Polity by Rob Salmond

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Polity: House-buying patterns in Auckland

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  • simon g, in reply to talkie_toaster,

    I guess I'll go back to the Greens, who at least know what they stand for.

    Yes they do. Fortunately it's the very same view you've been dismissing:

    Green Party co-leader Metiria Turei said while Labour's information was interesting, its housing spokesperson, Phil Twyford, was making massive assumptions about people's identities.

    "You can't use those stats he's got to make the claims he's making," said Ms Turei. "It's a pretty crude piece of racial profiling." (Radio NZ)

    That's pretty clear, unless you're determined not to see it.

    Auckland • Since Nov 2006 • 1321 posts Report Reply

  • David Hood, in reply to nzlemming,

    Attachment

    It’s just as plausible that the problem is too many people watching Homes Under The Hammer on the Living Channel and deciding to build a property portfolio for their retirement

    I can rule that one out- there has been no change in household savings in other forms of wealth or incomes sufficient to account for the rise in house prices.

    I can tell people exactly what happens if you just talk numbers. You tell people that if you add up the amount of money in mortgages, and the value of NZ housing, it was a rock solid predictable relationship up until 2001/02 then began to diverge in 2001/2002 and that the mystery money cannot be accounted from other sources within the NZ economy (for example household wealth in other forms has not altered, incomes haven't altered, etc). (attached graph)

    Then they go "yes, it is a mystery", or rather most of the time "I don't understand". At which point you can't actually say much more as there is no positive evidence of where the mystery money is coming from*, only negative evidence from inside NZ for where it isn't. And the conversation dies as too abstract.

    Then you go away and look at other housing markets and establish that in Ireland household debt did go up because Irish people were buying the houses

    https://www.dropbox.com/s/gpuhxvs4apfhz7s/bubbles.pdf?dl=0

    Then people say "yes, but Ireland was different" so you get the figures for the United States as well, and find that U.S. debt again increased with house prices as local people were buying the houses. Figures at https://sites.google.com/a/thoughtful.net.nz/home/international-house-bubbles

    You try and find figures for Australia but their housing market records are even murkier than New Zealands.

    At which point those few people still with you go "It is strange isn't it, huh" at which point, because it is clear that the argument is way to technical to get any traction and you have satisfied your own curiosity about the matter, you get on with your own life.

    Dunedin • Since May 2007 • 1443 posts Report Reply

  • Russell Brown,

    BNZ economist Tony Alexander weighs in:

    Firstly, good on someone for trying to throw more light on an issue which I have highlighted in the past with a recommendation that we adopt Australia’s rules of banning sales of existing houses to foreigners. See for instance my last BNZ-REINZ Residential Market Survey from March 2014. I do not fault Labour’s Housing Spokesman Phil Twyford for releasing the data. But as with my own efforts to estimate offshore buying last year and in 2013 the data simply do not allow us yet to truly know what proportion of our housing stock is being sold to people who will never live here - be they Chinese, Albanian or whatever.

    The real estate agency data released this week suffer a huge flaw in that one cannot identify whether the person with the Chinese name is in fact located offshore having no intention of living in New Zealand. Their family could have been in New Zealand since the Otago gold rush days of the 1860s. They might have migrated here in the wave from the late-1980s when we changed our migration rules to specifically reduce emphasis on English heritage and open the door instead to people based on measures of merit, regardless of where they were coming from.

    And:

    1. The fundamental cause of rising prices in Auckland is a shortage
    of supply and until that gets addressed prices will stay highly elevated and perhaps keep rising out to late-2017 this cycle.

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

    3. We should as soon as possible adopt Australia’s rules restricting foreign buying of anything other than new housing unless resident for 12 months.

    But here is the fourth point which to date I have not emphasised but now will do. Adopting Australia’s rules as they stand won’t be the panacea many are hoping for. In Australia’s case people have been able to get around the restrictions quite easily. The regime is now being enforced more rigorously, but that does not necessarily alter what is being seen as a huge problem – something which people in Hong Kong have been seeing more and more of in recent years.

    Many Chinese who buy properties never, or rarely, occupy them. They sit empty. This applies even to newly built apartments sold to Chinese buyers. Chinese simply want an asset away from any control by the CCP.

    There was an article on this in The Australian newspaper this weekend, page 6. What this means is the following. As Auckland very slowly goes vertical in areas like New Lynn, developers will find they can very easily get offshore financing for their projects and hefty sales off the plan to Chinese investors (we Kiwis prefer to touch and feel before buying). These investors may never occupy or even rent out their investment. Thus while on the face of it the Aussie rule that a foreigner may only buy a newly built house or apartment sounds like a grand idea, it could leave the housing supply situation unchanged from a no-rule regime.

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

    Auckland • Since Nov 2006 • 22754 posts Report Reply

  • Rich of Observationz,

    The fundamental cause of rising prices in Auckland is a shortage of supply

    Don't believe this.

    If you have a market with a shortage, like out of season aubergines, the price rises until there's an equilibrium of buyers and sellers and then stabilises.

    If you have a bubble, like tulips in 1637, the price is entirely driven by an expectation of future gains. There is no equilibrium, because any increase in price is taken as an indication that prices (and hence profits for the asset holder) will continue rising.

    Auckland property is a bubble, not a market.

    Back in Wellington • Since Nov 2006 • 5550 posts Report Reply

  • Idiot Savant, in reply to Katharine Moody,

    nzlemming - you need to be the Government to do either of those two things!

    What could the parties in opposition do - right now - to find the numbers?

    Put up a member's bill on it. Its worked very well for them in the past.

    Palmerston North • Since Nov 2006 • 1711 posts Report Reply

  • Russell Brown, in reply to Rich of Observationz,

    The fundamental cause of rising prices in Auckland is a shortage of supply

    Don’t believe this.

    David Hood's comment above would seem to argue against it.

    Auckland • Since Nov 2006 • 22754 posts Report Reply

  • Moz, in reply to Russell Brown,

    Thus while on the face of it the Aussie rule that a foreigner may only buy a newly built house or apartment sounds like a grand idea, it could leave the housing supply situation unchanged from a no-rule regime. Thus, were we to adopt the Aussie regime we would need to add in an extra clause along the lines of apartments having to be made available for rent, actually rented, or something like that.

    As someone living in the Sydney Property Market (I thought I lived in geography, but apparently I'm a consumer living in a market. Who knew?). Anyway, the empty property problem is real, especially for apartments. We need an "empty bedroom" tax instead of stamp duty. NZ should do the same, remove any tax that discourages trading homes because it's hard enough as it is without the govt throwing sand in the machinery.

    Being somewhat in touch with the squatter scene here, I think encouraging that is a very valuable thing to do. It means that someone with an empty house has to actively manage it. Apartments somewhat less so, the strata fees do a similar thing (can be high, $200+ a week in multimillion dollar apartments). I think giving squatters tenancy protection after 6 months would be very handy here, because it ups the cost of keep your "investment" empty. Or just outright tax the snot out of them. Let/encourage councils up the rates on empties (set a cap of, say, 10x normal rates to hint at the size of the increase that's expected), and introduce a national housing tax (AFAIK councils tax the land, govt should therefore tax the house).

    Sydney, West Island • Since Nov 2006 • 1198 posts Report Reply

  • Moz,

    What scares me here is not so much "they're buying our houses!" but "they might en masse sell our houses". If/when the Chinese sharemarket corrects/crashes there will probably be a lot of people needing to liquidate those investments very quickly, and the Chinese government will probably be very keen to help them. In a staring contest between the NZ government and the Chinese one on the question of currency controls or "will we let the Chinese government buy 5% of NZ's houses this weekend", I'm not betting on the locals.

    Just as bad from my PoV would be to have those houses/apartments actually dumped on the market. Seeing the asset behind my mortgage halve in value would be somewhat tricky for me, and catastrophic for all the smug *ankers who came through the GFC so well. Watching a major Australian bank after its mortgage portfolio went significantly underwater would be scary. Watching them all do it at the same time would be terrifying.

    Sydney, West Island • Since Nov 2006 • 1198 posts Report Reply

  • Stephen Judd,

    On this shortage of supply thing: seems like shortage of supply started a cycle of rising prices, and it may actually be still that there's not enough houses in Auckland for notionally reasonable prices. And then on top of that, a bubble, which as Rich says is basically mass belief in the greater fool theory. It's not contradictory to say Auckland doesn't have enough houses AND that there is a property bubble in Auckland.

    Wellington • Since Nov 2006 • 3122 posts Report Reply

  • BenWilson, in reply to Moz,

    I also don’t really believe it because it’s almost entirely down to what you define as an unutilized house. Is a holiday home that could sleep 10 people, but is completely empty 90% of the time, a potential residence? Yes and no. Yes, it could technically house 1-2 families. No, it won’t because the rich owner doesn’t want to. We have hundreds of thousands of these in NZ.

    There’s a big development at the end of my street. A request to development a retirement village there came to me about 10 years ago, and I agreed (I’d pretty much agree to anything, but it’s nice to be asked). It ran out of money when the GFC hit, stalled for 2 years, then got bought up buy a Chinese concern and cranked out super fast. I was astonished at how fast they built 30 houses. But what has become of them? Most are still empty, years later. Of those that aren’t, most are housing young single Asians, presumably students and such.

    So when I hear of the housing shortage being a result of undersupply I have to wonder what is truly meant by that. Undersupply doesn’t mean there’s no houses. It means the owner of the houses are unwilling to use them at the rates that the tail end of house renters can afford. So maybe more supply will fix this, but maybe not, because people just banking land for massive later profits are not really adding to the functional supply, and people with a ton of money can afford to buy up the excess supply and just use it for holidays or perhaps a spare house for their kids one day.

    ETA: Doh, that was meant to be a reply to Rich, not Moz.

    Auckland • Since Nov 2006 • 10633 posts Report Reply

  • steven crawford, in reply to Rich of Observationz,

    Auckland property is a bubble, not a market

    Yes! and if all the social housing is desposed of, then the Auckland housing really becomes a market proper. And the word community becomes redundant, proper.

    Atlantis • Since Nov 2006 • 4316 posts Report Reply

  • Russell Brown, in reply to BenWilson,

    I also don’t really believe it because it’s almost entirely down to what you define as an unutilized house. Is a holiday home that could sleep 10 people, but is completely empty 90% of the time, a potential residence? Yes and no. Yes, it could technically house 1-2 families. No, it won’t because the rich owner doesn’t want to. We have hundreds of thousands of these in NZ.

    My impression, unsupported by data, is that "lock up and leave" is increasingly being touted as a virtue in Auckland property ads. But I'm damned if I know what it actually means.

    Auckland • Since Nov 2006 • 22754 posts Report Reply

  • steven crawford, in reply to Moz,

    What scares me here is not so much “they’re buying our houses!” but “they might en masse sell our houses”. If/when the Chinese sharemarket corrects/crashes there will probably be a lot of people needing to liquidate those investments very quickly, and the Chinese government will probably be very keen to help them. In a staring contest between the NZ government and the Chinese one on the question of currency controls or “will we let the Chinese government buy 5% of NZ’s houses this weekend”, I’m not betting on the locals.

    That’s another reason influential people should not passive aggressively point blame at people with Chinese names, for a problem that actually belongs to New Zealand, as a collective. We had an election resently.

    Atlantis • Since Nov 2006 • 4316 posts Report Reply

  • Mark H,

    What we need is accurate data on foreign buyers, but we don't and we need to. I get you might be sensitive that this is asian bashing, but I don't care where or who the foreign buyers are, I just what to be able to buy a house in Auckland.

    To be blunt and I suspect this the problem with the Left in NZ, is that they tend to a bunch of overly-sensitive PC white middle-class middle-aged soft pinkos who don't have the stones to ask hard questions, and in this case, about foreign ownership and its economic affects. You're all too terrified of being labelled racist - you are being played by the National Party and the real estate industry. They are playing you. And we are all losing.

    Since Sep 2014 • 10 posts Report Reply

  • Worik Stanton,

    I have read and attempted to reread Rob's post. Let us call it what it is: Racist.

    It may well be true that "... ethnically Chinese house buyers tended to purchase flash houses....". So what?

    The offensiveness in all of this is thinking that surnames are a valid way to judge residency or that ethnicity (race) matters. IMO Phil Twyford should go. Far far away.

    Otepoti • Since Nov 2007 • 32 posts Report Reply

  • Sacha, in reply to linger,

    the racist framing of the issue came from media reports rather than from the wording or interpretation used in the original analysis.

    The framing came in Twyford's own words live on television. An unsubtle meathead like Cosgrove saying it may have attracted slightly less attention, but the response on twitter was immediate without any further mediation.

    Ak • Since May 2008 • 19686 posts Report Reply

  • Craig Ranapia, in reply to Russell Brown,

    My impression, unsupported by data, is that "lock up and leave" is increasingly being touted as a virtue in Auckland property ads. But I'm damned if I know what it actually means.

    "Lock up and leave" sounds a lot classier than "no need to pour shitloads of money and time into keeping the house and grounds looking decent." Has done for years, especially if you're trying to hit that "downsizing retiree who wants to blow the retirement savings on Tiki-touring NOT the house" demographic. Sorry, it's not some secret code for predatory foreign hot money.

    North Shore, Auckland • Since Nov 2006 • 12370 posts Report Reply

  • Dylan Reeve, in reply to Russell Brown,

    My impression, unsupported by data, is that “lock up and leave” is increasingly being touted as a virtue in Auckland property ads. But I’m damned if I know what it actually means.

    This has been of interest to me in the last couple of years - the house directly opposite our (rental) house in a newish Henderson sub-division is one of these. It's occupied, maybe, 3 months of the year. Sometimes just by what I assume is the early-20s son of the owner, and sometimes by a more mature family.

    The rest of the time it sits empty with a couple of lights on a timer. Some neighbour mows the lawn occasionally while the Porsche sits, unloved, in the garage out of sight.

    It's weird.

    Auckland • Since Aug 2008 • 311 posts Report Reply

  • Sacha,

    I believe the reason why many of us saw it as racist was not just the analysis relying on ‘Chinese surnames’ (which Rob has defended the validity of) but Twyford’s associated messaging about ‘hard-working Kiwis’ as if they were a different group.

    If Labour wanted to be smart about this they could have arranged for media a young NZ-Chinese couple trying to buy a first home and being thwarted by phone bids at auctions. Or many other things. They didn’t.

    Ak • Since May 2008 • 19686 posts Report Reply

  • HORansome, in reply to steven crawford,

    We had an election resently.

    As typos go, that's very accurate indeed.

    Tāmaki Makaurau • Since Sep 2008 • 441 posts Report Reply

  • Stephen Judd, in reply to Mark H,

    overly-sensitive PC white middle-class middle-aged soft pinkos who don’t have the stones to ask hard questions

    As I said upthread, the hard questions are about who benefits: current house owners. Mostly older people, say 50 up, who’ve experienced decades of capital gains, want to retire on them, and vote for the policy settings that will make that possible. But point out the obvious about that and you’re a boomer-hating class warrior who hates ordinary Mum and Dad investors. Now who doesn’t have the stones?

    Wellington • Since Nov 2006 • 3122 posts Report Reply

  • David Hood,

    Bubble explanations of future gain only really apply in closed model - if you have other drivers like Tony Alexander's one of money hiding- people may be prepared to lose money as "insurance"

    Dunedin • Since May 2007 • 1443 posts Report Reply

  • Katharine Moody, in reply to Idiot Savant,

    Put up a member’s bill on it. Its worked very well for them in the past.

    Aside from the marriage equality bill, I can't think of another Member's Bill that was passed into law recently. Can you?

    That process requires the Bill to be successful in the ballot and even then, referral to a SC has to secure a majority in Parliament to progress it. My perspective is that the issue is so pressing that I don't think we have the time - action is needed now to curb foreign speculation in our residential housing market. National must be pressured by public opinion to do the right thing.

    Wellington • Since Sep 2014 • 798 posts Report Reply

  • steven crawford, in reply to Mark H,

    I get you might be sensitive that this is asian bashing, but I don’t care where or who the foreign buyers are, I just what to be able to buy a house in Auckland.

    I would like to be able to buy a house with views to Rangitoto, to be precise. Them I would buy a saficticated manufacturing tools instead. And I would attempt to convince the Auckland consumer market to buy my goods instead of imported goods.

    Atlantis • Since Nov 2006 • 4316 posts Report Reply

  • Stephen Judd, in reply to Mark H,

    overly-sensitive PC white middle-class middle-aged soft pinkos

    And now that I think about it: where do Keith and Tze Ming fit into that analysis?

    Wellington • Since Nov 2006 • 3122 posts Report Reply

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