NZ PM goes into bat for foreign housing speculators

By Leith van Onselen

New Zealand Prime Minister, John Key, remains the biggest roadblock to the country achieving genuine housing reform.

A year ago, Key cheered on rising house prices and the associated Chinese investment – effectively selling younger generations out whilst promoting unproductive investment:

“Aucklanders are getting wealthier,” Key said, referring to front page newspaper articles in Auckland about house prices…

“The point is there is over 500,000 Aucklanders that own a home. They are significantly wealthier. I go around the rest of the country and people say to me ‘Can we have a few of those Chinese buyers in Wellington and other parts of New Zealand because actually we want our house prices to go up’,” he said…

“Let’s just take the counter-factual for a moment. Would you want your house price going down?,” Key said.

“And what most Aucklanders say to me is ‘I’d rather my house price went up, but I’d rather it went up a little more slowly than this'”…

John Key has also been an unabashed supporter of the population ponzi, backing New Zealand’s record immigration program despite growing concerns about its quality and adverse impacts:

Prime Minister John Key… told a business audience on Thursday that Auckland’s house prices and congestion issues were a “sign of success”…

“If you look at the challenges Auckland has at the moment – and you know, they’re well documented from housing to transport – they are in a funny kind of way a quality problem to have because what they reflect is that Auckland is doing well”…

“You’ve got net migration not just strong from India, China and Australia but actually net migration from around the country”…

“And the truth is we would rather be having to deal with the challenges of growth and say ‘OK we’ve got to deal with those issues but gosh they’re signs that as a city we’re doing incredibly well and actually as a country we’re doing incredibly well’.”

And today, John Key has pushed back against calls to tax foreign home buyers as well as tighter money laundering rules, claiming the Government’s role was to protect homeowners’ equity:

“Anyone in Government has to be a bit careful, because for most people their primary asset is their house and for most people, a significant amount of the home is borrowed from the bank, so you do have to protect their equity.”

In the article, Key claims that tighter rules and taxes on foreign buyers could cause a “catastrophic slump in the market”, but then directly contradicts himself by arguing that foreign buyers are a non-issue because LINZ data showed that only 3% of buyers were non-residents for tax purposes.

Only in Bizarro World would endemic traffic jams and unaffordable housing, not to mention falling per capita income, be a “sign of success” and economic progress.

The sad truth is that New Zealand’s authorities, like Australia’s, are no longer managing an economy, but rather a property bubble.

One can only wonder how both nations would now look if the many billions of dollars of excess capital that has been poured into established housing had instead been funneled into businesses and infrastructure. Instead, both countries have been been left with hollowed-out industries, non-mining/agricultural companies that are struggling to compete, and an infrastructure deficit that will likely never be closed, made worse by rampant population growth (immigration).

Youngsters in both nations now face the choice of a life time of renting or debt servitude as they pay-off some of the world’s biggest mortgages, together with an ever-rising tax burden as they fund their asset rich boomer parents, along with a zombie economy.

That’s some future that is being bestowing on our ANZAC youth.

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Unconventional Economist


  1. John Key comes across like a dunce. He is obviously serving the interests of powerful elites, not the average young New Zealand voter.

    • The age of holding power by serving the elites and claiming it is somehow of benefit to all are disappearing across the Western world.

      Politicians here and in NZ need to revisit the post WW2 world where the middle class was nurtured and policy was aimed at full employment and affordable housing lest we end up in the sphere of Trump/Brexit lunacy.

      • Dumbing down degrees is a recent phenomenon. Even in 2005 it was hard to get a degree.

        Of course there was immigration in the 1950s but AUS had it without dumbing down degrees.

        So we are slapped twice: making AUS overcrowded and making Aussie degrees worthless.

    • PMT and Bruce Baird are Key clones.

      Key’s spin doctors (and dirt throwers) have protected him for longer but he certainly cannot help himself.

    • Amen…

      “They are significantly wealthier. I go around the rest of the country and people say to me ‘Can we have a few of those Chinese buyers in Wellington ”

      By that logic, I should be able to sell heroin to kids in primary schools.

  2. The right hon. member for Merrill Lynch. You can see why Australia’s right hon. member for Goldman Sachs is a fan of his gravitas….

  3. At what point in time in the future are the youth actually going to revolt against pigs like this? Surely there’s going to actually be some kind of, almost stringing up of people like him and our own similar politicians? This has to come to a head at some point.

    • I keep waiting for it too, but nobody seems as angry as me in my cohort. I want to riot at how absurd it is, but I think everyone else thinks if they buy something they will be ok and will enjoy ever increasing value of a home too. If only they could get into the market… When this spills over I don’t know, but a tipping point has to be close?

      • I am immensely angry, but I’m in my late 30’s and I “saved” to buy a place, I made the exact opposite move, but what was taught to me as the right way to handle money. I wanted a really big deposit, low mortgage. Negative gearing, foreign investment, money printing, interest rates, I simply didn’t get it. My money has done nothing for me, it’s my fault but this system is currently broken.

        I’m ….very, very angry about it, mostly NG and foreign investment, it’s utterly disgusting. The young are basically being robbed and they have no idea.
        Exceedingly angry.

      • There are days I walk around the streets of Sydney and part of me just wants to start burning houses down in protest. Of course I’d never do that to the poor folks in them paying off a mortgage, but when I see a vacant house left vacant which would purchased by a Chinese speculator I want to torch it. I know the value is in the land, but the fire might cause them some grievances and headache and that’s enough for me to make my point.

      • I think the global coverage on what happened to the Occupy group in America pretty much sorted that kinda thingy….

        Disheveled Marsupial… to act out as such instantly labels you a hippie, property destroyer, socialist – commie, anti capitalist, et al….

      • Gavin I can totally appreciate the frustration. I think pragmatism is the only real option atm.

        I was utterly gobsmacked – still am – with how little my partner and I can safely borrow even despite a very hefty deposit. In the end we did buy a small apartment in a decent suburb, with a small mortgage (~30% of the purchase price) that should hopefully be paid off in 2-3 years. If it crashes, yes that would suck, but at least we didn’t borrow overly much.

        The crazy thing is, and I hate to say it, but John Key is right that most people would rather see the value of their home go up than down. I think it’s something like 2/3 of the Aussie population that either own their own home outright, are paying off a mortgage or are a dependent of someone in the other two categories. There’s just too much invested in this, it will be the last thing that’s allowed to fail.

        The only way out is to dig up! :/

    • There are a lot of stupid 25 year olds who keep voting for the LNP against their own interest.

      I met a 32 year old who was saying he should be paid more given his qualifications and experience – but he votes for the LNP!

      I guess he does not know that the 457 visa rort – cheered on by Gillard and Abbott – is there to replace Aussies on $80k with foreingers on $60k. (And Aussies on legal wages with foreigners on illegal wages).

      I saw an SBS Insight episode recently – broadcast after 2 July 2016 – and some oldies were saying they like Bob Hawke because he drank a bottle of beer in 1 go or something. Forget policy – vote on personality and looks!

  4. The truth is that John Howard got there well before him.

    Back in the relatively early days of our housing boom, someone asked JH what he was going to do about it, and he said “I’ve just talked to someone who’s sold their house in Sydney for $xxxx and moved to Tasmania to retire and I think that’s fantastic”.

    That told you everything you needed to know about Howard’s generational priorities.

    • Howard also said the states should release more land.

      Given how much land there is around Darwin and Adelaide, there is no excuse for not releasing more land or not lifting height limits in certain industrial suburbs in MEL, ADL, SYD.

      Or even allowing aged care rooms to be built atop high schools – especially Civic Drive, Epping, Victoria.

    • Which at the time was pre WW2 babies. He could sense the ‘wealth’ effect and how many votes it could buy.

  5. Prime Minister John Key… told a business audience on Thursday that Auckland’s house prices and congestion issues were a “sign of success”…

    “If you look at the challenges Auckland has at the moment – and you know, they’re well documented from housing to transport – they are in a funny kind of way a quality problem to have because what they reflect is that Auckland is doing well”…

    “You’ve got net migration not just strong from India, China and Australia but actually net migration from around the country”…

    This sounds exactly like our NSW state government. The measure of success is apparently that loads of Chinese and Indians want to live in our city. And why wouldn’t they when the population density of Shanghai is 13,400/sq km and Mumbai is 29,650/sq km? Compare this to Auckland at 2,000/sq km and Sydney at 2,100/sq km.

    How “well” do you really have to be doing in order to attract people from overcrowded and low income parts of Asia? This is a pathetically low bar -try doing well by the people who already live there.


    YOUNG Australians are being warned they risk becoming mere “bystanders” to prosperity as wealth is concentrated in the “arthritic hands” of their parents and grandparents.

    Already home ownership among young Australians is at the lowest level it has ever been and wages have actually gone backwards for people in their 30s, while those over 55 are earning ever more.

    the cries of youth are being drowned out by the creaks and groans of the arthritic bones of their parents.

    • In the young Australian’s favour is that their arthitic parents will die before them so they’ll get the house eventually.

      In the meantime, rent.

      • That’s wonderful for the single child. Yippee I’ve just turned 60 and finally can have a house to live in.
        Too bad if you have a few siblings or don’t want to wait that long.

    • Wages and job opportunities shrinking. Is that not why Gillard and Abbott cheered on 457 visas?

      To replace Aussies on legal wages with foreigners on illegal wages.

    • Bystanders to the Chinese as well. Where I live has changed incredibly in only 4 years. Mostly the last 2 though, it’s mind boggling how frequently I now see high end Porsche, BMW, Audi vehicles in my area.

    • I remember a discussion about the pressure the pension will put on the budget when all the immigrant workers age and eventually need their pensions too. I said that I believe when Gen Y is old enough to retire, the government will propose a transition to death program where your family get a tax break if you choose to euthanase yourself. Wouldn’t surprise me if they’re discussing that idea behind closed doors already.

      • Yeah, but, can you, say, top yourself 3 times and cash in every time? How about negatively gearing that sh*t??

        Does your family get to turn you into a few liters of diedsel and run you through the family car? ?

  7. There might be a fiscal element to this as well. I’d suspect foreigners are subject to tax on gains on the sale of real estate in NZ whereas as we know, local investors (and OOs) aren’t if the property is held for 2 years.

  8. data showed that only 3% of buyers were non-residents for tax purposes.

    Funny that data, must be the same data in Vancouver and Melbourne and Sydney and London and SFO etc.. That magical 3% it just sounds low enough to not be a problem and high enough to be plausible… It’s not 1.25%or 5%. A nice rounded 3.

    • Yes. There are liars, damned liars and shortage-deniers. The shortage-deniers can always come up with statistic to “back” their nonsense.
      How would you like 2% of your body to rot away every year?

  9. Jumping jack flash

    Bloke is clearly delusional.
    However this is a man who has obviously embraced the debt machine and the new FIRE+services economy.

    He will surely have a long and fruitful career, shielded by the banks, overseas investors and developers – the people who count in the new economy.

    The key to success is to get someone to give you a houseload of debt they are liable for. Better if that’s a foreigner. Better still if that’s a foreigner with foreign cash from who-cares-where.

  10. Average asking prices on Trade Me Property up 20% in Otago, 19% in Waikato, 17% in Bay of Plenty, 11% in Auckland and Wellington but Christchurch lagging behind |

    The average asking prices of homes listed for sale on Trade Me Property are rising in most places around the country and setting new highs in Auckland. … read more via hyperlink above …

    How many Big Macs could you buy for the equivalent cost of a median priced Auckland house compared to Melbourne, Sydney and New York? |

    How many Big Macs would it take to pay for an average house in Auckland?

    And assuming you could find a vendor willing to accept payment in the iconic burgers, how would Auckland’s Big Mac buying power compare with other places such as Sydney, Melbourne or New York?

    These questions were recently pondered by the technical boffins at local property valuation website as they updated the valuations for 1.4 million New Zealand homes that are freely available on their website…. Read more via hyperlink above …

  11. John Key forgot to mention the other 500000 Aucklanders who don’t own a home because they couldn’t possibly afford the jumbo mortgage associated with owning one. What a sign of ‘success’.

  12. FYI for those that think supply and demand is a huge factor in prices I again point out the huge expansion of urban development in many country’s pre GFC, where prices always went up and in many places which saw significant corrections are currently seeing another upward trend.

    Disheveled Marsupial… in addition because of AGW supply is a more complicated issue than its historical precedent e.g. its not just a greenie environmental issue, its a engineering infrastructural fact.

    • Right. Thanks Skippy. I was thinking along those lines but was a little bit off. Your post really cleared it up for me.

    • Skippy … check out Greater Christchurch housing ‘inflation’ where there is abundant new supply coming on to the market … in the Trade Me posting above … and too … the latest REINZ and QV figures as well.

      Christchurch median house price is about $425k … Auckland about $825k. Christchurch residential rents have come back about 8% in the past 12 months.

      We need to see the Greater Christchurch housing supply situation take hold throughout the rest of the country … particularly Auckland, Tauranga and Hamilton.

      • Hugh…

        I understand your perspective wrt observing a price point in a snapshot of time, albeit due to a plethora of factors its not inclusive of the long term ramifications. per se RE prices relative to long term income expectations [-neg], the aforementioned AGW factors [see your common reference point to TX], network effects from property valuers to loan origination and the inevitable securitization demand pull, private and public collusion to enrich the primary players, hot capital flows, and lastly the decreasing standards in build quality [see builders warranty], et al…

        Disheveled Marsupial… I disagree with your price mechanics methodology as its too narrow in scope and its failures will ultimately be born by the consumer and society at large…. after those that have extracted their wealth are long gone… I think Katrina is a reasonable example…


    Televised this evening … Well done Nigel Latta ! …

    Nigel Latta: No magic bullet for housing crisis |

    OPINION: I recently went back to the house I grew up in: a pretty modest brick place on Arthur St, Oamaru.

    Out in the yard, the current owners had a surprise for me. It was a tiny name, scratched in the cement foundations of a fence post.

    The name was Nigel Latta. When I took a stick to the wet concrete back in 1970, I was putting my name on the place I called home. … read more via hyperlink above …


    House prices still rising in Auckland and Wellington but down in Waikato/Bay of Plenty and Canterbury; Big drop in Auckland sales volumes year-on-year |

    Auckland is way out of control … qwith gross under-supplyof new housing.

    Note Christchurch / Greater Christurch … with greater new supply.

  15. Leith, ‘ANZ youth’ would make more sense than ‘ANZAC youth’ as army corps has diddly squat to do with it. I get why you would want to avoid ANZ however.

  16. … From


    For metropolitan areas to rate as ‘affordable’ and ensure that housing bubbles are not triggered, housing prices should not exceed three times gross annual household earnings. To allow this to occur, new starter housing of an acceptable quality to the purchasers, with associated commercial and industrial development, must be allowed to be provided on the urban fringes at 2.5 times the gross annual median household income of that urban market (refer Demographia Survey Schedules for guidance).

    The critically important Development Ratios for this new fringe starter housing, should be 17 – 23% serviced lot / section cost – the balance the actual housing construction.

    Ideally through a normal building cycle, the Median Multiple should move from a Floor Multiple of 2.3, through a Swing Multiple of 2.5 to a Ceiling Multiple of 2.7 – to ensure maximum stability and optimal medium and long term performance of the residential construction sector.

  17. … LEVITTOWNS …1950s …


    … as the Dumb Generation relearns history … the hard way …

    1950s newsreel about the building of suburbia in Levittown – YouTube
    … VIDEO …

    Return to Levittown: a suburban dream turns 60 – BBC News
    … VIDEOS …

    Levittown, New York – Wikipedia, the free encyclopedia,_New_York

    William Levitt – Wikipedia, the free encyclopedia