BNZ chief economist picks curbs on house buying from offshore within two to three years

BNZ chief economist Tony Alexander's predicting that within two to three years restrictions will be put in place on offshore investors buying houses in New Zealand.

In his latest "Sporadic" newsletter, Alexander says this country should "as soon as possible" adopt Australia’s rules restricting foreign buying of anything other than new housing unless resident for 12 months.

"When might we see the adoption of some form of restriction on foreign home buying in New Zealand? Maybe within two or three years," he says.

Alexander has been recommending that New Zealand adopt the Australian regime for about three years. He has also been one of the few people to attempt - through a survey of real estate agents he used to conduct - to quantify the extent of offshore buying of NZ houses.

The Government has so far not collected meaningful data on overseas buyers, though new measures requiring provision of IRD numbers will provide more information.

Alexander said he had recommended adoption of the Australian regime, "not because I feel Chinese buying is currently the big buying force people believe it is, but because the buying will grow and the eventual popular backlash against such buying and introduction of legislation in that heated environment would risk a backlash".

"The Chinese leadership may feel we were targeting them and getting above our station. Trade retaliation would be likely."

Alexander reiterated that the "fundamental cause" of rising prices in Auckland was a shortage of supply "and until that gets addressed prices will stay highly elevated and perhaps keep rising out to late-2017 this cycle".

He also reiterated his view that whatever the true magnitude of Chinese buying has been these past few years "it will get much greater".

"Chinese families are growing wealthier, so naturally they will seek offshore assets. Chinese people wish to get assets off the mainland and this week’s massive intervention in sharemarkets by the Beijing authorities illustrates why people have high distrust of the environment on the mainland in which they would hold assets. And Chinese authorities have yet to relax hefty restrictions on people getting their funds offshore. When they do, well then you will see something entirely new hit the world’s residential property markets."

However, Alexander cautioned that adopting Australia’s rules as they stand "won’t be the panacea many are hoping for".

"In Australia’s case people have been able to get around the restrictions quite easily. The regime is now being enforced more rigorously, but that does not necessarily alter what is being seen as a huge problem – something which people in Hong Kong have been seeing more and more of in recent years.

"Many Chinese who buy properties never, or rarely, occupy them. They sit empty. This applies even to newly built apartments sold to Chinese buyers. Chinese simply want an asset away from any control by the CCP. There was an article on this in The Australian newspaper this weekend, page 6.

"What this means is the following. As Auckland very slowly goes vertical in areas like New Lynn, developers will find they can very easily get offshore financing for their projects and hefty sales off the plan to Chinese investors (we Kiwis prefer to touch and feel before buying). These investors may never occupy or even rent out their investment. Thus while on the face of it the Aussie rule that a foreigner may only buy a newly built house or apartment sounds like a grand idea, it could leave the housing supply situation unchanged from a no-rule regime.

"Thus, were we to adopt the Aussie regime we would need to add in an extra clause along the lines of apartments having to be made available for rent, actually rented, or something like that."

Alexander said the earlier we adopt Australia’s rules "with the extra twist noted above", the better for everyone, including exporters to China wanting good access for many years who may feel nothing needs to be done on foreign home buying.

"You are the ones most at risk should this situation turn bad in 5, 10, 15, or 20 years time."

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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"Chinese leadership retaliation?"

So an admission the property invasion is at the behest of Beijing.

Clearly a political and military tactic is in play to gain a foot hold in major world centres:

New York, San Fran, London, Vancouver, Toronto, Melbourne, Sydney, Singapore, Auckland.

Funds used to buy property and income used to obtain mortgages should also have to be proven to belong to the NZ citizen buyer. Also only NZ citizens should be allowed to buy residential property unless it is the sole primary residence of a permanent resident.

Did you realize all the "major cities" you refer to are in the Anglosphere? If there is a conspiracy, why is it against the English-speaking world?

Old, solid, safe democracies with strong property laws. The rampant house price inflation is also a common theme in these nations, whether that's a symptom or a cause of the investment I don't know.

How qualified I wonder is he to make that assertion? If he has some inside understanding that this would be the case - then that is very scary indeed. I do recall Key earlier saying that regulation on foreign ownership of residential RE would breach our FTAs with China, Australia and Mexico. It seemed at the time to me to be totally without credibility (given Australia had just enacted similar, and we have an FTA with them).

So, TA's suggestion that there would be "retaliation" almost implies, not a challenge to an FTA by them, but an action in breach of our FTA with them.

My point is this. If many investors from mainland China already own NZ residential property in Auckland - and the on-going availability of such assets becomes restricted through regulation, then the perfect means to re-open the spit, so to speak, would be to economically thwart the rental market by lowering any expectation of yield (running rentals at a loss) which would serve to force local rental property owners into liquidation/foreclosure - and of course that would then also see a lot of owner-occupiers underwater as well.

He didn't say China.

Very patient, the mainland Chinese and have a very very long term view/agenda..

We all need to read that article and regard it as a template for what is likely to result in Auckland if things continue much further.
We need someone with a well presented Facebook presence to start off and campaign for "Likes" until our wonderfully responsive Nat ostrich MPs see some light.

...there are a few going already, such as!/NZpropertyResidentsONLY?fref=nf

compulsory reading

In interviews, five real estate agents who primarily sell homes on Vancouver’s exclusive west side estimated that between 50 per cent and 80 per cent of their clients have financial ties to mainland China

the problem is not the buying its the selling en mass could destroy a local economy


2-3 years will be too late

Indeed, the horse will have already bolted or in a more pertinent way, the Fox will already be in the Kiwi house.


It was too late 2 years ago

In 2-3 years Treasury will still be panicking over the political correctness of a buyer registry, and fretting over the almighty question "...and what we do with that information once we have it..." let alone pulling a thumb and taking action.

This Government and its officials at Treasury are all utterly pathetic.

In 2 years time, there will be an election.

That is Nat's answer to the problem -- Hi Labour, the ball is passed to you. Go for it if you wanna solve the problem.

The deeper question to ask is whether it is a problem from the NZ political system -- it is no longer representing the interests of majority of NZers.

I think one of the deeper questions is why the sleepy NZer's have allowed their media to have been totally manipulated by the right wing agenda in NZ.
This government expects to not have to account for anything they do to the people that pay their wages.
They shut down anyone that questions them, Campbell Live, TV7, Mihingarangi Forbes, and get spuikers for the National party on Prime time both major networks, Hosking through owning TVNZ, and Henry, party because Keys good mate runs it.
The media in terms of questioning the government is basically dead now, it all kind of reminds me of a book by Michael Moore "Dude, Where's My Country?"

Plenty of mud thrown towards Chinese buyers over the last few days. Let's not forget that it takes two parties to complete a house sale. How about we throw some mud at the good ole patriotic kiwis selling their homes to Chinese buyers. No?

i think most kiwis could not care less where the buyers come from. to sell to people that dont live here and have no intention of living here is just wrong wrong wrong.
i dont blame people for taking what they can get thats the new world me me me.
the problem will be in the future and those that have lived overseas or visited certain counties overseas have seen what an unequal society leads too and its not nice

Sharetrader - yes I for one don't care if its someone in China, London, Aus or the USA. It's not racism, it IS looking after your own citizens first and foremost.
The Aus system is good - it hasn't stopped the boom but surely it has helped take edges off it

And the RE agents encouraging it.

Every cloud has a silver lining

All the leaky-homes in Auckland should have been flicked on by now - problem solved

Yes I wonder how many off shore buyers have bought leaky crap heaps for far too much?

Well given that most homes in Auckland are selling at auction, and you don't know who a buyer is until the hammer actually falls, at which point it's become a legally binding contract.... then as a seller you don't actually know who's bought your house until the moment it's sold.

The silly thing is that if people keep these antics up I can see that buying NZ houses or more correctly Auckland houses will end up changing in an unexpected manner.....there will be a drive to have the transaction look Kiwi but the ultimate ownership will be completely different to that on the title.

.. are you suggesting we should select our buyers on a race based system? That aisde, those that sell must then compete against all this imported cheap competition. Free trade I guess...and this lot want even more of it.

How about the mud be thrown at the idiot law makers that allow it. If you need to rebuy you are pretty much forced to take the OTT money in order to compete with OTT money for your next place

I would love to have a dollar for the times over a period of 30 years agents said to me or the purchasers I was dealing with, " I will get the purchasers the price they want to pay for the property."
They generally forget to remember that the vendor is paying their commission but getting that last bit for the vendors does not affect their commission too much so why bother trying to get it for them. No wonder this "profession" generally attracts people to join it who have failed in other areas of employment first.

2 or 3 years? 2 or 3 years! Jeez I hope you mean 2 or 3 years ago.

It'll happen much sooner than that despite Key's absolute resistance to it. The pressure continues to build with every news article, every bit of data, every increase in price. From 1st October National will be faced with data they cannot deny.

The 'funny' thing is how bad the impact will be on the market.

Two degrees of separation

Not sure requiring an IRD number and a domestic bank account will do much

The only thing that will do will be to create the fear of their identities being shared with their home Tax Authorities - and that assumes the NZ government will even get around to doing it

It's simply an exercise in jaw-boning

National will no longer be able to deny the problem once data is 'officially' collected.

It's the banning of foreigners buying existing dwellings that will have the impact.

I must have misunderstood

The new requirements being introduced on 1 October 2015 simply require the purchaser to provide an IRD number and a domestic Bank Account number - can't recall anything about property transaction data being collected - or by whom

Housing minister Nick Smith dismissed the data as unreliable and questioned Labour's surname methodology. He said the Government's register would give far more accurate information about overseas investment in Auckland housing.

Nick Smith's comments have suggested the IRD / bank account details collected from 1 October will provide the Government with information on foreign buyers. I don't know the mechanism or whether there is a separate 'register'. Is residency status associated with each IRD number?

However, Housing Minister Nick Smith said while the tax and bank data the Government will begin collecting would give it a better picture of foreign ownership of houses in New Zealand, there was no need for a register of foreign owners.,-nz-first-want-for...


There is a massive problem, and it is happening here, mainly in Auckland caused from factors and forces that are nothing to do with New Zealand. A whole generation is being damaged.
Given the havoc that it is occuring it needs to be managed. The national government is derelict in it's duty to citizens by ignoring it. Insulating us from it is not their desired approach, but given it is a massive problem they need to deal to it.
Restricting property sales to New Zealand citizens only would be effective. "Citizens" not "Residents".
Over time those properties not currently owned by citizems come back into citizen ownership.
Some management of the unintended consequence will be required. eg managing who become a citizen.

In essence, it is a capital control/diversion policy that Govt needs to think about.

Also think about the potential problems may be created if foreign $ were banned from pouring into AKL 2nd hand residential market.

The key potential problem would be a falling property price scenario, in which nearly everyone would be worse off.

Which of course, is proof positive that it should have been done years ago. I guess you have to consider that as things are, there are a great many kiwis including those from all parts of the world but are kiwis nonetheless, who will be seriously harmed if we don't do something (are already seriously harmed, I should have said)

why would it fall, and how far.
My thought is that it would be taken in steps. Foreign direct buying. then proxy buying. the NZ citizens absent from NZ.
should be no reason to reduce resident purchases who are in (non-proxy, ie using their own funds) as that is an immigration issues, and their money and children are actually part of the local economy, so velocity of money is reasonable to them.

JK please explain, this is almosnt Treason by our top politicians

Sheeeeez. The real worry - it seems plausible.

One can be absolutely certain that as of today there is a vigorous witch-hunt going on in the confines of a certain Auckland Real Estate Agency

Game on - it's happening
Headline:- Barfoot & Thompson director: If it is our data, it's been given illegally
Barfoot & Thompson director Peter Thompson said today the company was "seeking legal advice" following the leaking of sales data from an unidentified real estate company



Happy to share with us how big he is, how many he sold last month, how much total sales were, but doesn't want us to know the societal changes he wreaks, or how, or who


Peter Thompson, if you are reading this, know that if you identify the leaker of this information, in the view of many, many of us, that person will be a hero(ine)

In which case the data seems legit....

Yes, the hat did fit, so he's wearing it

This gives a completely new meaning to the term Leaky-Homes

If Chinese money is trying to get out so fast, what about the reason for that? All well in china? I think not.

Who remembers 2 years ago Tony Alexander began collecting data from Real Estate Agencies in the form of surveys that the RE agencies filled in and sent back. This was all about Auckland and what was happening to property prices in Auckland. The results coming out of those surveys was that buying by foreign purchasers and or Chinese nationals was no more than 6% to 8%. What happened was Alexander was shot down and demonised by the many, including the usual big-hitters and none other than JK his-self. Unsurprisingly Alexander shut the surveys down.

Now, today, 2 years later

One can only conclude that the RE Agencies (or one in particular) were lying and Alexander was un-fairly treated by the cognoscenti

that wouldnt happen to be the same agency that the head of made a big donation to national party coffers for the last election.
whats the difference between that and WP accepting money
bit hypercritical to attack one and then put your hand out

Ye gods, of course Real Estate agents were less than diligent about revealing the truth. It would have been akin to the turkey counting down the days to Xmas

Which is why non or self-regulation is a sick joke.

Just an hour ago in the NZ Herald by Anne Gibson

Real estate insider: 90 per cent of Auckland properties sold to overseas Chinese in May
Says it all really!
Will Jonkey deny this too?

Of course he will, he believes he has a bale of laurels to rest on.
He's about to find out, though, that someone's done the old switcheroo and the bale of laurels has become a bale of gorse

The market is heating up, the emotions are heating up and a fire has been lit under the government's bum....Waiting for the fireworks to go off soon. Interesting times, aye ?

Yes. I can't wait for bank residential mortgage risk weighting rates to rise.

interesting report from Apra to the four major banks today
The APRA study also found that to be comfortably positioned in the top quartile of their international
peers across all four measures of capital adequacy over the medium to longer term, the major banks
would need to increase their capital adequacy ratios by at least 200 basis points relative to their
position in June 2014. In relation to CET1 ratios, to achieve the bottom of the top quartile would require
an increase of around 70 basis points in CET1.


Warned you 3 months ago - when Australia began cracking down on foreign nationals breaching the rules there would be an upsurge into Auckland property - and here it is - it's happened - too predictable

For me the surge started in December 2011 leading up to both of our kids (if mid 30s are kids still) started looking seriously. Fortunately both were satisfied by March 2012. As an example one bought at 575k is just a couple of doors away from a very similar one that sold a fortnight ago for 900k.
At that time we witnessed Asian young women, early 20s making offers at above the then market prices.
Nothing new now, just the froth before the bubble finally bursts?

Chinese students are being paid 2 per cent of the purchase price of the property to purchase property on behalf of relatives


Putting aside the objections of racism and poor data: let's assume the data is valid the real issue to be debated is::
1. Is it good for the NZ economy to allow unfettered offshore buying of Auckland houses?
2. Is the unregulated buying of Auckland housing something that NZers agree with and support?

Notice the complete absence of National politicians making any comment on the issue. Their spin doctors are activating other nonNational spokespeople..


The emperor's new clothes.

John Key -"What crisis, there is no crisis, the important thing is my new clothes look good".

It has been reported that there are 20,000 unoccupied houses in Auckland. Probably nonresidents dumping money out of their countries. Time for a Squatters Website featuring those houses for Kiwi families who can no longer own a house there. They don't live here, we do, they lose the rights to the property unless they become residents.

I would not be surprised to see stories start to appear about squatters, they already happen in Chc at least the Auckland ones aren't falling down

You would think social media these days would be listing them all - back in London in the 80's all the squat lists were readily available and all we had was the corner telephone.

Not falling down but not being kept well. If squatter families move in, tend to the lawn and garden, fix chipping paint, etc, they'd be a positive for the neighborhood. Win-win.

Finally it comes to the surface!
Why person working, living paying taxes in NZ can't buy a house because it became unaffordable and the overseas buyer can do it as he is in a better position to do it ('printed money'). For me it is sad, unfair and wrong that those things happen. We are not talking about outbidding by 5...10 or $15.000 but 300.000-400.000! It seems like irrational approach with bottomless pocket. A working person, living and paying taxes in NZ can't cope with that. I was trying to buy a house for a while - unsuccessfully, but i was at the auctions, i have seen who was bidding and who was buying...

You think he will talk about Auckland housing there ? Or will the Chinese raise this issue ?

more like been commanded by his master to please explain how the info of the master plan has leaked out

Peter Thompson claims he does not know his customers

The answer is here in todays article by Jenée Tibshraeny on Anti-Money-Laundering-laws (AML)

Under AML Law, financial institutions are required to conduct due diligence on their customers and report unusual activity to authorities. The Ministry of Justice is working on extending coverage of AML/CFT regulations to accountants, conveyancers and real estate agents.
Reporting Institutions have to report international wire transactions exceeding $1000

Under these regulations the principal has to conduct due diligence on its customers - and know them

When the government announced the new IRD and Bank Account requirements it should have brought Real Estate Agents inside the AML tent at the very same time, starting 1 October 2015
As it currently stands their inclusion is some time away.

Typical Government - can't even synchronise their own laws and regulations - hopeless
New Zealand is such a diversify country, and Chinese is the largest ethnic group in Asian category. From 2001 to 2006, the Chinese population in New Zealand had jumped from 105,057 to 147,570, significantly increased 40.5%. (Source: Statistics New Zealand 2006 Census)

Why aren't we asking why JK and his band of "Tricky Men" (not to be confused with Robin Hood and his merry men) find it so difficult to implement such basic solutions.
They had no such problems at planning and scheming their Machiavellian plots prior to the last election.
Doesn't seem logical that their planning co-ordination and management skills should desert them just when they require them to actually govern and manage the job they were voted into power to do?
From TPPA and management of trade deals, to Housing, Immigration, Selling off New Zealand, etc etc, it looks more like a case of being deliberately obtuse, and maybe some wilful blindness!
Perhaps we should be "scratching" beneath the surface of spin, to find the real agendas?
The "Tricky Men" are not that dumb.

Creepy key has a clear run now, he's killed off any media that used to question him, and all that remains are the his supporters, and sleepy Kiwi's are apparently going to sit there and watch it happen.
So called serious economists like Shamubeel Eaqub will pop up every now and then and criticise anyone that criticises them, and generally just throw a smokescreen around it and avoid the real issue, while being among keys biggest supporters.

When JK returns from his holiday in Hawaii I expect him to announce tax cuts to stimulate the economy and to try to take the focus off this issue

Yeah why not spend more money he doesn't have, these guys couldn't make a surplus to save themselves anyway.

What I find most interesting is that the RBNZ has a legal obligation to target CPI at 2%. This isn't like the good old days where everybody just inflated their mortgage debt away. Without massive productivity gains incomes are going nowhere. These never ending price increases of 20+% cannot go on forever because it becomes more and more unstable. The longer it goes on the greater the risk that the tiniest recession or change in interest rates or banning of Chinese speculators (am I allowed to say that?) is going to tip the whole apple cart over.

If inflation starts taking off, its CPI that will be protected first by mandate. Asset prices will be the collateral damage. Everybody seems so blind to it.

Then again most people aren't very good at maths. The shrieking racialist outrage to a valid statistical analysis says it all.

The "problem" is the RB has several criteria it has to fulfill, a biggee is financial stability. I do think that the RB was wrong to raise rates and I have said that all along, but it was a case of caught between a rock and a hard place. In terms of instability and 20% that is some areas of Auckland most of the country is rather flat. plus those crazy increases are with more debt or cash from overseas? If its more NZ bank debt that is bad, if its cash from overseas not so much.

Inflation can only take off if ppl can afford to pay more. They cannot, as most ppl have seen no or small pay increases for 5+ years. What is happening is as the Govn granted monopolies like rates and power increase ppl are forced to cut back elsewhere. I mean if all you have is $100 and an item goes up $1 then you cannot buy that item or something else or that something else has to drop $1. That means the greater prices increase in some parts of your bill the more you have to cut elsewhere. The q is when all you have is that $100 what is going to give?

CPI v assets, is a different argument, CPI is simply a reported figure for everyone it isnt "protected" it simply is, so I dont follow you? In terms of assets these I suggest are owned by the "better off" who can mostly afford higher costs as they have disposable income. Trouble is some like FHBers are very sensitive to extra costs but has their houses been going up at 20%? I suggest not, the areas appreciating so wildly are not typical FHB suburbs?

In terms of racist, I do think NZ should stop,

a) immigration or at least cut it 50~75% for now, why? because too many NZers are unemployed and the pressure of more ppl puts up costs like rates, it makes no sense.

b) Only people living in NZ or who were born here should be allowed to own residential property in NZ.

So where is the racism in my comment? considering my other 1/2 of my family is NZ of Chinese descent, no where.

this is why I object to non kiwis buying nz property and not living here because we are at a disadvantage and they don't contribute in any way to NZ.
my questions are
since the house is positively geared are you paying tax on the income?
have you a NZ IRD number and file a tax return?
you say work harder save more what percentage of your wage in china goes to government tax compared to what kiwis pay.
how did you get 500K out of china and into NZ?
is the money legally obtained was it checked here as per the anti laundering laws?
what is your objective GC?
if GC will you pay tax when you sell and take the money out of NZ?
and my last question is why is IRD not catching this

these are some of my questions im sure I would be happy too if I could invest somewhere tax free and suck income out of that country before I walked away with the GC

There will be ages before GOV make ANY action - or they will do none...
Look what Swiss did to CHF / EUR - they 'unfixed' is overnight - none knew it was coming.
Why - because it was GOOD FOR SWITZERLAND - what is good for NZ? Selling our homes and land and allowing US, NZ'ers and ourkids to be tenants in our own country ???

Either they should take out the tax advantage for investment properties or give same tax rebate to home owners for the interest they pay on the loan, level the playing field. Take out the advantage for speculators and idle investors who are not residents/citizens. And introduce annual land tax for non-resident buyers of houses. Heaps of ways to skin the cat and boost the government coffers and also control the house inflation. Where there is will..and all that.

Its astounding that the Government place restrictions on locals with minimum deposit rules but nothing on foreigners - helped by our falling dollar value. Kiwis are forced to loan more increasing overseas paid interest and debt into a Greek like scenario. The fact that local wages and housing un-affordability continue to escalate doesn't register with National they pull out racist xenophobia card rather than help/protect their own people by altering foreign investors behavior. Globalization needs to be controlled.

When did this Nat govt even pretend to be "for the common good?" A phrase never spoken by them.

True - Nats common good of those few who are benefiting from foreigner purchases.

LOOK. Just get the army to shoot the foreign buyers stealing our homes

Then we can all be happy that our government is actually doing something to protect the interests of our good kiwi NZ families, their children and their children's children.

If foreigners want to come and live here. Let em rent for 10 years like all the kiwis who work and save for a deposit. Then they we can make em Kiwi's and everyone's happy. As long as they are resident for that long then no problem.

One house for each only and one for an investment if that's what your into.

Enough for everyone. Problems solved.

thats why limiting them to new builds also works. no competition for existing stock, only location.

Why not make a simple rule with foreign investors, if we can't buy in your country then you can't buy in ours . That rules out China! seems fair to me. What kind of FTA has Key signed with them? People forget business is a competition and we need to stack the cards in favour of New Zealanders not foreigners.

FTA od we do what they say, and turn a blind eye to what they do, and Key gets a fancy bank job and some mates of the party get concessions.

They can't. This will be in breach of the China FTA provisions. The taxpayer would be faced with penalties imposed by a tribunal under the investor state dispute resolution process of the agreement. Blame Labour, Not National's fault this time, but it's rather farcical how eager an avowed liberal like John Key is to collaborate with a authoritarian regime like the People's Republic of China.

So ... why wasn't China in breach of the FTA provisions when it banned ALL non-residents of Beijing and Shanghai from buying ANY property in those 2 areas in 2011

Free Trade Agreement huh? have a close look thru this and ask yourself what is going on

Market Forces - yep - that'll be right

China imports from New Zealand have tanked
lower right hand graph - nz is the purple line

Comment from an incredulous Alan Kohler on the fall at ABC news if you can see it
Starts at the 1 minute 28 seconds mark

Helen Clark's government signed the FTA with China.