Associate Finance Minister David Parker said on Friday: “New figures showing a high level of overseas house buying in New Zealand’s least affordable areas vindicates the Government’s move to ban foreign buyers of existing homes.”
The aim of Mr Parker’s new law to stem the flow of home ownership overseas, the Overseas Investment Amendment Bill, is “to ensure that investments made by overseas persons in New Zealand will have genuine benefits for the country”.
Mr Parker introduced the bill to Parliament on 14 December and the finance & expenditure committee is due to report on it by Thursday next week, 21 June. He said it was on track to become law next month.
He was using the first release new Statistics NZ research to support a conclusion he’d already reached.
But he made one wrong assumption – that the concentration of buying is in the areas of worst affordability. The research showed foreign buyers (holding neither NZ citizenship nor a resident visa) accounted for 18.7% of residential purchases in Auckland’s central city Waitemata ward in the March quarter.
As I noted in my story on Friday: “There’s no differentiation in the statistics between purchases of apartments & houses in the Waitemata ward, which is material to the value of the statistics. Auckland’s (and New Zealand’s) apartment market has been led by sales through overseas campaigns, particularly through Singapore, Malaysia & Hong Kong. Without those overseas campaigns, most of the city’s big apartment developments would not have got out of the ground.”
Secondly, a high proportion of purchases by full foreigners (neither citizenship nor resident visa) & partial foreigners (where one half of a couple might have citizenship or a visa, for instance) have been in expensive suburbs such as Remuera and some of the bays on the North Shore.
They are areas which are expensive, where only wealthy people will buy. Some of their purchases have raised the overall price level and, I’ve argued, that has flowed through to the overall spiralling increase in house prices nationally. But to consider those areas to be in the realm of “affordable”, as in first-homebuyer affordable, would be irrational.
The foreign purchase of apartments off the plans – enabling development, followed in due course by selldown, not part of the proposed ban on buying existing homes but included in the statistics – is not a steal from locals. In some cases, the secondary sale has been made at a loss.
And purchases in expensive suburbs shouldn’t be used for an affordability argument. The Government is entering a programme to get construction of cheaper homes underway, KiwiBuild, and it’s not going to do that by buying land in the most expensive suburbs.
The first target for KiwiBuild is land the Government has bought from Unitec at Mt Albert, and you can expect the Government to look for similar suburban sites to continue the programme.
Back to Mr Parker’s Friday statement, in which he noted 3.3% of purchases nationally were by foreigners, rising to 18.7% in central Auckland & almost 10% in Queenstown.
“That shows the concentration of buying is in the areas of worst affordability and where price rises have been the highest,” he said.
“Kiwis were right to be concerned, and that is why we are passing the foreign buyers law.”
He said the data measured the flow of properties into overseas hands, not the proportion of the stock that was held by overseas owners, and with more foreign buyers than sellers the number of homes in foreign hands was increasing.
“We want the prices of New Zealand homes, whether it be a lakeside station, the best houses in the Bay of Islands or the most modest homes in our towns & cities, to be set by local buyers, not on the international market.”
He said it wasn’t just about the raw numbers of houses being sold overseas: “It’s also a matter of values. We believe New Zealand homes should not be traded on an international market and New Zealanders should not be outbid by wealthier foreign buyers.”
8 June 2018: 3.3% of March quarter home buyers were foreigners – but 18.7% in central Auckland
25 March 2018: Unitec land transfer kicks off KiwiBuild
15 December 2017: Twyford launches the KiwiBuild plan
Attribution: Ministerial release, Statistics NZ research.