David Hargreaves says the Government should take advantage of the quieter house market to put in place more exact measures of who owns houses and where they come from

David Hargreaves says the Government should take advantage of the quieter house market to put in place more exact measures of who owns houses and where they come from

By David Hargreaves

One of the great riddles in dealing with any set of statistics is deciding what said those said statistics actually tell you - if anything.

On the face of it the latest quarterly property transfer figures from Statistics New Zealand would tell you a couple of things, first, that the Coalition Government's move to ban foreign buyers is working and secondly that the number of homes being bought by foreign buyers has plummeted. That would sound like two ways of saying the same thing, but it is not quite.

Looking at the first thing, we can probably make some assumptions about the new laws that came into effect on October 22. But of course all things have not been equal. The residential property market, particularly in Auckland, is not the bright shiny thing it was between 2013 and 2016, while in the meantime there's been external things happening like the Chinese authorities clamping down on money leaving the country. The point is, demand from foreign buyers would appear to have lessened.

As for the second thing, the numbers. Well, we know that these statistics are not all encompassing. 

If for example an offshore buyer were to set up a trust that had one NZ-based trustee (and the friendly family lawyer would presumably do the trick) this would not be regarded as a transfer of property to an offshore buyer. Although it is. And there are other foibles with the information as well. 

The upshot is that this information is not an exact measure at all. Not even close. 

Making assumptions

So, we might think we can measure a trend and see a trend emerging from the figures, but we still have to be careful about making assumptions really. Yes, the 'trend' might suggest that foreign buying has been 'stopped' but without unambiguous means of measuring such activity, it's dangerous to start drawing conclusions.

The big problem we have is that we don't know what the situation really was going back a few years. The ownership information that is now being gathered dates back only as far as the previous National Government's 2015 introduction of the bright-line test, but the information gathered, as explained above, is not exhaustive.

During the last great Auckland housing market bull run the anecdotes told us there was large-scale offshore, particularly Chinese, buying. And, yes, that was clearly happening to some extent. But as for the true scope of it, we don't know and we will never know because we had no accurate way of gauging it. And, sorry, taking pictures of auction rooms and identifying people with non-white ethnicity, or reading lists of what look like Chinese names, doesn't cut the mustard. 

In fact I still cringe at all that stuff. If we'd had proper data that kind of scurrilous gossip and anecdotal information would never have been given the kind of currency it was.

As for the situation now, the Government would undoubtedly like to happily claim that its foreign buyers ban is helping to control the housing market.

But as explained above, there have been other external forces at work. Also, the apparent sharp drop in offshore buying indicated by the latest statistics might reflect the fact that some buyers rushed in ahead of the introduction of the new law. But again that's an assumption.

Will the new law do what we want?

I've been no great fan of the new law, although I do commend the way a piece of hastily drawn up, dog's-breakfast, legislation was somewhat tidied up by the select committee process. It needed to be. 

I'm still not absolutely sure, however, if it will really do what we want it to do long-term. The simple thing would have been to introduce rules along the lines of those in Australia, where offshore buyers can't buy existing houses but may build new ones. That's certainly what I supported. 

But because of our trade agreements, we couldn't do that, so, we've got the rather convoluted piece of legislation that we have. 

I think we will only really know how effective that is once the property market turns up and gets busy again. At the moment there probably isn't really the same extent of offshore interest that there was previously. Although I'm again making assumptions. 

The true test of the new rules will be at the start of the next property bull-run, whenever that might be.

In the meantime, we do have breathing space. And we do know that house prices are starting to move in a more affordable direction, that greater numbers of houses are being built and that first home buyers are active. 

Given these factors, the easy option would be for everybody to sit on their hands.

That would be a mistake.

The time to make changes is when all is quiet. Not when all hell is breaking loose.

More detail please

I would still like to see the idea of some sort of property ownership register pursued.  Imagine. If we had a definitive version of what houses have at least some offshore ownership, what houses are owned by investors and are designated as rentals, what houses are owned by multiple owners, that kind of thing. This would be a goldmine and it would help to inform crucial decisions about what's driving the market and what is needed in terms of building activity.

At the moment, the housing market seems to be reaching some sort of orderly state. There's still big question marks about how committed this Government is to driving meaningful levels of affordable house building and how successful such efforts can be. But the first home buyers are getting a bit of a break and interest rates are still very much playing the game.

We shouldn't congratulate ourselves on any of this though.

Muddling through

The fact is we muddled through the last housing boom with no accurate information on who was buying houses and no effective Government input into increasing the rate of building activity. Yes, building activity did gradually scale up, but goodness it took a long time and there's no evidence initiatives such as the Special Housing Areas helped.

A lot of the time, it looked like we were fumbling around in the dark in terms of how we handled the housing market and perceived housing shortages. Which of course we were.

Now is a very good time to 'get our houses in order', so, that the next time there is a house market upturn we have proper information to call on and we can therefore make more informed decisions.

So, at a minimum, we should get a proper snapshot of who owns houses and where. And then we need to be deciding on things like how many houses we will need in future. That calls for a proper population strategy incorporating migration policy.

These sorts of strategies and decisions should be a priority. Trouble is though, unless the house is on fire (metaphorically) Governments seldom find the urgency to provide fire extinguishers. 

Well, here's hoping a bit of thought is given to some of these issues, because they are important and if we ignore them we will not be doing ourselves any favours as a country in the long run.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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28 Comments

"And, sorry, ... reading lists of what look like Chinese names, doesn't cut the mustard.

In fact I still cringe at all that stuff. If we'd had proper data that kind of scurrilous gossip and anecdotal information would never have been given the kind of currency it was."

I wonder if you're actually aware of the data science behind Labour's poorly conveyed scoop about the number of foreigners buying in the Auckland housing market.

Here's an archived snapshot of a summary of the statistical process that was actually used to come to their conclusion: https://web.archive.org/web/20160424071249/http://polity.co.nz/content/h...

IMO the only real grounds you can have for labelling that as "anecdote" is that they didn't have complete sales history for Auckland for the given time period, it was only the sales from one real estate agency. It's possible, although very unlikely, that somehow all of the "people with Chinese sounding names" just chose that one agency and didn't use any others.

Is it hard statistical data that is unimpeachable? No. But it's also quite a bit more rigorous than the label "anecdote" would lead you to believe.

Labour's mistake was instead of unveiling this as "People with statistically Chinese names are buying more houses in Auckland than you would normally expect" they instead rolled it out as "People with Chinese-sounding names are buying too many houses in Auckland". It seems that (probably) Phil Twyford under-estimated the ability of NZers to understand statistics and overestimated how racist we are and went with the simplified and inherently racist way of portraying the data.

I think you are far too kind to both the authors of that "research" and to Twyford .

The stats were used to stoke concerns about the numbers of foreign house buyers - but they do not shed any light on that.

You write that a "correct" presentation of the findings would be "People with statistically Chinese names are buying more houses in Auckland than you would normally expect" ; it does not make any sense once inspected a bit closer.
What WOULD you expect ? a number in proportion to population with Chinese background ? Certainly not.

Chinese people make up a MUCH greater proportion of new immigrants compared to their numbers in general population . Migrants ( over time ) tend to buy more houses than established locals ( none of them have houses already .. ) . On top of that it is not unreasonable to expect that migrants from China bring more money with them than average given current economic developments there - you would expect them to buy more houses than an "average" migrant.

Where statistics are available ( US , Canada ) it has been shown repeatedly that young people with Chinese background tend to outperform in education . You would expect this to translate to higher than average earnings and higher rate of house buying .

So the only thing the study really illustrates is that Chinese tend to be pretty successful economically . Labour tried to use this to play the race envy card ( and partly succeed in that).

Pitty, isn't it?

Working hard and smart is not valued by the current government (Labour party).

No wonder that their policies are promoting the opposite.

It's a pity that it was also the strategy of the previous government too.

All of your points are addressed on the public address blog post of which you can find a link at the bottom of the article I linked to.

In short, ethnic Chinese make up 9% of the population but appear to have bought 39.5% of the houses and 49% of sales over 1 million despite only being 5% of high income earners - because most ethnic Chinese in Auckland are younger and on lower incomes.

The other comparator to ethnic Indians I'll just quote in full:
"Well, we have a good comparison case to test this idea: the ethnically Indian population in Auckland. It has 8% of the population, 6% of the high-earning population, and it is growing even more quickly than the ethnic Chinese population, including through immigration at similar rates. That means the Indian population is subject to similar dynamics of incoming capital for new residents, and has the same need to find new places to live.

So what proportion of Auckland homes are being bought by the ethnically Indian population? The data show they are buying 8.6% of the houses, more or less in line with their population share. Again, the discrepancy between ethnic Indians and ethnic Chinese is striking.

The “resident Chinese Aucklanders on a real estate bender” theory now additionally requires that population to buy homes at about four times the rate of another ethnic group in broadly the same socioeconomic and immigration position."

My point in posting this is that writing off this information as "anecdote" is really a misrepresentation of the source of the data.

And also that people like yourself like to come up with all sorts of justifications that don't actually hold up under scrutiny.

Possibly even probably, when you arrive in NZ with a lot of cash and a severe local language deficit, the only thing you can do for an income is buy a low contact investment usually property. Indians at least in the main have some English language based education to make it easier.

RE :
The “resident Chinese Aucklanders on a real estate bender” theory now additionally requires that population to buy homes at about four times the rate of another ethnic group in broadly the same socioeconomic and immigration position.

Again - the unspoken assumption here is that all ethnic groups "should" somehow be buying houses at same rates ( controlled by "socioeconomic position" , narrowly defined ) . No allowance is made for the ( very likely ) possibility that Chinese migrants bring more capital with them than others or any cultural differences etc.etc.

It is your arguments that "do not stand up under scrutiny".

Waving your hands around and saying that there are other reasons that 'could' explain the discrepancy, when you have no data to back that up whatsoever, is not convincing.

The fact is that there is a comparable migrant community in Auckland. The degree of how 'fair' this comparison is is uncertain, but the comparison shows that for all of this activity to be exclusively chinese migrants (and not off-shore foreigners), they would have to be buying houses at 4 times the rate of this comparable community.

That's not just a "little" more houses, that's substantially more. It is suspicious and requires explanation, and you don't have any data to back up your attempts to explain this very large discrepancy.

You have some data that appears to show a discrepancy .

You are the one promoting a particular explanation for the "discrepancy".
You have NO data whatsoever to show that your particular explanation for the discrepancy is the correct one.

I have pointed out that there are many theories that would explain the discrepancy just as well as a your theory does , may of them pretty logical . I have not supported that with hard data - but neither you have any hard data to back your explanation.

Waving your hands around and saying that your explanation is the right one - just because - and anyone to question it one must provide exhaustive hard data ( whereas you have none to support your explanation ) is not convincing.

I'm not claiming it is the right *one* or that it is the *sole* reason that Chinese people appear to buy 4 times as many houses as another comparable ethnicity.

I am suggesting that it is likely to explain at least some of the discrepancy. If it explains *some* of the discrepancy, then it justifies the foreign buyers ban.

You have a much higher bar to reach - you have to offer enough explanations to fully (or almost fully) cover the discrepancy. That seems unlikely given the magnitude of it.

"You have NO data whatsoever to show that your particular explanation for the discrepancy is the correct one."

Data showing the demographic makeup of Chinese migrants suggest they should not be buying 49% of $1M+ houses in the time period. Comparing them to a similar migrant ethnicity shows they are buying houses at a significantly higher rate. Both of those pieces of evidence support the theory that foreign buyers of Chinese ethnicity are having a marked impact on house purchases in the city.

Your alternative explanation is basically "Chinese migrants are exceptional", but you've no justification for that apart from woolly ideas like 'culturally they buy more houses' - surely you would be able to find some support for this suggestion. Again, you have to come up with enough justifications that fully cover the discrepancy, but the argument that foreign buyers are having a marked impact in the market only requires that *some* of the buyers are foreign to be true.

Wrong .
I do not have to prove anything . You are the one promoting a law change ; you need to provide data supporting the need for it.
Postulating an unproven theory and saying that I have to disprove it does not cut it - the burden of proof is squarely on you .

RE :
"I am suggesting that it is likely to explain at least some of the discrepancy. If it explains *some* of the discrepancy, then it justifies the foreign buyers ban."
Can you put any number on "some" ? would foreign buying accounting for 1% of the discrepancy justify a ban ? I think it does to you - simply because you already made up your mind that you want a ban , never mind any proof that it is actually needed.

RE :
"Your alternative explanation is basically "Chinese migrants are exceptional", but you've no justification for that apart from woolly ideas..
"
Chinese migrants bringing more capital with them not a "woolly" idea ; this is probably why you studiously avoid addressing this possible explanation in any way .

Easy as David. We can just use a couple of questions in the next census to get the information. Oh wait....

Haha, yeah what a laugh!
Seriously though I am disappointed about the census shambles.
Would be nice to have something released from it.

One in four people living in Auckland is of Asian descent. Auckland is also home to the biggest polynesian population in one place on the planet - literally & figuratively. That is culture changing whether you admit it or not, & we can see it on the rugby fields in Auckland every weekend. The Asians are too small (as are the whites) & the polynesians are too big. Result: You end up with the Blues & the Warriors. The racist rests his case.

Should add livestock blocks, mining sets, rural land, commercial properties as well!

However, I would expect the findings not that surprising -- stock of foreign ownership ranks as the following AUS, UK, US, Canada, Singapore, Holland, Germany, South Africa, China ....

However, only Chinese ownership stands out in public media for some reasons.....

"only Chinese ownership stands out in public media for some reasons....." Simply because the property buying has been so blatant and on mass over the last few years, enough to so completely destabilize economies by massively increasing the cost of living in their major cities. Not all of that money has been legitimate, so much so that even the Chinese Government has had to clamp down on capital flight. Now causing some of those property markets to collapse. You only have to look at Australia and Canada to see that and our own property market has been seriously effected too.

AUS, UK, US, Canada, Singapore, Holland, Germany, South Africa, China .... How many of those countries would allow me to buy freehold property?

Pretty much all of them except Singapore. China allows property purchase in designated areas and when formally applied for. E.g. Ancestral land passed down through families, and surplus development land from local city authorities. Also, you can buy the title to any apartment that you can afford with no strings.

Wouldn’t the council have some of this information? They will need residential addresses of home owners when sending out rates bills.

Anyone know how other countries gather this information? There must be someone somewhere that knows how to do it.

Yes I do very much agree that we need to fully track not just use tokenism to kind of track who's buying property and by how much volume. At the moment it is far too easy to blur the property data just by buying using a Trust company to hide foreign buyers. You can take a look at websites such as One Roof who can give an indication of the percentage of ownership if you scroll down to their suburbs sections.
Some examples: * Coatsville Rodney, Auckland - 41% Owned by Trusts, 6% Owned by Other??
https://www.oneroof.co.nz/suburb/coatesville-rodney-1366
* Remuera, Auckland City - 34% Owned by Trusts, 4% Owned by Other??
* Saint Heliers, Auckland City - 31% Owned by Trusts, 4% Owned by Other??
* Mellons Bay, Manukau City - 33% Owned by Trusts, 4% Owned by Other??
And the list goes on.... Take a look for yourself.

Well one thing is obvious is that we really need that 2018 census data to give more accurate figures.

New Law needed if your rent is paying the mortgage then you are a part owner in the property. Would that level the market?

If they become liable for rates, insurance and wear and tear above their weekly rental as well then I'm sure it'd be a proposal worth investigating further.

So your rent just covers the dept against the property the above comes out of your pocket?

I must be a part owner in my local Countdown supermarket as my weekly grocery shop helps them pay the lease.

And I've always wanted to own a pub.

Totally agree. Look at what Australia produces re rental market ownership and loans for it especially.
Is it amateur hour in NZ or something?
The most up to date figs on Auckland ownership for example, are 2013!!
And a you rightly say, when house is "sold"it is unclear who lives in it - is it owner occupied or rented?
No figures.
Census cock up really helped too
I suspect, in my Leftie conspiracy fashion, that the owning class do not want people to know who owns what.
Just for example, on Property Smarts (website for REAs) you can see what properties and owner owns elsewhere, how many etc) But its not published anywhere I have seen.
Ownership of land would be good too. Then might have a shot at taxing people on that, NOT income.

The Australian system is equally open to rorting by foreigners, and as such, the only good foreign buyer ban is one that has no loopholes at all.
Rort #1 - temporary residents can buy established housing in Australia, provided they sell it when they leave the country. However, no one ever checks if the property is sold, and there is no enforcement of the rule.
Rort #2 - foreign buyers can buy established houses for the purposes of development. This resulted in huge numbers of houses on large blocks being purchased, left empty (there are now over 1 million "ghost" houses in Australia), and a token application to subdivide the property lodged with council. The subdivision never proceeds, and again, no one ever checks if the property is subdivided and developed.
Rort #3 - foreign buyers can buy undeveloped land. This exemption resulted in two thirds of all Melbourne residential land being purchased by foreign buyers and the price of a block of land increasing 30% in one year. Again, no one checks if any development ever gets built.
Rort #4 - foreign buyers can buy off the plan apartments and homes. This has resulted in a huge number of poor quality, cheaply built (see issues with flammable cladding over there), badly designed, exceptionally small 1 and 2 bedroom high rise apartments, all designed and built for foreign investors not the people reduced to having to live in them, which are the ghettos of the future (if not already).

So I would look at the exemptions in the NZ foreign buyer restrictions, and ask "how will they be rorted?" because I pretty much guarantee they will be.

You are quite right - NZ ban is sure to be rorted - this is one of the reasons why it should not even be in place.

I do not get your reference to " .. good foreign buyer ban is one that has no loopholes at all" .
I do not think such thing exists or is even conceivable . Suggest a realistic one - and I will tell you how it could / would be circumvented .