A political war has erupted across the pond after the Labour Party’s housing spokesperson, Phil Twyford, released a large Auckland real estate firm’s data showing that almost 40% of buyers in the three months to the end of April had Chinese names, despite Chinese-New Zealanders making up only 9% of Auckland’s population.
This massive over representation, Mr Twyford claimed, meant that there was large scale investment from Chinese nationals investing in Auckland real estate, which has helped drive the massive 26% year-on-year price growth across the metro area.
From Radio New Zealand:
Mr Twyford said he had no regrets raising the matter and warned Chinese investors could spend up to $16 billion on Auckland property over the next ten years.
“This is a vital public debate that we need to be having in New Zealand about the impact of offshore investment on the housing market. Property speculation is rampant in Auckland. It is, I believe, one of the key factors behind skyrocketing house prices.”
He said there was mounting evidence of the impact Chinese buyers were having on Auckland house prices in particular.
“Im talking about all of the international commentary and evidence about the wall of private Chinese investment that is moving into real estate markets, particularly around the Pacific Rim.”
He said foreign investment in housing needed to be banned.
Mr Twyford said that the data strongly suggested offshore buyers were a significant part of the housing problem.
“It’s not credible to suggest that the 9 percent of the population of Auckland who are Chinese-New Zealanders could possibly have bought all those houses … Nobody in the last three days has been able to put up a plausible alternative.”
Mr Twyford’s claim received support from a “property insider” interviewed by the New Zealand Herald, who claimed that one big Auckland real estate agency, where many salespeople are of Chinese ethnicity, was selling almost every single property throughout many suburban areas to people living in China:
In some cases, those buyers had a New Zealand connection “but it’s one group disenfranchising the other. It’s really taken off in the last 18 months. I’ve been studying the figures since October.”
“The Kiwis, South Africans and British have dropped out of the market because they just can’t compete with the Chinese. The people living in China buy the places the Kiwis are trying to get, then those places are rented out the next day,” the insider said.
That showed the person is in an important position in the property sector with extensive access to information unavailable to the public revealing who the buyers really are.
“We’re becoming tenants in our own country. It’s utterly outrageous.”
Rather than engage in debate on the issue, the National Government’s housing spokesman, Nick Smith, and the Greens instead claimed that Mr Twyford was just being racist:
“I think it’s pretty cheap politics from Labour to be targeting one ethnic group and blaming them.
“I’ve seen it before in politics with jobs, seen it before with crime, see that Labour is now effectively blaming Chinese for the housing problems.”
Green Party co-leader Metiria Turei said, while Labour’s information was interesting, Mr 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… It’s a pretty crude piece of racial profiling.”
To which Mr Twyford countered that his opponents were using the race card in order to ignore the issue, and that he has resorted to so-called ‘racial profiling’ because the Government kept no data on sales to foreigners:
“Anybody, I think, listening to this debate – I hope – has realised that Labour is talking about offshore Chinese investors. We are not pointing the finger at Chinese-New Zealanders,” he said.
“The evidence points overwhelmingly to the fact that there is a very significant presence of overseas Chinese speculators buying and trading houses for capital gain in Auckland.
“If people can’t see that then they’re not willing to address the problem”…
“We wouldn’t even be having this conversation if the Government wasn’t in denial and they agreed to collect the data and share it with the public.
“But they refuse to do that. They refuse to set up a register of foreign property ownership. They refuse to make that information public,” Mr Twyford said.
It is worth pointing out that in the lead-up to the Budget, the New Zealand Treasury examined starting a register of foreign ownership of real estate, but concluded that it wasn’t needed. From Interest.co.nz:
[Treasury] looked at the logistics of creating a foreign buyer’s register and found the costs were manageable, but it questioned whether there was a problem that needed solving or what the point would be without restrictions…
“The evidence we have is limited, but does not suggest a problem with foreign ownership of housing (our best estimate is that around 3% of housing stock is under foreign ownership),” a Treasury official said in the briefing.
“The cost of collecting more information is large and would involve some kind of residency screening of all land transfers. The benefits of collecting the information are likely to be small in relation to the compliance and administration costs of collecting it. So our view is no, it’s not important to collect the data,” the official said…
Of course, it is a bit hard to have an informed debate about foreign investment when zero data is collected. Instead, New Zealanders (like Australians) are left relying on anecdotal evidence or back-of-the-envelope data, which then leads to claims of racism and xenophobia whenever someone raises concern about foreigners buying-up established homes and pushing-up home values.
It’s not like this has only just become an issue. Prominent economist, the Bank of New Zealand’s Tony Alexander, has been calling for Australian-like rules banning foreign ownership into existing dwellings for three years, while commending Mr Twyford for trying to get a handle on the issue:
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…
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…
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…
We should as soon as possible adopt Australia’s rules restricting foreign buying of anything other than new housing unless resident for 12 months…
Many Chinese who buy properties never, or rarely, occupy them. They sit empty… 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.
The National Government today claimed that it will collate and publish data on where foreign buyers are coming from after new rules on reporting investment property buying kick in from 1 October. From Interest.co.nz:
The Government announced new rules in the Budget which will force buyers of investment properties, both resident and non-resident, to declare their IRD numbers to LINZ. Non-residents will also have to open bank accounts here, obtain New Zealand IRD numbers and declare their home country tax details.
“The real information will be collected from the 1st of October and it will undoubtedly be released,” Joyce said, adding it would be not be itemised by surname, but would show which countries the non-residents were buying from”.
Maintaining a comprehensive database of foreign interests, along with strong rules precluding investment in established dwellings, is a no-brainer. It is also the best way to prevent so-called xenophobic attacks on ordinary Chinese-New Zealanders by bringing integrity to market rules.