Capital outflows from China may have had a bigger impact on Auckland's housing market than low interest rates and high immigration

By Greg Ninness

New figures on the number of homes being bought by overseas buyers has reignited debate about the Government’s plans to introduce restrictions on residential properties being purchased by overseas buyers.

The figures show the number of homes being purchased by overseas buyers has risen steadily from 2.1% of all residential property sales in the first quarter of last year to 3.3% in the first quarter of this year.

However for the first time the figures also gave a regional breakdown, which showed that most of the purchases by overseas buyers were concentrated in Auckland, where they accounted for 7.3% of all purchases and Queenstown Lakes, where they accounted for nearly 10%.

In some Auckland suburbs nearly 20% of all sales were to overseas buyers.

On Friday, Associate Finance Minister David Parker was quick to point out that foreign buyer activity was concentrated in the only two places in the country with serious housing affordability issues.

According to the Real Estate Institute of New Zealand, the median price of Auckland residential properties increased from $496,000 in April 2012 to $850,000 in April 2018, up 71%.

In Queenstown Lakes the median price rise has been even steeper, rising from $493,000 in April 2012 to $950,000 in 2018, up 93%.

Nationally, the median price increased by 51% over the same period.

So could the comparatively high number of overseas buyers in Auckland and Queenstown have been a major factor in the extraordinary property price growth that’s occurred in this country over the last few years?

It’s important to remember that there have been three main factors that have driven up house prices so dramatically.

First the extremely rapid increase in migration which occurred over the last six years.

In the 12 months to April 2012 there was a net loss of 4006 people from New Zealand due to migration, as more people left this country to live overseas than arrived here to live.

In the following 12 months that had turned around to a net gain of 4776 people, and in the 12 months to April 2014 it ballooned to a net gain of 34,366 and continued to rise before peaking at 71,885 in the 12 months to April last year.

In the 12 months to April this year the net gain was 67,038.

That rapid escalation in migration, particularly to Auckland, easily outstripped the supply of housing and led to what has become known as the Auckland housing crisis.

And when demand exceeds supply, prices generally go up.

The second factor that helped to push up prices was the availability of cheap bank debt.

According to interest.co.nz’s Home Loan Affordability Report, the average two year fixed mortgage rate peaked in the current cycle at 9.64% in March 2008, and by May 2016 had dropped to its cyclical low of 4.35%.

It remains near this low at 4.69%.

On their own, low interest rates and the excess of demand over supply would have been inflationary for house prices.

But there was a third factor at work, the huge outflow of capital from China that occurred up until late 2016 and this turbo charged the rise in Auckland house prices.

From mid-2014 interest.co.nz covered many of the main residential property auctions that took place in Auckland and the norm was for them to be dominated by Chinese buyers, both those who were present in the room and those bidding via phone.

The word that comes most easily to mind to describe the bidding that took place at those auctions from 2014 until late in 2016 is “frenzy.”

It was a Chinese bidding frenzy that was motivated by their desire to get money out of China. Auckland residential property seemed a good place to park that money, because the housing shortage and low interest rates were already pushing up prices.

They could just sit back and accumulate the capital gains.

But it all came to an abrupt end in mid-2016 when the Chinese Government cracked down hard on capital outflows.

Within a very few months Chinese buyers at open homes and auctions dwindled and sales started to decline.

The frenzy subsided and the market cooled.

Other factors such as the introduction of loan-to-value ratio restrictions on new mortgage lending and greater scrutiny of mortgage applications by banks have also helped, as will changes to tax deduction rules on investment properties. But none of those things has had as much impact on our housing market as China’s clamp down on capital outflows.

What would happen if those controls were eased again?

We still have mortgage interest rates hovering at near record lows, and Auckland’s population growth continues to exceed the supply of new homes by a substantial margin and is likely to continue to do so for many years, even with Government projects such as KiwiBuild aimed at boosting supply.

All it would take for prices to start skyrocketing up again would be the Chinese money tap to be turned back on.

Unless we have measures in place to regulate and control that activity, our housing market could easily be swamped by another wave of speculative buying from overseas.

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213 Comments

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37

From now till next month when the bill will be passed to ban all non resident buyer from NZ, all efforts and arguments will be tried by all vested parties, media, experts, speculators, influential rich and so called experts to avoid or delay the ban or if cannot be avoided to dilute the law.

See how antiban lobby gets active now supported by media many a times paid in kind or favour.

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Remarkable, really, considering National's claims that foreign buyers were not an issue.

City Officials Struggle To Fend Off "Unstoppable Juggernaut" Of Chinese Homebuyers

https://www.zerohedge.com/news/2018-06-07/city-officials-struggle-fend-u...

As we've pointed out time and time again, foreign - mainly Chinese - buyers seeking to park their ill-gotten gains beyond the reach of the Communist Party have - in addition to global capitals like New York City and London - favored a handful of cities in the Pacific Northwest, as well as Australia and New Zealand. Many of these cities - for example, Vancouver - have seen property values rise to levels that are unaffordable for local buyers.

While the influx of capital helped fuel an economic recovery in the aftermath of the crisis, home values soon reached crisis levels that demanded action by local officials. Some places have tried to use taxes to deter foreign buyers. In some instances, the taxes worked - at least temporarily.

Black and White

The Overseas Investment Amendment Bill will allow any non-NZ citizen or permanent resident to invest in new builds.

Attaboy

I find it curious that the New Zealand housing market has got tot the point where is has to rely on overseas investors from collapsing (that is what Collins is implying) - is the housing market in that a precarious state. While government intervention is sub-optimal - doing nothing is even more sub-optimal. Some seem to want the optimal solution - it doesn't exist - there is only a sub-optimal solution that will displease many.

See the media and so called expert anti foreign buyers last ditch attemp has started

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12068187

"auctions that took place in Auckland and the norm was for them to be dominated by Chinese buyers"

Why on earth would someone in a foreign country who doesn't even live here wish to buy into our over heated housing market? Who will keep an eye on their house for them while they live in China? So they will pay taxes, rates, maintenance, insurance, etc....and for what??

Idiotic.

Dear Canton
NZ is a safe place to own property
Family connections take care of the NZ property just like family connections often purchase the property on behalf of .
There are no absolute ways to prevent foreigners buying NZ properties
What NZ should be doing is introducing a land/property transfer tax @1.5% to at least collect some revenue from the flipping of houses. So much potential revenue for Auckland City was lost by not implementing this because National had to keep its Ponzi property voters happy

So, it is most likely LVRs worked against New Zealanders/New Zealand citizens (especially both FHB and investors) who were restricted in their ability to borrow and purchase, but advantaging overseas purchasers through reduced competition as they would no doubt be cash buyers.
(Note that foreign buyers would not be affected by LVRs as they would not be looking to bank mortgages through a lack of credit history and income)

No, the OBs would often also leverage up to increase their holdings and maximise those capital gains.

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Even if they leveraged up, I still suggest that LVRs would have had greater impact on local buyers especially FHB as overseas buyers would most likely have the ability to meet the LVR thresholds compared to NZ FHB.
If overseas buyers were an important driver (as I agree they seem to be) then government action should have directed here, rather than through NZRB LVRs.
Hindsight is wonderful.

20/20 is hindsight

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Greg, are you and David Chaston still on talking terms after this article?

Edit: Being facetious, I’m guessing your views align when it comes to Auckland and Queenstown, but you did use the C word quite a bit, Chinese.

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The data shows Chinese buyers were a large proportion of the overseas buyers. There is nothing racist in acknowledging this.
Good article Greg.

Good article, yes. Chinese buyers were a large proportion of overseas buyers. Overseas buyers were only prevalent in certain parts of Auckland and Queenstown.

The Australians (exempt from the upcoming ban) weren’t far behind though. 504 China, 381 Australia.

Australians also sold a lot to balance out the numbers.

The Chinese hoarded.

I'm surprised he hasn't been banned.

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28

Correct Chinese waited for the ideal moment, which presented itself in the 2008 GFC when the financial market tanked, forced locals to sell, Chinese took advantage releasing capital globally to buy up the west with ridiculous offers that real estate agents then used to drive up prices and commissions with no care or concern to communities and largely the cause of the position we are in to day. Banks under pinned this with cheap and easy money.

Chinese financial activity in the USA in the 12 months after the GFC was huge. For 2 years they bought into the Merchant Banks and other soft assets. By 2010 they were buying hard assets. As push-back (US knocked back a fuel and coal company buy-out) occurred the global or commonwealth buy-up began

Real Estate agents having care or concern for their communities ? Please.... , you are crediting them with a degree of altrusim and intellect rather than their dedicated self-interest.

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44

Foreign Chinese Buyers are destroying our New Zealand Families !!! Thanks again China for your amazing integrity, and thank you Chonn Kee for nothing . You lost my vote last election.

Key didn't even contest the last election - time to move on.

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You are right, but him and his policies (and his policy mistakes) hung around the election like banquo’s ghost. A judgement on National was effectively a judgment on him. And many judged him quite harshly

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24

Quite why a silly Nation thought an ex-Bwanker would be good for anyone but himself is beyond my understanding.

Quite why the Voters and Party Hearty cohorts allowed him to bring in people with the wrong attitude to life, ethics, reciprocal agreements over housing, business and political persuasions is the most stupid thing I have ever seen in my life.

Shake yer hand, dip into yer pockets. Pick someone elses

Taint all about money, That is already tainted by Bwankers anyway they can.

Tis all about selling are souls and land and people, up shite creek, that may be used for a spear head for their next invasion in this war of our attrition and their expansion. and yes...expansion of its mite and might.

That the World cannot see where the World is heading using broken China funny money debt, aided and built by Western and yes, "Our Southern Stupidity " that gave them the wherewithal to build infrastructure and war materials, like never before, bought and paid for by us mere mortals daily expenses and needs....but more importantly.."Wants".

That people will eventually regret this is evidently mounting. That people cannot live without perpetuating their expansion, is totally and eminently... immorally....stupid.

'Housing a threat like never before"

Labour can never reverse this trend as it may turn to custard if Houses fall. They are our only wealth accumulation factor. Sad to say.

Supporting Island Nations to retain their trust is untrustworthy. We are just a stepping stone for an expansionist regime, building ports, warships and war materials with our effectively, cheapened debt money.

Millionaires can be cheap too, especially when bought out by funny money.

But I ain't laughing.

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I think you'll find that foreign buyers have penalized themselves for a very long time. They've paid for assets at future value many years from now. If we assume for a moment that foreign buyers are completely banned and market prices have increased far behind the means of the average KIWI family , who will then be the recipient of those expensive homes purchased by foreigners when they decide to liquidate? Bad investments have no bias , and sooner or later it will be time to pay the piper....especially if you cut off the main reason for the asset increase. Good luck trying to sell those assets for what you paid for them. If median reversion holds true prices will adjust to levels affordable by the majority.

Chinese buyers are not “destroying NZ families”
NZ had a aging population and would have stagnated without immigration
It is just that National failed to immediately address foreign speculation in the Auckland property market & allowed foreigners to buy & sell NZ properties repatriating the capital gains tax free out of NZ
Also National ran a loose immigration policy made worse by people like MW etc
The Chinese like those fleeing South Africa will transform NZ for the better but there will be adjustments
required by kiwis & migrants alike.
NZ is a beautiful country The latest Jeep Wrangler was showcased in NZ in the media
Let’s all get along kiwis

The Chinese have certainly led the way in transforming Auckland into a busy place. Everywhere you go, from the hot pools, to strawberry farms, to shopping malls and the hundreds of restaurants everywhere you encounter quite a hubbub of activity. Go to downtown Auckland now and it is really alive when once, not so long ago, it was practically dead.

The only exception is at night in downtown Auckland when it becomes a living nightmare due to primarily dinkum Kiwis and perennial losers. Something needs to be done about that.

Chinese do like to go out and do things and they have adopted and embraced the best things about the Western lifestyle. Honestly we could do a lot worse.

We cannot really live an isolated life and I believe, deep down, we don't wish to. We enjoy everything that globalism has to offer. We want a modern, bustling city, constantly improving its infrastructure and amenities. We want the latest technology and cheap air travel.

We actually don't have what it takes to be isolationist, we don't have the will nor the vision, to create a unique and vital society on our own. Far too many of us are whiny and negative and just a bit hopeless. There would be a mad rush to Australia if NZ tried to isolate itself.

Like the little red hen story the ones who wouldn't help and work still want a share of the rewards. Very sad how many nzers are bludgers and not contributors

Have you considered that landlords/property speculators might be bludgers who contribute nothing to NZ other than expensive houses?

No I haven't. The businesses that Zach referred to, "hot pools, to strawberry farms, to shopping malls and the hundreds of restaurants" all have landlords and without the landlords there wouldn't be any of the businesses which you can patronise.

I can tell you don't actually *talk* to any Chinese people. Just mention any of the three T's - Tibet, Taiwan or Tiananmen - and you'll see their true colours.

Dearest Zachary
Heading to Asia soon & will deliver your kind welcome to our friends there
The question remains why did National not run a balanced immigration policy and why did a former senior investment banker & former member of the New York Federal Reserve tasked to lead the country of NZ fail to implement policies to prevent foreigners speculating in Auckland family homes ? Maybe there was a lack of memory in not recalling what happens in an open market without regulation ? I doubt it

NorthernLights, I am really just saying we could do worse, a lot worse, and just maybe isolationism and a NZ stuck in the past could be worse too.
I had some ideas in awhile ago but no one was too keen so now I'm a globalist. Got to make the best of the current situation as an individual global citizen. Much like you really. I have to some extent taken your advice.

Excellent to hear Zach
Globalism is the best solution albeit the workers displaced by it in higher wage countries have not been funded
into higher education so they can be re tasked in higher paying jobs than mere part time work
The biggest job growth in the US is in part time work with commensurate decline in full time work
Trump is ruining America going backwards with tariffs He should instead be funding the up skilling of Americans for better jobs. People have been made redundant and left outside the work force.
The wages here are the same as 20 yrs ago for many. This is the reason Trump got his shot but he has done
nothing to address re education of American workers & missed the opportunity to include that as a proviso for giving the tax cuts to companies here.
Good to hear from you Zach

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With the frenzied times now behind us, many who were shut out by LVR's will soon be thankful they were and are still solvent.

Strange logic indeed, being thankful for missing out??

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Oh-my, a comment from "johnny cm lately" who thinks he holds all the winning tickets......

You keep saying Johnny come lately but you assume wrongly. We didn't just dream up being property investors in the last few years when we all saw the incredible gains from property which were made even better with leverage. You should know by now that true property investment does not rely on bidding wars and buying frenzies but is measured and is successful long term. Although I don't think much of the boring way you have handled your own investments your approach is based on your own stategy to sit on the sidelines waiting for property investments to fail. All the while earning a small return

Retired-poppy should read the Parable of the Talents. I'm pretty sure DC was thinking about him when he wrote about pessimists in this week's Top 10.

Touche. Heads up that retired poppy will not be able to comment this week, he has got a whole week of coronation street to watch starting with the 2 hour catch up tonight.

Houseworks, you entered the Hamilton market no more than nine months ago. Yes, you are indeed a "Johnny cm Lately" I struggle to think you've entered the market at the bottom of a cycle, seizing a unique opportunity. Anyway, good luck with your ticket, you're sure going to need it.

In January, Zachary believed Sydney was about to boom and drag Auckland with it. Talk about a complete disconnection from reality. Still waiting Zachary........

I entered the Auckland market in the early 90's booyah!

DGZ, as did I. All your eggs are in one basket and you stay awake at night counting chickens. It's all part of your addiction....

I gave an example of a property we bought 13 months ago and did quite well through our own smarts
(I'm not saying we made a poltus, as you will become angry and resentful). I have previously explained our situation which you read and commented so how can you now say Johnny come lately? Retired Poppy it is really a shame that Alzheimer's has come to someone so young as yourself, keep exercising and eating up your pulverized greens

Ha-ha-ha :) Johnny, its hardly "smarts"! Nowadays, it's just gambling with others money. Like I said, good luck, you will need it. Remember, your bank is your Landlord and it ain't fun for the complacent on the downside ride.

You have assumed wrong again RP we don't have a mortgage on it :) it wasn't smart of you to follow the advice of the vocal Mr hickey in 2012 now was it, things would have turned out differently for you, you wouldn't be so bitter. Where is Bernard (waldo) now? Anyway have a good afternoon.

Houseworks, lies. Talk to your bank as to the best and of course legal pathway to being debt free. It takes unwavering commitment, dedication and patience. I think an aversion to gambling on quick gains forms a key part. Loose comments on a string just doesn't cut it as truth coming from you. Remember, it was you foolishly gloating my term deposits were funding your speculating! Yet another comment you forgot you made (chuckle)

Just as I said, you are angry and resentful and that blinds you. Take a nap and calm your nerves

Houseworks, I'm also so envious it's driving me insane! Property junkies have that effect on me. I yearn to feel that equity erosion - NOT!

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Yes, if the market crashes there will be many people who were glad they got outbid as they drive past the place they tried to buy with a mortagee sale sign outside.

Retired-Pooopy

How soon is soon, in your opinion?

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Who knows, but if you are renting now you are already getting the benefit of occupation of a property for materially less than it would cost you to buy it, so I would say you should continue to rent for another 12 months and see where things are at then. Financially there is little potential downside and lots of upside to that decision. You may have other considerations that make you want to buy, but financially right now it seems a no brainer. It’s highly likely there will be further price falls over that period.

You think there will be further price falls over the next 12 months. In what order of magnitude do you think? I think Aucklandwide 1% gain year on year from this month. 4% nationally.

I don’t know, but I would say that is or will be the trend. The cause will be taken tightening credit conditions. I think the biggest risk we face is a disorderly unwinding of the Aussie bubble, not sure if that counts as an “external shock”

You think marginal gains will be the trend??

No, price falls, but I won’t guess as to the order of magnitude

That’s no fun, what have you got to lose?

I think 5% drop in Auckland in next 12 months. More if there is an external shock

Good stuff, let’s see.

BuyLowSellHigh, for your name sake you will have already cashed up a year ago - right?

Not yet Retired-Poopy, not yet. I tend to play long. Now what say you to my question. How soon is soon? Also, what magnitude of fall.

Last Dec, interest.co invited us all to place our predictions. I then predicted an overall -5% fall for just Auckland and when included nationwide, -2% by December 2018. I felt that the downdraft from Auckland would have by then spread to the provinces by causing them to at best, flatline.

Separately from that, if we experience a GFC2, then I think anything up to -60% is possible. Australian banks liar loans could easily intensify any downturn and generate an Australasian Banking Crisis. Also, this is on the basis that previous stimulatory measures will prove much less effective against deleveraging and there's no "White Knight" like China was to us after GFC1.

I challenge you to provide opposing facts in support of your 10% per annum gains for housing in each of the next ten years. I challenge you factually mitigate the growing global credit stresses that have popped up in recent weeks together with the coming effects of ring fencing and the foreign buyers ban.

Good luck with your challenge......

What’s this about 10% per annum gains?

Good luck with your -5% prediction. Currently tracking +1% year on year and only 6 months to go.

"What’s this about 10% per annum gains?" I challenge you to factually support the camp in which you live. Where are your counter facts?

I don’t recall predicting a 10% gain, but if you can link I’ll comment.

Next 12 months 1% gain in Auckland. Market supported by insufficient supply, high immigration, low interest rates, slightly higher incomes. Constrained by affordability, cautious lending, market sentiment due to Lab govt. and LVR. Kiwibuild and foreign buyer ban impact negligible.

Downward pressure on average price due to more appartments and townhouses. But I think main measures of price change account for this.

BuyLowSellHigh, even if your utopian YOY world of gains played out, its fraught with potholes. Do you also think the IRD will not consider you for CGT outside the brightline test? There is no time limit for retrospective assessments on a buyers initial intentions.

Serious question, how many years is long term to you?

In terms of how long, I honestly see no end in sight. 25 years at least. Most likely will never sell and instead use rental income to support retirement. Who knows.

You mentioned earlier that I’m scared of a price drop. Truth is this doesn’t concern me (not that I’m expecting a drop). Main factors for me to keep an eye on are rents and interest rates. Rents are almost certainly going to continue to rise slightly above inflation as they have done forever on average. Fixed on low interest rate, so will worry about that in a few years time (by which point rents will probably be up 10%). Also, exposure is not only in Auckland.

Fair enough - each to their own. If you consider Barfoots reported negative price movements for Auckland, I beg to differ with your %.

Anyway, I noticed you gave wide berth to factually mitigating the growing global credit stresses that are appearing everywhere together with the effects of ring fencing and the foreign buyers ban. I guess you failed the challenge. Some things are just too big to fathom what the possible fallout could be aye! In a tight lending environment combined with sinking confidence in future gains, immigration numbers mean diddlysquat.

It's been fun, enjoy your weekend :-)

Hi Poppy Any one seen TTP lately?

Now called BuyLowSellHigh

I was in Palmy yesterday. Every old man that I saw I thought to myself “is that TTP?”.

Haha, like trying to find banksy

Probably found zipping around the hospital grounds on his mobility scooter with Mrs The Point.

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A friends son married a Chinese woman who has bought a house in Auckland, two in New York and one in London on behalf of her wealthy father. Rich Chinese families understand only too well the fickleness of a one-party state. Let's not forget, too, that China has been the centre of civilisation for most of recorded history and is now an expansionist power with a long-term view.

Let's not forget, too, that China has been the centre of civilisation for most of recorded history

Ha! Maybe in their own eyes they were.

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The stats released are a bit of a blur.

Where property purchased is in the name of a nominee(s) or company where the true beneficial owner is unclear, then it should by default be classified as foreign buyer.And therefore subject to OIA approval.

Hope the OIA Bill will have sufficient provisos to flush out dodgy ownership & severe penalties for those who seek to circumvent the law ( including their advisers who willingly abet or turn a Nelson's eye to wheeling & dealing)

By default - good idea

Agree. And a big penalty for the accountant/lawyer acting on behalf.

Already underway with AML Phase II coming into force next year.

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Agree... these three factors have been the main factors driving up the price of houses.
The only other thing I would add would be local investors buying due to low returns from banks and the "safety" of bricks and mortar.
Just all so frustrating... as a few laws around the purchasing of properties and capping immigration would have been enough to keep a lid on prices.
Poor governance and vested interests have led us to this place.

No New Zealand this is not good enough and cannot happen.... how does honest factory owner from China buys a house in Auckland.... gets cash out of the country (or Chinese bank debt which is huge).. 12 months later sells NZ house to mate who owns Chinese factory next door (to get money out of China, or bank debt)... 12 months later, sells to factory owner next door - good friend, (gets money out of China, or bank debt) - sells to .... This is starting to sound repetitive and I'm sure hasn't happened during the unregulated tenure of the Key/English Administration.... or Factory owner (gets money out of China, bank debt... buys John Key's house) John swans off......Chinese debt bubble?/ NZ debt bubble trying to compete.. One way game..... Now in reverse... Chinese Revolution?? Lets hope not...Kiwi revolution? it should have happened ages ago but there were too many specu-debtors controlling the media and sadly they still do ...

Juwai.com is Where Chinese Find International Real Estate
https://list.juwai.com/chinese-buyers?utm_source=Facebook&utm_medium=cpc...

It was always going to be so

Foreign Buyers - same data, spread across
Nationally - 3%
Auckland - 7%
2 particular suburbs - 20%

Which Suburbs?

Waitemata Local Board in Auckland and Queenstown.
The rest are 3% or less.

That's nonsense! the data is just crap. All the expensive nice burbs of Auckland were subject to extremely high levels of foreign buying. The data only distinguishes the following regions, forgive the long paste (EDIT I believe the numbers now show the actual number of house sales recorded in the regions over the entire 2013-2018 period, they're look too high so I may have double counted somewhere but it gives you an idea of the relative magnitude of sales registered to each region)

Albert-Eden Local Board Area 89640
Area Outside Territorial Authority 867
Area outside region 408
Ashburton District 42177
Auckland 1842120
Auckland Region 4304490
Bay of Plenty Region 483603
Buller District 12573
Canterbury Region 874524
Carterton District 15228
Central Hawke's Bay District 23733
Central Otago District 42357
Chatham Islands Territory 408
Christchurch City 544431
Clutha District 25971
Devonport-Takapuna Local Board Area 76353
Dunedin City 174432
Far North District 89940
Franklin Local Board Area 103380
Gisborne District 52698
Gisborne Region 52725
Gore District 20124
Great Barrier Local Board Area 2193
Grey District 16476
Hamilton City 231903
Hastings District 100179
Hauraki District 32094
Hawke's Bay Region 224910
Henderson-Massey Local Board Area 125865
Hibiscus and Bays Local Board Area 160542
Horowhenua District 66363
Howick Local Board Area 141006
Hurunui District 19779
Invercargill City 86526
Kaikoura District 6690
Kaipara District 41790
Kaipatiki Local Board Area 99819
Kapiti Coast District 83979
Kawerau District 12072
Lower Hutt City 128322
Mackenzie District 10998
Manawatu District 45432
Manawatu-Wanganui Region 378564
Mangere-Otahuhu Local Board Area 47817
Manurewa Local Board Area 94707
Marlborough District 84807
Marlborough Region 84807
Masterton District 42756
Matamata-Piako District 49545
Maungakiekie-Tamaki Local Board Area 75519
Napier City 91194
Nelson City 75315
Nelson Region 75315
New Plymouth District 114831
New Zealand 24838224
Northland Region 263661
Opotiki District 10458
Orakei Local Board Area 112998
Otago Region 363453
Otara-Papatoetoe Local Board Area 60633
Otorohanga District 12852
Palmerston North City 116688
Papakura Local Board Area 86454
Porirua City 52647
Puketapapa Local Board Area 41634
Queenstown-Lakes District 83592
Rangitikei District 22269
Rodney Local Board Area 93573
Rotorua District 101487
Ruapehu District 22539
Selwyn District 85056
South Taranaki District 36972
South Waikato District 35340
South Wairarapa District 22326
Southland District 43062
Southland Region 149907
Stratford District 14157
Taranaki Region 166002
Tararua District 30930
Tasman District 74511
Tasman Region 74511
Taupo District 85866
Tauranga City 237417
Thames-Coromandel District 86925
Timaru District 65016
Upper Harbour Local Board Area 89178
Upper Hutt City 59919
Waiheke Local Board Area 21264
Waikato District 91974
Waikato Region 722841
Waimakariri District 85221
Waimate District 10338
Waipa District 78819
Wairoa District 9438
Waitakere Ranges Local Board Area 59370
Waitaki District 40755
Waitemata Local Board Area 187317
Waitomo District 13620
Wellington City 226404
Wellington Region 632310
West Coast Region 40020
Western Bay of Plenty District 79413
Westland District 10746
Whakatane District 45414
Whanganui District 73809
Whangarei District 131346
Whau Local Board Area 71787

All the while the real estate industry hid that data...

fat pat, now the door is closing, will foreigners start selling? Exciting investment on the way up, a liability on the way down...

Retired pop. A possibility the top end may see some price downside as a result of these long overdue foreign buyer regulations but given a significant shortage of supply still exists in mid range housing, I really can't see the potential for a wide scale correction. ..... unless immigration tanks, unless the Oz economy gets on an even bigger roll, unless interest rates rise...... etc . But absent that, the foreign buyer ban will not, of itself, have much of an impact on pricing for most market segments.

middleman, negative variables are gathering overseas while our market is stratospherically valued on an historic basis. Apart from unknown outcomes in Turkey, Indonesia, Brazil, India, Italy and Greece among others, I also think Australia's $500 Billion in liar loans will present one ugly challenge in the future. It has the potential to overwhelm Australasias banking system no matter how the bubble deflates. Any negative consequences are more likely than ever to deliver unexpected consequences to the unprepared on both sides of the Tasman.

As it stands today, high employment, immigration and lower interest rates present a supportive argument (for some) for limiting the downside in house prices. Countering this is the ring fencing, extended brightline, offshore buyer ban, tighter lending criteria and LVR's. The outcome of ring fencing, offshore buyers ban and extended brighline are still unknowns. Post another shock, all the remaining positives vanish when credit tightens, work runs out and confidence in future gains plummets further. Especially scary when a higher than ever percentage of employment is reliant on a market that's now too big to fail.

You forgot to mention the restriction on lending to anyone with overseas income Poppy ;-) another tailwind

Oh and I asked Martin North if he thinks the Oz crisis he sees brewing...will reach NZ and he thinks its likely that NZ will be similarly impacted.

I am quite impressed by this Martin North guy. We need someone like this in NZ to offer good analysis and an alternative viewpoint.

Was that you asking the question? I also follow Martin North and I saw his response. His DFA blog is excellent.

Yup TainuiBabe that was me! I follow his blog and often listen to his vlog while i'm doing chores etc.

Are these overseas buyers a structural or a cyclical thing? Seems to me they are mostly “hot money” who know or care little about the fundamentals of the nz market, but they know it’s going up so fill yer boots. If the market went into reverse are they really going to hang around? Some may not care, but most surely would cash up and get out, take their money somewhere else? Even if they were just looking for somewhere to park their capital, if that capital is eroding surely they will exit. I doubt many of those who don’t have residency rights have any interest in our market long term

Capital flight is cyclical but the rights of overseas individuals to buy or buy not is structural. If the government ban them, that's a structural change.

A lot of Capital flight is about perceived risk in the domestic environment and so the capital is looking for a safe haven. If NZ no longer seems stable, then they might extract their capital.

Yeah, if capital isn’t protected in this market ie prices are falling I just can’t see most of these foreign buyers hanging around. I assume you mean price stability not political stability

Yup, I meant economic stability. But politics can impact on that too obviously.

If/when it all goes belly up for residents China side, could selling of NZ based assets ensue to cover margin calls......

A Chinese investor who made a fortune manufacturing window blinds tried his hand at dairying. It hasn't ended well; https://www.stockandland.com.au/story/5456459/chinese-investor-at-mercy-...

This comment is most telling "made the $280 million purchase after just one visit to the farms and without any significant due diligence" - this sounds more like speculating rather than sound business.

Sounds more like impulse buying on a very, very large scale and I reckon that has been what many of the purchases by Chinese nationals have been, they were like little kids in sweet shops that they have never been allowed go near before, with their pockets bulging with money their grannies gave them for their birthday.

Except some of the sweets were actually laxatives.

There's a subset of house accumulators who are clearly in the grip of a compulsive shopping addiction.

Manipulation of data and lies to suit elite few is a BIG corruption.

Betcha one is Northcote

Yes, sales to OBs in western North Shore which includes Northcote was 10.3%. For the whole of Auckland region it was 7.3%. This story gives more of a breakdown:  https://www.interest.co.nz/property/94168/overseas-house-buyer-activity-concentrated-places-auckland-and-queenstown

And you know what, it would be a good 4 or 5 years since I was anywhere near Northcote and prior to that I cannot recall ever having been there, I left Auckland south in the early 90s. The thing that stuck out the time I was there was the number of shop signs in Chinese with no English and the number of houses that were clearly unoccupied. 4 or 5 years ago.

On second thoughts, it was probably more than 5 years ago. Around the same time I had to go out to Half Moon Bay and noticed similar unkempt, unoccupied houses on the way there. I was pretty sure then that foreigners were putting pressure on the housing market.

Well one thing is for sure those two expensive Auckland suburbs are going to drop by -20%. Time to stock up on the baked beans Zachary/DGZ.

Wasn't that long ago that you could by a house in Auckland, St Heliers for $600k.

That’s true if you were buying a house about 15 years ago. If you look at the stats, the foreign buyers in Orakei were net 2.2% buyers of NZ citizen / resident visa owned homes. While there may be an impact on those selling 1050 homes to move to 1071, I think it will be minimal. But we will all see won’t we? The bathers at Kohi beach all seem to be wearing togs so far.

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Come on IRD buck up & play your part in giving some teeth to the OIA Bill when it becomes law.

You are very earnest in checking cash payments to tradies, small retailers etc who work hard,pay taxes & are hardpressed to put food on the table for their families.

How about scrutinising more diligently those who have seemingly little or zero income but are suddenly flush with cash to purchase houses ( & multiple ones),met mortgage payments or who show a pattern of buying as nominees for others ???

The reality is that NZ has chronic current acct deficits.
In order for us to maintain our current "lifestyle".. ( which includes Labours coming "well being" budget and new way of measuring the economy), we have to welcome foreign direct investment...
Foreign direct investment can be in the form of debt or equity....
If/As we close the door on foriegn investment, we will either have a deep recession as we adjust to a more affordable way of life, or we work really hard and grow our exports dramatically.

As far as I can tell, alot of Foreign direct investment eventually flows into our Real Estate mkt.. ( It is not as simple as a foreigner buying a house)
eg... Foreign investor buys a NZ company for a premium...and the Cashed up NZ seller invests proceeds in Real Estate. NZ govt or Local body borrows from overseas investors and spends on infrastucture... Money flows to businesses and profits flow into real estate..
In a macro economic sense foreign house buyers and speculators are only part of a bigger macro game which is that as a debtor Nation we need both immigration and overseas money to maintain the illusion of wealth and prosperity.

Watching some of the emerging economies and how problematic things are when Capital flows back out, shows that NZ is a little between a rock and a hard place..
We are dependent on Foreign money..
Hand in hand with Labours shift away from GDP to measures of wellbeing maybe they could also include the concept of our wealth as a Country, in the same way we might measure the financial health of a household..?? .... ( maybe some metrics of our levels of debt)
I think it might be a good thing for NZers to realize we are not quite as wealthy as we think... as a Nation

Not sure how accurate this debt clock is..( This measures Public dent, and not private sector debt )
https://www.nationaldebtclocks.org/debtclock/newzealand

For me , Lowell Manning shows the effect of current acct. deficits on house prices in NZ.
https://www.interest.co.nz/opinion/64724/lowell-manning-says-problem-hou...

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I like your terminology for money laundering 'Foreign direct investment'! Because that the vast majority of that so called investment is, pure and simple money laundering especially in those expensive regions of Auckland.

We still need to free up housing supply, so the next thing on the Governments list should be the Empty Homes Tax. Other cities across the world have already taken these steps, so why shouldn't we in central cities like Auckland consider the same option?

Not long now until the recent census results reveal the true horror of empty homes around Auckland generated through asset stripping.

Better Dwelling article: Vacant Homes Are A Global Epidemic, And Paris Is Fighting It With A 60% Tax
https://betterdwelling.com/vacant-homes-global-epidemic-paris-fighting-6...

Hey CF.. Taking your philosophy further ..It would not surprise me that after taxing empty homes the next step will be taxing empty bedrooms. the rationale being that people are being greedy if they live in houses bigger than their needs, as defined by "The state".

ps..do u accept the better dwelling article as being the truth..?? I don't

I've been told the numbers are far less.. eg I would not include households than escape our winters and return for summer...

At least, someone else pointing to the current account deficit. Our problem is not lack of export business, it is too much foreign capital flowing in. We do not need foreign capital as we have a developed banking system. We can never escape the current account deficit by continuing to think "Oh, we are a poor insignificant little country who need help from bigger countries". They will just continue to gobble our assets and rent them back to us. New Zealand, losers (ie loss making) since 1973.

I'm guessing that with our "developed banking system", being foreign owned , our chronic current acct deficits are .. here to stay. ie.. we will never escape our need for foreign Capital
Our assets will continue to be gobbled,
FDI will continue to purchase existing assets, rather than in NEW , productive investment.
Ou Politicians and Treasury will continue to spin things, to make it seem that FDI is somehow wealth enhancing for NZers...

https://www.interest.co.nz/rural-news/53744/acting-treasury-head-defends...

The phrase "Highly Intelligent but Stupid" comes to mind.

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Foreign speculators saw a sucker's market and pounced. Now they move on, leaving the suckers with nothing but shattered dreams of fame and fortune, a bunch of crappy houses and laughably gigantic mortgages.

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My second comment on this topic. Everybody knew this was the case and that National Party denials were a smokescreen. Real estate agents, lawyers, accountants, anybody who'd been to an auction room knew the party line was BS.

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Yeah and 20% in central Auckland could easily be 30-40% if you factor in companies or nz residents buying on behalf of foreign interests

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Watch the foreign buyer Denialists lobby hard over the next few weeks
E.g. https://thespinoff.co.nz/politics/17-04-2018/a-policy-in-search-of-a-pro...
Sometimes the truth can’t be fully suppressed, & the public know the media & spin is representing vested interests.

More to come till the law is not passed. Infact will get more intense.

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Judith Collins - headline maker - claims

"The Foreign Buyer Ban will destroy the housing market"

It must therefore be concluded that Foreign Buyers have established the current market

Exactly.
I thought National said the influence of foreign buyers was negligible. And now they are saying a ban would destroy the market?
Totally contradictory!

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National Party = Corrouption

National party = waste of space

You'da thunk even she could see that one

She's pretty dumb

JK and BE knew this, but wouldn't admit to it. The difference between Collins and JK, is that JK will serve you fecal matter flavoured coffee, but convince you that its earthy flavour is good for you - and the fools will drink away. Collins doesn't seem to have this skill (perhaps that is a positive in terms of character - not as good at bs'ing?)

But it does raise the question, if Collins thought eliminating foreign buyers would kill the housing market, why wasn't she more vocal the last 9 years? I mean...WTF?

Neo-liberals - yawn. I flirted with that fundamentalist religion, once upon a time.

We have a housing problem but playing for political gain is not going to help. Allowing in foreign investment is only going to be helpful. The foreign investors cannot uproot this newly aqquired asset and take it away off shore. BTW, the buyers who were spotted in auction rooms in droves who looked "different" could be second or third generation kiwis.

This has been happening since the late 1980's in what looks like waves of opportunity. In the late 80's you couldn't sell your home for love nor money. Then, all of a sudden, all the Chinese people starting appearing. They couldn't speak a word of English but they didn't care. They new there were millions of others, just like them, who were waiting for their chance to get their money and themselves out of China. It's still happening. Some accounts have over 50 million Chinese people who are ex-pats. Half a million live in New Zealand. Most of those in Auckland. Folks we have sold the silver and the farm to keep up the illusion of being wealthy. The horse has bolted. There is no going back for NZ Inc now. In my children's lifetime they will become a minority in their own land. And if you're thinking the Aussies and the Yanks will come and save us, think again. They've got their own versions of what we're talking about. There's only one answer from here.... learn Mandarin.

Agreed. As our dairy farms go to the wall due to a rather sus strain of MBovis, guess who is going to 'bail' them out? We are all but colonised....

Nice stirring article Greg !, well done, but alas you insist on swimming against the tide ...and taking these aggigitated DGMs with you.

Time and again, the fundamentals point toward higher Auckland house prices and are obvious to all but the ones blinded with their own mental blockage or political affiliation.

I visited a couple of show homes today to see where the market is at and what are the current replacement prices for similar quality existing homes, and happy to report the following ( because it is relevant to this issue):

Hobsonville : Shoe boxes and similar smaller area houses, apartments, and terrace houses are not cheap (600 - 900K) for up to 120m2 one small single garage sitting on 160 - 180m2 land and facing thousands $$s in Body corp and outgoing expenses pa ... they look like camps!

New detached 240m2 high quality built houses sitting on a flat section 600 - 800m2 sections in Riverhead will set you back between $1.2 - 1.4 Mil .... these are similar to current property prices of the same quality on the Shore. Hundreds of new homes were sold lately at these prices in this new suburb. Undoubtedly, like Silverdale and Millwater

What does this mean? ... Nothing New, but it means new replacement houses, twice as far from CBD, costs more than existing ones in better & closer urban areas ... which makes it highly unlikely for house prices to drop anytime soon as some are predicting.

Whether 3.3% or 10% of buyers are foreign makes no difference at all now ... the market rush is Over and price frenzy is gone (for now) ... and Labour and its CoLs will not govern forever.

Organic growth and limited supply will push prices up no matter who is buying .... yes, some foreign buyers had deep pockets and pushed some prices up, but just like 2000-2007 when prices almost doubled mostly because of immigration, house prices held their value and appreciated more once the cycle reversed after GFC. I wish I had bought more then !!

At the end of the day, its the Perceived Value of any purchase that dictates the price at any given time not the nationality of small % of buyers.

You make valid points. But you are also neglecting headwinds.

headwinds can hardly be predicted, the possibility of another GFC or natural disaster could not be discounted ( imagine basing your home buying decision on the possibility that Rangitoto might soon erupt in Auckland ). ... Equally, no one could discount the possibility of more unpredictable silly regulations by this CoLs .... but since when normal life on the ground is put on hold or has taken into account future risks of such enormous magnitude?

The chicken little DGM crying sky is falling are all hiding behind their keyboards and waiting for doomsday. .. Good luck to them!

Even the GFC in 2008 did not bend the market by more than 10% in Auckland and most main centres after appreciating almost 100% in the preceding 8 years... and those who didn't buy in 2011 are kicking themselves everyday for such a costly mistake.

No serious analyst or businessman would subscribe to the " What If " theory, investment and business decisions take calculated risk but cannot rely on pessimism and doomsday possibilities, life goes on .. and that is what's happening.

Life will continue until the next handbrake is pulled and it will continue after that too ( cycles) .. unless it was WWIII ..and we are reset back to cave ages !!

"Even the GFC in 2008 did not bend the market by more than 10% in Auckland and most main centres after appreciating almost 100% in the preceding 8 years... and those who didn't buy in 2011 are kicking themselves everyday for such a costly mistake."

I think you are assuming that NZ's escape from the affects of the GFC were because NZ was different rather than pure luck and China. The next GFC NZ will most likely not be so lucky indeed NZ may have it's own mini GFC if interest rates rise.

Your glass is half empty most of the time, and that is your choice ... mine is the opposite ... its a matter of perception in gazing through a crystal ball.

Hence everyone has a different degree of risk tolerance which cannot generalised.

I'm actually quite optimistic about the future - just not the future of housing as an investment. I don't think any amount of financial engineering is going to allow house prices to double in the next ten years unless there is significant wage inflation or a significant drop in interest rates. The math just doesn't add up. It all depends on peoples ability to pay. And then there is yield.

As has been pointed out by others - Kiwisaver is filling the coffers of the banks but it is also being invested in the local and foreign share markets. This is not going to magically stop.

Additionally the issue of house affordability is a big political political nightmare not only in New Zealand but worldwide which I think is only going to continue to gain attention (unwanted by some).

People's risk preference is a decision only they can make. I prefer shares (which strangely continue to go up in value).

Indeed, Even better if you had a foot in both camps - smart investors do not put all the eggs in the property basket, although Share are riskier, but as you said they are doing much better ATM in terms of CG and yield, however one needs the first to leverage the second and grow a bigger nest egg -

We might agree on this one , I suspect :)

Yes, me too, I think there are many things to be positive about but the real estate market at these prices looks like a complete dog for the foreseeable future.

I would have thought being optimistic about kiwis being able to afford to live in good quality housing was glass half full.

Ah....more unfalsifiable claims based on an assumption things won't or can't change. Unfortunately human nature is the spanner in the works - fear and greed have a habit creating unintended consequences- both positive and negative. If things don't change you're probably right but if things do change for the worse then anything could happen. Then assumptions just become b*t*hes

History has showed and proved that on the long run things tend to change to the Better not to the Worse when it comes to owning a house ... you may ask your parents or grandparents about that.

Anything could happen is the logic of people who do not want to take ANY risk in life and hence they are always on the losing end. that includes crossing the road !!

Calculated risk and possibilities are not 50/50 in this market, they are more like 90/10 for success. See house price graphs for the last 40+ years

Lowest interest rates for 5000 years mate, Central banks have amazed 22 trillion dollars on their balance sheets nearly one half of global GDP.
https://www.businessinsider.com.au/interest-rates-5000-year-history-2017...

Yes, while that is true, all the causes are just minor details

I still believe that the value of real estate everywhere is a measure of the buying power of the currency of the day.

Regardless of the reasons, RE appreciate because it became the best hedge against fiat currency devaluation ... after Gold !

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No, no, no, realestate prices are the result of cheap credit and debt creation, it's a bubble not supported by a strong growing economy.
Otherwise we would have increased disposable income, not rent induced poverty

Cheap credit and dept creation dilute you $$ value ... having more of the easy paper doesn't make it more valuable.
https://www.youtube.com/watch?v=PHe0bXAIuk0&feature=youtu.be&ab_channel=...

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It's not wealth it's debt, the country has 550 billion of it. It's only inflationary on assets not incomes, the future is some sort of correction

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Yes, you are absolutely right. If and when aggregate credit reduces, the bubble goes pop

When Germany printed a whole load of money you needed a wheelbarrow load of Deutschmarks to buy a loaf of bread.

When the FED “printed” a whole load of cheap credit, that pushed up the price of things you purchase on credit. Houses.

The difference is that the Deutschmark wasn't a global reserve currency. How many Deutschmarks did it cost to buy a wheelbarrow?

Andrewj, you are right that the prices we see today are the result of a massive expansion of credit, and when that amount of aggregate credit reduces so will house prices. Yes, it’s a credit bubble that is manifested as a real estate bubble. But eco bird just doesn’t accept it has anything to do with an unsustainable expansion of credit. Apparently it’s some other paradigm at work. So you are wasting your breath.

And if someone can please explain to me what the following actually means, I’d be much obliged, cos it looks to me like jibberish

“the value of real estate everywhere is a measure of the buying power of the currency of the day”

“RE appreciate because it became the best hedge against fiat currency devaluation ... after Gold !”

We can argue until the cows come home ... but simply put, regardless of your income, if your $400K which could buy a 2bdrm unit in Auckland 6 years ago is not enough to buy almost Half of the same unit today, then your $$ has lost its purchasing power, you could still eat and drink with the same $ or so, but even food has gone up significantly since then.

10 years ago you could buy an ounce of Gold for $1200, today you need $1800 to buy the same ounce. is that a bubble too? or depreciation of your $$?

Yes, RE prices might be affected to the downside when the credit dries out, but how and when that will happen is questionable given the slow motion QE activities and smooth landing by the RBs and the FED in shrinking their balance sheets.

I draw my assurance from the RBNZ relaxed statements and confidence in the banking system which it seems to control nicely.

The rest is speculation and can go both ways.

"I draw my assurance from the RBNZ relaxed statements and confidence in the banking system which it seems to control nicely. "

The Australian public most likely had the same beliefs before the current revelations around the actions of the Aussie banks. I think you are naive.

"The rest is speculation and can go both ways"

but last week you were adamant that house prices will double in the next ten years - here you seem to be implying that is up in the air and not guaranteed.

Property price increases have been many times is excess of the rate of general rate of inflation. These increases do not represent a “loss of purchasing power” but represent the elevation of an asset price due to demand. That demand is a function of the demand for accomodation, investment demand and the availability of credit. The price of property has increased disproportionately to prices generally and has nothing to do with a loss of “purchasing power” generally. It has everything to do with the increased availability of credit. Is that really even an issue we need to debate? We can form different views about what the future holds for mortgage credit creation, but surely we can agree it’s the most important issue for property prices by a country mile?

The same logic applies to gold as an “inflationary hedge”. I do not see any relevance of gold to property except to the extent their prices reflect inflation. But property prices growth is well in excess of inflation due mainly to the increase in available credit. The price of gold has nothing to do with it, prices changes in gold and property reflecting general inflation but that link is a correlation from a common cause ie general inflation. Changes in credit availability have a direct effect on on property but sod all effect on gold. Your gold comments are a complete red herring

Ah tell that to those who lost their house in the GFC in the US. While the economy has recovered, many are not in the same financial situation and may never recover. Similarly in Japan where house prices peaked @ 1990

http://www.doctorhousingbubble.com/japan-real-estate-bubble-home-prices-...

The Melbourne Banking Crisis Melbourne Land Boom

https://en.wikipedia.org/wiki/Australian_banking_crisis_of_1893
https://collections.museumvictoria.com.au/articles/2676
http://www.abc.net.au/radionational/programs/rearvision/the-history-of-h...

Florida Land Boom

https://en.wikipedia.org/wiki/Florida_land_boom_of_the_1920s

The list goes on.

You haven't specified which graphs to look at so I've chosen these.

As I have said before any graph you look at you have to consider the denominator (it's the denominator that matters) - in this situation it is wage growth versus home price growth. Looking at just one is irrelevant without considering the other My guess is that in the mid to late 80's the two started to diverge as Basel I preferred housing debt to other debt as far as banks were concerned.

While economy's generally recover from a financial crisis, individuals and banks may not.

I hate two things in analysis and avoid making decision based on them:
1- Comparing NZ markets to other countries ( selectively) to show that shit can happen. I was in the US in 2007 at the peak of the crisis and saw what was about to happen.
2- comparing markets today with long past eras where systems policies, Income, Governments and economy were totally different, that would be very selective and unfair comparisons, especially the $$ value ( and purchasing power) was completely different from today !

Graphs to look at are : ( the trend here is important regardless of value) unfortunately I don't have graphs of RE prices adjusted to inflation or Gold prices.
https://www.interest.co.nz/charts/real-estate/qv-house-price-index
https://www.interest.co.nz/charts/real-estate/house-price-index-reinz-rbnz2
https://www.interest.co.nz/charts/real-estate/median-price-reinz

We would agree to disagree

But New Zealand is a market no different from any other ( unless you think it is "special" and the market rules don't apply to New Zealand). In most financial crises it is" irrational exuberance" that drives the market before the failure - witness how many crises have occurred in the past century - humans don't seem to learn. You seem to be desperately holding on the some supply and demand for housing and history as the factors that are driving the Auckland market and that other factors can't or won't change.

I believe in Japan people began to believe the situation in the 80's was the new norm and that nothing could or would change. In the late 80's, early 90s that all changed - Japan had an epiphany. Nothing had really changed - only that people where fooled by irrational exuberance. My argument is that New Zealand could be at that same juncture. It's about humans and their arrogant belief and their failure to understand that they really don't know anything ( how long have people been predicting the next big crash). While at some point it is certain there will be a crash - when who knows.

You pays your money and you takes your chance The only certainties in life are death and taxes.

BadRobot, you say "it is certain there will be a crash" and then in the very next breath say "The only certainties in life are death and taxes".

Earlier you write, "New Zealand is a market no different from any other.." yet NZ is different to any other market due to its unique history, geographical location and demographics. It would be more accurate to write that no market is the same as any other.

For instance Japan's real estate market is absolutely different from NZ's. They have quite a different mindset when it comes to property buying and development, have a declining population and almost no immigration.

The etymology of the idom "The only certainties in life are death and taxes" is as follows

Death and taxes is a common reference to the famous quotation:[1]

Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.
— Benjamin Franklin, in a letter to Jean-Baptiste Leroy, 1789

However, Franklin’s letter is not the origin of the phrase, which appeared earlier in Daniel Defoe’s The Political History of the Devil.[2]

Things as certain as death and taxes, can be more firmly believ’d.
— Daniel Defoe, The Political History of the Devil, 1726.

And in The Cobbler of Preston by Christopher Bullock (1716)

’Tis impossible to be sure of any thing but Death and Taxes,

https://en.wikipedia.org/wiki/Death_and_taxes_(idiom)

An idiom has a definition of

"a common word or phrase with a culturally understood meaning that differs from what its composite words' denotations would suggest"

An idiom is a phrase where the words together have a meaning that is different from the dictionary definitions of the individual words. In another definition, an idiom is a speech form or an expression of a given language that is peculiar to itself grammatically or cannot be understood from the individual meanings of its elements"

https://en.wikipedia.org/wiki/English-language_idioms

so you attempt to take a literal interpretation implies that you don't understand the quote.

The quote is not exhaustive of certainties in life

* the sun rises in the east and sets in the west
* night follows day
* the four seasons , spring summer autumn and winter
* that a storm will hit Auckland sometime in the future
* that one day the Alpine fault will rupture.

You attempt to create a myth that New Zealand is different. Then how come the world keeps having these similar economic crises every few years. Each and every county has different history, geographical location etc, etc. Each individual is different, but to argue that these factors are unique in how economic markets operate is a bit of a fallacy.

Your argument sounds like the "it's different this time" which is generally advanced to describe asset appreciation which is almost always not based on anything substantial. You are myth making to fool whom - me or yourself.

Your post supports my argument. Before the Japanese real estate bubble burst they most likely had similar "it's different this time" arguments. It is only with thirty odd years of hindsight that proves that their arguments were wrong. How will your arguments be judged in thirty years time.

You say New Zealand has a unique history. Every country in the world has a unique history (many more interesting than New Zealand) and demographics. Geographical location - well New Zealand is a couple of small islands far away from most of the major population centres - it is isolated geographically. Auckland city is an isthmus with two large bodies of water on either side

"The mainland part of Auckland City occupied the Auckland isthmus, also known as the Tāmaki isthmus. The Waitematā Harbour, which opens to the Hauraki Gulf, separated North Shore City from the isthmus. The Manukau Harbour, which opens to the Tasman Sea, separated Manukau City from the isthmus. The distance between the two harbours is particularly narrow at each end of the isthmus. At the western end, the Whau River, an estuarial arm of the Waitematā Harbour, comes within two kilometres of the waters of the Manukau Harbour on the west coast and marks the beginning of the Northland Peninsula. A few kilometres to the southeast at Otahuhu, the Tamaki River, an arm of the Hauraki Gulf on the east coast, comes just 1200 metres from the Manukau's waters. Being part of the Auckland volcanic field, much of the isthmus is mantled with volcanic rocks and soils, and several prominent scoria cones dot the isthmus."

https://en.wikipedia.org/wiki/Auckland_City

This is a bottle neck. The city can only expand north or south. All highways have to go via this isthmus which at it's narrowest point is just 1200 metres.

Finally this article is the closest I have found that gives a reason why Chinese buy houses in New Zealand

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=119...

and none of the reasons are specific to Auckland or New Zealand and could apply to many countries around the world.

Eco - please tell us more about trend line analysis for housing investment - as you say, its 'important regardless of value'.

Historical data used to develop future property price expectations in Auckland.

Both Auckland property price bulls and Auckland property price bears are looking at historical data. Both groups are looking at historical data to develop their expectations of future property prices in Auckland, however they are looking at different historical data, so hence come to different expectations and different conclusions.

1) Auckland property price bulls are looking at historical property prices in Auckland and developing their future property price expectations on that data

2) Auckland property price bears are looking at historical credit data, macro-economic data and developing their future property price expectations on that data

The interesting thing is that those in group 2 understand the perspective of group 1 and how they arrive at their price expectations, however those in group 1 do not necessarily understand the data that group 2 are looking at.

The discussion of future property prices is most likely irrelevant for a buy and hold investor who uses very small amounts of debt, with no dramatic change in personal circumstances.

However a large number of property owners use large amounts of debt to finance their property purchases, and as anyone who has purchased any asset with a large amount of debt, they are subject to their ability to continue to meet the debt service payments and the terms of their loan under ALL economic and market price conditions, and change of personal circumstances.

It is unexpected changes in personal circumstances, economic conditions or market price conditions that some highly indebted households may be unprepared for that can cause financial stress.

Using a Chinese colony like hobsonville as an example isn't very convincing. It doesn't take much of a change in foreign buying and immigration to tip the market.

your observations point to the absurd costs of building and the ridiculous cost of land. A lot to do with the stupid council, crazy building code, and the fletchers carters hardies triopoly..

Wonder what the deal Key and Van de Hayden did with China to take all our milk powder in 2010 ?

He expanded on the great deals made by Helen Clark few years before that ...

I also wonder what we gave up.

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Phil Twyford was totally on to it when he pointed out that 40% of Barfoots buyers over a two month period in 2015 had an asian name. Now over 50% of most north shore suburbs have asian names on the title - ask any real estate salesperson on the shore.
John Key and the National govt allowed the Chinese to blitz this country with their buy up of real estate. The sooner the plug is pulled on foreign buyers the better.
Jian Yang should resign as should Judith Collins - https://www.newshub.co.nz/politics/timeline-judith-collins-and-oravida-2...
Too much Chinese influence - it must be stopped.

^^LOLz^^ do you think 'Lee' sounds English, Korean or Chinese? Do you think Linda Hill is definitely not Chinese? https://www.barfoot.co.nz/l.hill
bigblue, you just made yourself look like a clown!

DGZ, last sentence is a tad rich coming from you don't you think?

No, I think it sounds more like you than bigblue when I think about it lol.
Sold sign up outside 2 Market Rd, Remuera (CV $3,200,000). Just got snapped up on Friday I think. https://rwremuera.co.nz/auckland/remuera/2-market-road-17521045/

2 Market Rd paid $780,000 16 years ago and same owner holds another Remmers property with a CV of $4,800,000

I know. They also own a holiday home in Whangapoua with a CV of $2,080,000. It just proves that you can't live in DGZ if you don't own multiple properties lol.

DGZ in translation, "HOLD THE DOOR!, foreign based buyers ban is coming! HOW CAN THIS HAPPEN! Zachary, where are you when I need you?"

Ooooo those pictures were so NAUGHTY....I love it when you share. Do it again...

#sadpropertypornaddict

Bobster, I thought this was a good watch - Steve Keen; https://www.youtube.com/watch?v=x1zC3GP49kk Its an Australasian issue thats for sure!

Now that our Government has introduced legislation to prevent foreign based investors buying, maybe they should also prevent them selling our houses too. HOLD THE DOOR!

Hadn’t seen that. He’s been banging on about a correction for years, I think he’s right but who knows about timing. He’s a perma bear

He also seems, like Martin north, to have only 1 major item of clothing. He has a leather jacket, north has a khaki shirt. Beware of financial commentators with more than 1 top.

It’s easy to change your name by deed poll DGZ.
One thing I can say with certainty is that she wont be selling too many homes to offshore foreign based buyers once Labour does the right thing and finally pulls the plug on that. Hopefully this will then flow through to a reduction in prices in all areas where such foreign buyers have preciously been absolutely rampant.

True, though and it's not just us here in NZ that rampant overseas unregulated investment has destabilize markets and economies, for a short term false economy.

Both Australia and Canada have also felt the brunt of this economic anomaly too.

Here's an example: Court Hears of Unexplained Millions From China and Toronto Real Estate
https://betterdwelling.com/city/toronto/court-hears-of-unexplained-milli...

You lot of chicken little DGMs crying sky is falling are all hiding behind your keyboards and waiting for doomsday. .. Good luck to you CJ099!

Go spank yourself with a rolled up property press, property porn man! Lols!

#sadpropertypornaddict

Hey DGZ if you're so confident that it wasn't foreign buyers that massively over inflated property in your area of Auckland then you have nothing to worry about. Otherwise you can expect that -20% drop, or possibly more when your local money launders realize they need to cash out now.

Otherwise you can do a lot with your stockpile of baked beans, here's a few gourmet baked beans recipes for you. :)

http://www.geniuskitchen.com/recipe/sweet-savory-gourmet-baked-beans-99656

https://www.gourmettraveller.com.au/recipes/browse-all/smoky-baked-beans...

Houses prices in Auckland can fall 30%and more but still your average joe public won't be able to afford to buy.
If your house value dops 30% and you can still afford the mortgage,you won't be worried at all.

“If they thought they were going to lecture Trump on the glories of free trade, they got a rude awakening. He came to a gun fight armed with a stealth bomber,” one U.S. official told Breitbart News.

http://www.breitbart.com/big-government/2018/06/09/trump-america-will-no...

Almost embarrassed to admit it but for me it's refreshing that someone was prepared to say these 'communiques' or leader's statements that come out of many of these summits are a bunch of hogwash anyway. They are aimed purely at protecting the status quo - which is a failed 'free trade' world.

Trump is upsetting that status quo - and for NZ, with virtually no tariffs on anything, I'd say, good job.

Someone should interview Mike Moore on it - as I'm sure he'd agree that the WTO was never allowed to reach it's full potential - that protectionism and subsidies existed everywhere BUT New Zealand.

Remember the cheap French butter?

"Other parts of the world have a lot more subsidies in their industry so they [have] subsidised milk production, which can mean at times they've got surplus product and that drives lower butter price," he says.

"It's not a level playing field with a lot of those international trade regimes."

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=119...

If course they are hogwash. But that seems to be less of an issue than Trumps obvious lunacy

Trump isn't crazy. He's childish, stupid and as narcissistic as any typical spoiled Richie Rich trustfund kiddie.

Lunacy includes “extreme folly or eccentricity”, “wild foolishness...extravagant folly”.

“Lunatic is an informal term referring to a person who is considered as.....dangerous, foolish or unpredictable, crazy, conditions once attributed to lunacy.”

He’s a lunatic

Pretty clear that he is a) damaging himself via damaging his nation. b) Uping the odds he'll assists if not trigger a second great depression.

With regards to trade is he a lunatic. What's wrong with wanting fair and reciprocal trading arrangements?

You can pretty much guarantee that whatever Bobster and Marlarkey write the complete opposite is true. They're incredibly consistent like that.

Zachary, why post such an ignorant unthought comment? Was your computer Troll hacked or is it your genuine belief Trump is a performer of economic and diplomatic miracles?

Hmmm...no...
In a court full of fools that can only describe the world as an ancient east west conflict he plays the court jester and tells uncomfortable truths.

Very insightful comment positevelywallstreet. Trump is doing what every wealthy, independent, Western man should be doing, speaking the truth, without fear of consequences. Macron, Trudeau, Merkel, May, fools every one of them.

As a mind game try a scenario where a united northen hemisphere has been in conflict with the southern hemisphere for a thousand years.
Didnt happen of course, northern hemisphere plundered the south.

500,000 comments later I know.

But I’m curious – let’s assume a foreign buyer was a recent purchaser – and they played the part of the last marginal buyer.

For whatever reason let’s say they paid a knock it out of the park price.

Subsequently all similar properties in that area are now revalued to that price – in reality not that straightforward I know.

Moving forward - that foreign buyer and their like are now removed from the market – equally removed is that “knock it out of the park” price for the foreseeable future.

So what happens to the future market?

I think in the short term nothing – in the medium term a realisation that the revaluation probably never really existed – and longer term – that the last price is to be simply removed from the equation.

I also think that removing the foreign buyer, no matter what ultimate percentage they made up, will have more of an affect than thought – because of that marginal price.

See all vested interest anti foreign buyer lobby last ditch attempt to influence government has started and will gain momentum till bill is not passed.

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12068187

I think on this issue it will be hard to take U Turn and have to wait n watch if they get cold feet and try to delay and dilute the bill.

The ‘article’ by the National Party unofficial lobbyist, omits the 20% Auckland Central foreign buyer influence of course.

You can't spot an Australian in the auction room. But you can see the Chinese and so this has turned into an embarrassing race blame game.

It's been made slightly more complicated by the fact some get confused with foreign buyers versus local buyers of a certain race. In other words, you might see an Asian buy a house and see them as a foreigner when in fact they're residents, if not citizens.

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12068187

yes much easier to identify but not a race blame, a nationality blame!

when a portion that makes up 10% of the population represents 90% of the participants in auction rooms, its easy to see something is not quite right.

Easy to call the racist card instead of reading more into it. If you go into a pub and half the people there are patched gang members, alarm bells probably start to ring.

I'm a non-chinese New Zealander. Can you detail the steps for me to acquire citizenship of the Peoples Republic of China?

Do you think it's a) easier b) just as difficult or c) harder than for a Chinese person to get New Zealand citizenship?

and so?

And so you're not going to convince that actually we're not being bought it by others, we're being sold out by ourselves. Someone from a hyper-nationalist anti-immigrant ethnocentric communist dictatorship having a piece of paper saying they've been in NZ for a few years isn't enough to change the narrative I'm afraid.

Our citizenship is cheap in terms of the time or commitment required. There's no hard and fast english or maori language requirement that needs to be met, unlike practically every other country. Until we have real requirements for citizenship, you're not going to convince me that every tom dick and harry from any of the four corners of the globe who has been here 5 years is a Kiwi.

Agreed we are a very soft touch country.

no one has any proof that foreign buyers or capital out of China has made a material impact on our property market. I note there was no data referenced in the article.

It's all theory and speculation.

mathclub uou are correct. No data as national government was not interested in getting the correct data out. People and partites only lies and manipulate, when they are at wrong and want to hide something.

Good article highlighting the same issue in the US. Deciphering who the anonymous buyers behind shell companies won't be easy.
http://www.architectmagazine.com/design/editorial/dirty-money-shiny-arch...

This is good news for NZ

to allow foreign ownership in the 1st place was stupid. It should be a domestic shelter and homing market not an international property market.

All the Nat supporters are now saying it will crash the market when before the election foreign ownership had little to no effect. Make you minds up!!!!

This time it was the Chinese pumping up the prices, what if in future it was Rich Arab or Russian Oil Barons paying over the moon prices. It is not sustainable for our population.

Prices need to and probably will correct by about 20-25% to return to mean.

Taiwan, aka the Republic of China, actually manages to make some very sensible laws when they're not having fist fights in parliament. One of them is a reciprocal foreign ownership law. Basically if your country allows Taiwan nationals to buy property, then Taiwan allows your nationals to buy property in Taiwan.

I'm sure certain politicians would balk at something even that reasonable though - and we all know why.