Cracker: Johnny Foreigner & the Auckland Property Market
108 Responses
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I think you’re thinking of stamp duty which is applied to home sales in Aus, not CGT.
sez Wiki
CGT operates by having net gains treated as taxable income in the tax year an asset is sold or otherwise disposed of.
This applies to investment property. Although I'm not sure if that's exactly what you were referring to.
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Konrad Kurta, in reply to
Perhaps it would affect your ability to apply for citizenship? The anecdote I heard was that wealthy overseas folk were buying houses with the intention of applying for citizenship, which is a lot easier if you own property here. I can certainly understand the appeal if you're wealthy and want your kids to live in Auckland rather than downtown Shanghai or Seoul. If you're not the actual owner of the house, it has no citizenship value, so there is less incentive to buy. Note: I have no idea if this actually holds true or not.
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BenWilson, in reply to
Not necessarily. There’s plenty of examples up here of people buying up many, many apartments as an investment and leaving them empty.
I suggest that the intention is to sell them for a profit in the end, and that is based on an anticipation that they will eventually be tenanted in some way. Eventually might even be after the whole lot is knocked down and turned into something else, if they are being extremely speculative. Or if they have some inside knowledge or power, which is highly possible in China, no?
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Jim Welch, in reply to
sez Wiki
CGT operates by having net gains treated as taxable income in the tax year an asset is sold or otherwise disposed of.
Yeah, sorry, I meant primary residences--they're not taxed in Oz
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BenWilson, in reply to
Indeed. Which makes it the number one dodge for property owners. That encourages people to have properties that are worth considerably more than they actually need. All the profit is gravy.
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Rich of Observationz, in reply to
I don't believe it makes any difference at all to NZ citizenship whether or not you own property. You have to be a permanent resident and have mostly lived here for 5 years. Owning somewhere might make a marginal difference if you don't meet the physical residence requirement, but only marginal, and you have to have got PR first in any case.
Which isn't to say people aren't conned by real estate agents and the like into believing that buying their overpriced investment properties will get them residence in the promised land.
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JohnathanM wrote "Regardless of whether it’s good or not, if it’s clear you’ve not actually investigated it properly"
I do feel the need to point out that the Centre for Housing Research (CHRANZ) was closed down in 2011 after being unable to secure any more funding from the National led government (nor were any commercial groups interested in funding it). Had they or been shut down, they would have been the people to answer the question.
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Sacha, in reply to
the Centre for Housing Research (CHRANZ) was closed down in 2011
Didn't realise that. What a loss.
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Damian Christie, in reply to
My community is my address book anyway, I don’t lose them by moving house.
Talk to Emma Hart about this re closing of community schools in Christchurch…
Which is to say yes, *I* am not particularly wedded to New Windsor, but a family who actually have spent long enough in a suburb to bond with it, whose children have formed friendships and schools etc, who are suddenly “rich” because of some realty hyper-inflation, won’t be “stoked”.
But anyway, we're arguing about a PAS posters' hypothetical which isn't on the table, so....
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BenWilson, in reply to
who are suddenly “rich” because of some realty hyper-inflation, won’t be “stoked”.
If they're genuinely forced out of their suburb, that would suck. It would be like being unable to pay the rent and having to move, as happens to poor people all the time, except that they don't get a massive chunk of cash to do it with. Those would be people I'd feel really sorry for, and they could certainly be victims of an as-it-goes-up property tax - landlords would have to hike rents to cover the tax. Of course landlords will hike rents as a suburb gentrifies anyway.
But anyway, we’re arguing about a PAS posters’ hypothetical which isn’t on the table, so….
Yes, there's no danger of a wealth tax under either major party. They're full of property millionaires.
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Chris Waugh, in reply to
but I found this a little unreasonable,
Ah, yes, I was a touch preoccupied, but that's the kind of information I was thinking I need to find to complete what I was trying to say. It's worth noting, though, that at least here in Beijing foreigners have it easy compared to wàidìrén/Chinese whose residence is registered outside Beijing, who have to prove residence and solid income for, last I heard, 5 years. Can't see a date on your article, though, and I'm curious what effects the new visa regulations that came in 1 July have.
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Damian Christie, in reply to
It would be like being unable to pay the rent and having to move, as happens to poor people all the time
Except it doesn't. Or it hasn't. Rents in Auckland are such that for a long time you can rent in Ponsonby, as most of my younger studenty friends do, but when you buy, you end up in the burbs. Rents increase by $10 or so a year. Property prices - as I've discovered looking at buying one - aren't linked to rent. Not saying it doesn't happen, but I still have a major ethical objection to people who bought a cheapish house in a shitty suburb being forced to move because speculators around them have driven prices up to ridiculous levels, and we decide to tax that.
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I'd add that the only people forced to move under that situation are not the actual rich ones who will stump up, but those who are on paper rich, but actual earn middling incomes.
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Chris Waugh, in reply to
From what I see, I'm not convinced by the "eventually tenanted" assumption, and the "knocked down and turned into something else" sounds like a great way to lose whatever you capital you thought you were going to gain from the investment.
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BenWilson, in reply to
Except it doesn’t. Or it hasn’t
Ponsonby is a poor example. It used to be a Pacific Island and Maori area, at least when I was a boy living there. I went to Ponsonby Primary, and Ponsonby Intermediate. They were 50% brown people, in the 70s. We moved to Herne Bay later. Across the road from me was an orphanage. Now, it's a mansion and belongs to the Sultan of Brunei. I've probably got a rather more jaded view than you, having spent most of my life in the suburbs that went from being slums to the most valuable property in NZ. No one who owns property is complaining. And pretty much everyone else is gone.
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Would the concern trolls crying "chan ban" kick up a stink if it happened to be Arab oil sheikhs or tin-pot dictators buying up? The son of former Indonesian tin-pot dictator Suharto happened to have property in NZ - namely the Lilybank Lodge - that was later asset frozen.
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House that?
...and what will happen when the TPPA gets forced through?
How would we know?
Who will tell us?
But I'm betting the US will want very favourable access...
...voila, a sudden influx of cashed-up Americans,
heading west, looking for something like a democracy?
(or a haven for economic exiles..) -
Jim Welch, in reply to
Rents in Auckland are such that for a long time you can rent in Ponsonby, as most of my younger studenty friends do, but when you buy, you end up in the burbs. Rents increase by $10 or so a year.
True that is easier to rent somewhere like Ponsonby rather than buy but I don't think renters have it easy. Everyone I know who rents has to move frequently for one reason or another. Rental properties are often cold and damp and badly maintained. Better protections for renters would make renting more palatable--not just for students but for people with families--and take some pressure off the housing market, I reckon.
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Jim Welch, in reply to
a sudden influx of cashed-up Americans,
heading west, looking for something like a democracy?Yeah, doubt it. If you are "cashed up" you can pretty much already buy your way into living here. And if they wanted to buy without living here they already could.
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No-one seems to have any accurate data on just how many houses are sold to, or owned by, overseas interests
Thanks to a post from Whale Oil (or should that be blubberhole Damien ;) ) I can see that Tony Alexander from BNZ does - for a couple of months anyway:
http://tonyalexander.co.nz/wp-content/uploads/2013/05/BNZ-REINZ-Survey-May-2013.pdf
http://tonyalexander.co.nz/wp-content/uploads/2013/06/BNZ-REINZ-Survey-June-2013.pdfLooks like around 8% of buyers were from overseas. Of these, about half were planning to live here, leaving 4%.
The majority of the buyers are from UK, Australia, and China, so removing Australia from being included will cut back the effects of this policy.
It also looks like quite a few of the vendors were overseas too, i.e. some of the overseas buying was from overseas sellers so there will be no net change.
This probably means a policy like this wont have much affect. Although some might argue that a few is all it takes – when small numbers of UK buyers started buying up costal properties in spain for 10x what they used to sell for, suddenly ALL the properties became priced at 10x what they used to sell for…
As an aside, why did Shearer specifically mention the policy was dealing with Asian buyers? Why didn’t he just say overseas buyers (with Oz excluded)? Especially seeing as UK buyers are just as guilty as China according to the figures. All I can see is a gift of the racist card to his opponents, Whale Oil is already calling it a “chan ban”.
As China promotes mercantilism they would almost certainly strike back against a policy like this. Some suggest via the FTA, but I would predict more like the unashamed muscle flexing we saw recently with NZ’s meat exports being held up. -
Sacha, in reply to
why did Shearer specifically mention the policy was dealing with Asian buyers?
Because either:
- he was not well-briefed or competent enough to frame around that utterly-predictable angle when offered by the interviewer, or
- it was politically advantageous to not put up a fight and thereby cleverly allow that angle to be dog-whistled by the media and others.
Choose an answer based on past performance and your level of optimism, I guess.
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I feel what is keeping National fortunes may be that many of the people who have done well out of the gravity defying ppty market feel a change of govt may adversely affect their future wealth prospects.
The purchase of any real ppty financed from funds raised off shore - overseas bank providing money to non-residents to land bank real ppty in NZ should stop.
The right to purchase of real ppty in NZ should only be available to NZ permanent residents.
My thoughts are that should the gravity defying ppty market continue as it has I feel Auckland (and NZ) will be come politically unstable – can well see riots in say 15 to 20 years time as the gap widens and hopelessness abounds for many.
I also cosnder we don't have the rigour or basic knowledge to fix the problem and the plans mooted to build the nations way out of the problem are just BS - It won't happen.
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Ah, some explanation of the FTA thing. Exempting Aussies means we have to exempt Chinese. And other FTAs may be affected, too, although for different reasons.
And Raymond Huo's comments absolutely do not surprise me.
But does John Armstrong actually understand the policy? My interpretation was that banning non-resident foreigners from buying existing houses but allowing them to buy or build new houses would encourage more houses to be built, yet he writes as if a non-resident foreigner buying a new house will somehow cause an old house to magically vanish into thin air.
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WH,
There's a guy called Robert Tchenguiz who was once reported to own 1% of the entire UK housing stock. I think that is fucking ridiculous, but who knows - maybe he just has a spiritual connection to the land.
Let's be honest with ourselves about this. Residential property investment is based on the transfer of wealth from the poor to the rich and from the young to the old, to say nothing of the transaction costs captured by banks and real estate agents.
These urbane discussions of LAQCs and CGT somehow always end up as a prelude to sweet fuck all. You people are nothing if not Wonga in disguise.
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Jim Welch, in reply to
Wonga?
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