Polity by Rob Salmond

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Polity: House-buying patterns in Auckland

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  • Stephen Judd, in reply to Steve Barnes,

    for all those here bagging Twyford take a quick look in the mirror, Labour are NOT the bad guys here.

    But that was a pretty predictable way this story would develop, and they went ahead anyway. So they have to cop some blame.

    Wellington • Since Nov 2006 • 3122 posts Report

  • Katharine Moody,

    Auckland median house price rose by $3,000 a week last year;

    http://www.interest.co.nz/property/76464/auckland-house-prices-surge-new-record-rest-country-flat-reinz

    Rest of New Zealand flat/unaffected.

    Wellington • Since Sep 2014 • 798 posts Report

  • Clunking Fist, in reply to Jim Cathcart,

    "wouldn't it make more sense to more accurately weight the sample by characteristics such as age, income, etc"
    Eh? It's not really a "sample" in the classical, technical sense. And the buyers weren't asked their age, nor their income: if the data aren't collected, then they can't be analysed.

    Wellington • Since Jul 2015 • 1 posts Report

  • Stephen Judd,

    Not sure whether this was posted here yet, so just in case: Professor Thomas Lumley's take at StatsChat.

    One of the repeated points I make on StatsChat is that you need to distinguish between what you measured and what you wanted to measure. Using ‘Chinese’ as a surrogate for ‘foreign’ will capture many New Zealanders and miss out on many foreigners.

    The misclassifications aren’t just unavoidable bad luck, either. If you have a measure of ‘foreign real estate ownership’ that includes my next-door neighbours and excludes James Cameron, you’re doing it wrong, and in a way that has a long and reprehensible political history.

    Wellington • Since Nov 2006 • 3122 posts Report

  • Katharine Moody, in reply to Stephen Judd,

    But the outlier (statistically, price-wise) is Auckland - so James Cameron, had he purchased residential RE in Auckland during the sample period, would indeed have been counted. The analogy used doesn't make sense to me - James Cameron's Wairarapa farm purchases seem completely irrelevant.

    Wellington • Since Sep 2014 • 798 posts Report

  • Craig Ranapia, in reply to Steve Barnes,

    So, for all those here bagging Twyford take a quick look in the mirror, Labour are NOT the bad guys here.

    So, once more they're not the bad guys here because what... they outsourced the race-trolling and would like us all to believe they couldn't have possibly predicted how it would play? Well, thank heavens for that!

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

  • simon g, in reply to Steve Barnes,

    So, for all those here bagging Twyford take a quick look in the mirror, Labour are NOT the bad guys here.

    Ethics 101: A useful guide to “good” and “bad” is to ask how much time somebody had to think in advance about their actions/reactions.

    Reacting to a news story – maybe seconds. Sub-editing a developing news story – maybe minutes or hours.

    Preparing the entire basis of the news story, and deciding to release it, to use it – did that take days or weeks?

    So Labour knew what they were doing. They must have discussed it, and gone ahead having done so. We still don’t know if the overall response was what they wanted, but we can definitely say it was what they should have expected. No excuses there, at all.

    (ETA: and I appear to be agreeing with Craig. Labour, look wot you dun!)

    Auckland • Since Nov 2006 • 1333 posts Report

  • nzlemming, in reply to Craig Ranapia,

    Well, I kinda share your frustration there Mark, but not in a way you’re going to like. If a certain segment of “the left” don’t like being called racist anymore than certain segments of “the right,” that’s all on them. Stop making it so damn easy. It really is that simple.

    As I've said before, when Craig and I agree on something, it's pretty likely to be the truth. This is one of those times.

    Waikanae • Since Nov 2006 • 2937 posts Report

  • Katharine Moody,

    Holy Cow!!!!! This just stepped up another notch – try 90% of purchases from mainland China;

    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11480138

    Very sad too that these agents for fear of losing their jobs, I assume, want to speak anonymously. The Government who refuses to collect this data is putting their employment at risk.

    Wellington • Since Sep 2014 • 798 posts Report

  • Rosemary McDonald, in reply to Katharine Moody,

    Yep...and just heard from an agent that Aucklanders are pushing up prices in Tauranga and Hamilton to the point where prices are listed at $100,000 more for the same property last year.

    Madness.

    And specially scary that agents (who are benefiting from these ridiculous prices) are too scared to comment publicly.

    Waikato, or on the road • Since Apr 2014 • 1346 posts Report

  • Stephen Judd, in reply to Katharine Moody,

    The analogy used doesn’t make sense to me – James Cameron’s Wairarapa farm purchases seem completely irrelevant.

    He is simply commenting on the utility of using a Chinese surname as a proxy for non-residency. I quoted the summary of a much longer article which is worth reading.

    Wellington • Since Nov 2006 • 3122 posts Report

  • Jim Cathcart, in reply to Clunking Fist,

    "wouldn't it make more sense to more accurately weight the sample by characteristics such as age, income, etc"
    Eh? It's not really a "sample" in the classical, technical sense. And the buyers weren't asked their age, nor their income: if the data aren't collected, then they can't be analysed.

    But it is. It's a non-random sample of property purchasers from a real estate agency. And I agree with you. The demographics are nothing more than speculation and "back of envelope" inferences from census data.

    Since Nov 2006 • 228 posts Report

  • Swan, in reply to BenWilson,

    So much of our economy relies on what, selling houses to the Chinese?

    The RBNZ stress tests last year showed the banks could withstand a 50% fall in house prices and unemployment reaching double digits. We actually havent had high credit growth in NZ recently as others have pointed out, so the conditions for a financial crisis associated with falling asset prices just aren't there. More of our resources are moving back into house construction, but it is hardly an enormous part of the economy and it is still much less than the size of the industry in the 2000's.

    There just arent the conditions for a significant recession associated with falling house prices, particularly if the RBNZ is onto it.

    Birkenhead • Since Feb 2011 • 86 posts Report

  • Kumara Republic, in reply to BenWilson,

    I don’t know if it’s a bubble, personally. But if it is, that’s not a good thing. It’s a recipe for the next Great Depression for us.

    And if/when it does happen, the Icelandic approach would probably be the least worst approach for NZ.

    The southernmost capital … • Since Nov 2006 • 5446 posts Report

  • Katharine Moody, in reply to Stephen Judd,

    Oh, read it in full. Gee, not good in my opinion, as the author takes his own stab at ‘guesswork’ conclusions .. for example;

    Personally, I’d guess that all these explanations are true: that Chinese New Zealanders (on average) buy both homes and investment properties more than other New Zealanders, and that there are foreign property investors of Chinese ethnicity. But that’s a guess: these data don’t tell us — as the Herald explicitly points out.

    Completely inappropriate given that is all based on his own assumptions (what looks like him doing some kind of ethnicity-based 'profiling?).

    But more importantly, as an academic, he then strays into academic territory which he has perhaps no expertise in (i.e., planning/economics), in saying;

    But on top of that, if there is substantial foreign investment and if it is driving up prices, that’s only because of the artificial restrictions on the supply of Auckland houses. If Auckland could get its consent and zoning right, so that more money meant more homes, foreign investment wouldn’t be a problem for people trying to find somewhere to live. That’s a real problem, and it’s one that lies within the power of governments to solve.

    That was a badly thought out academic contribution, I suspect.

    Wellington • Since Sep 2014 • 798 posts Report

  • Stephen Judd, in reply to Katharine Moody,

    as the author takes his own stab at ‘guesswork’ conclusions .. for example;

    He's just pointing out other plausible explanations. Hence the stress that these are guesses, and the data doesn't itself say these things.

    Wellington • Since Nov 2006 • 3122 posts Report

  • Rich of Observationz,

    Yep, he doesn't apply his required rigour to his personal ideas.

    As I said above (maybe, I lose track) why, if supply limitations are the cause, does the property market not find an equilibrium of buyers and sellers?

    And in one sense it's impossible to increase supply - an apartment in the CBD or a greenfield site in Drury isn't the same thing as a house on a section in Pt Chev. Places with minimal zoning or MUL controls (LA, for instance) have had rampant house price inflation at times in their history. Places with rigid zoning (much of continental Europe) have avoided it.

    Back in Wellington • Since Nov 2006 • 5550 posts Report

  • Russell Brown, in reply to Katharine Moody,

    But on top of that, if there is substantial foreign investment and if it is driving up prices, that’s only because of the artificial restrictions on the supply of Auckland houses. If Auckland could get its consent and zoning right, so that more money meant more homes, foreign investment wouldn’t be a problem for people trying to find somewhere to live. That’s a real problem, and it’s one that lies within the power of governments to solve.

    That was a badly thought out academic contribution, I suspect.

    That's the weak part of his post, for sure. Attributing the problem to consents and zoning is pretty much an unsupported assertion.

    Auckland • Since Nov 2006 • 22850 posts Report

  • Katharine Moody, in reply to Rich of Observationz,

    Yes, exactly. Auckland is a narrow isthmus - it is constrained by its geography. So reference to "artificial restrictions" as being its only planning problem is just a nonsense.

    Wellington • Since Sep 2014 • 798 posts Report

  • Alfie,

    I wish that the people crying racism would step back and look at the wider picture. This is nothing to do with overseas buyers interested in living in our fair country. It's the wealthy looking after their assets and this mass movement of capital is happening worldwide at the moment.

    A new 230 apartment complex in London's Canary Wharf sold off the plan in five hours this week. Half went to local buyers, the rest to investors from Greece, Italy and China. Those flats won't even be completed until 2019.

    The same thing is taking place in Australia and Canada where the rich are parking their capital in safe havens.

    Around 20% has been knocked off the value of Chinese shares since mid-June, although attempts by authorities to stem the bleeding are having some effect.

    Many wealthy Chinese investors had already cashed out. Major shareholders sold 360bn yuan (US$58bn) in the first five months of 2015 alone, compared with 190bn yuan in all of 2014 and an average of 100bn yuan in prior years, according to Bank of America Merrill Lynch.

    It's no wonder our naive little market is being targeted. We've been told today that Auckland's median house price leapt 26% in the last year. Add to that NZ's lack of regulation of foreign property sales and the easy to circumvent must have an IRD number requirement coupled with zero tax as long as you hold a property for 24 months, and you're looking at some of the best tax-free returns on capital money can buy.

    In Singapore, offshore investors pay a 15% stamp duty on the purchase price of property to the government. Whether that's the solution or the 'new builds only' law in Australia, NZ desperately needs to stem the inflow of wealth that's distorting the Auckland market. Because it's not going to slow down anytime soon.

    Dunedin • Since May 2014 • 1440 posts Report

  • Katharine Moody, in reply to Russell Brown,

    It's a totally unsupported assertion. Extremely disappointing from an academic - and one domiciled in Auckland as well.

    Wellington • Since Sep 2014 • 798 posts Report

  • Rich of Observationz,

    Also, I do have a solution that doesn't involve any forms of racial discrimination.

    The Reserve Bank has a target range for general inflation, which they enforce using interest rates with reasonable success. They have no such range for property inflation (and indeed, such data is excluded from the price index and generally ignored by Stats NZ, presumably by edict from above).

    Have them make a plan for house prices - maybe 2-5% growth in the next 12 months, tapering thence to ±1%. Give them a set of clubs to enforce this with, ranging from the current light putter of bank lending requirements through to the nail studded lump of wood of a 100% tax on sale proceeds over a certain percentage of GV (making sales above that price fruitless for the vendor). Apply these accordingly to hit the target.

    After a while, it'll become clear that profits can no longer be made in the Auckland market, and "investors" will go elsewhere.

    Back in Wellington • Since Nov 2006 • 5550 posts Report

  • Rich of Observationz,

    the rest to investors from Greece, Italy and China

    Maybe the Greek government could engage Rob to scan the UK land register and identify investors with names like Serepsisos or whatever as possible sources of tax revenue.

    Back in Wellington • Since Nov 2006 • 5550 posts Report

  • Katharine Moody, in reply to Alfie,

    Yes, make it a 100% stamp duty and we might get more realistic prices being paid. That's what we could call a win-win for NZ.

    Wellington • Since Sep 2014 • 798 posts Report

  • Katharine Moody, in reply to Rich of Observationz,

    Any of that kind of policy takes in New Zealanders as well. We really just need to deal at this stage with the foreign direct investment. We either ban it completely (Labour's idea) - or tax it to our advantage on the way in (say at 100% of purchase price).

    Wellington • Since Sep 2014 • 798 posts Report

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