are retired, it is largely by owning their home free and clear that allows my parents to enjoy their "golden years" with some measure of dignity.

"The problem --specifically when it comes to saving a house deposit -- *is* frivilous spending, such as takeaways, coffees every day/most days, big boozy nights out chasing girls/boys, designer jeans, electronics, and so on. That is: a lifestyle that is generally not supported by the person's income."

You must be a hell of a lot of fun at parties to begrudge people spending their hard earned money on things which brings them some measure of pleasure. Not everyone derives the amount of enjoyment from watching figures accumulate in their bank balance which you appear to.

A house is a savings vehicle

Income can be either consumed or saved where (saving=capital creation)
Income goes into either consumption or capital creation
A house is compulsory saving
Renting is compulsory consumption

On the other hand, if the Chinese are speculating, there must be a risk they will all hit the exit door at the same time. China will be lucky to escape a market correction, the world biggest Ponzi scheme won't last forever, there may be a time when the buying is better at home, and they want out of AKL.

http://qz.com/452481/chinas-looming-stock-market-disaster-is-part-1929-a...

The writing is on the wall, mal-investment everywhere.
http://www.zerohedge.com/news/2015-07-22/forget-recession-according-cate...

http://www.telegraph.co.uk/finance/newsbysector/industry/11753059/Dulux-...

More Chinese in the real estate auction rooms than the casino these days!

Auction rooms are probably de facto casinos these days

It would be great if those immigrating, whatever their ethnic origin, bringing in their much needed capital were spending their money in creating new enterprise which created jobs and generating overseas earnings, rather than seemingly spending their investment capital on Auckland property, creating two negative outcomes of increasing unaffordability for local buyers, and loss of opportunity for jobs/overseas earnings. It doesn't help having a PM who is a property investor who has/is benefitting from the overseas investors.

I work with several Chinese in Auckland. They all have a pre-occupation with accumulating as many houses as they can in Auckland. Their culture is so much different than the "ordinary kiwi".
If they keep behaving as they are doing and keep pushing others out of the market, then in about another 5 years or so they be resented and they will be treated very badly. Of course, greed comes first.

well.... it is just unbelievable that NZ GOV is allowing this t happen. And sad it is as well...