Polity: House-buying patterns in Auckland
506 Responses
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Russell Brown, in reply to
There is another issue there – of ethnicity and poverty. Also indicates large inequality within the Chinese community – I wonder whether the margin between the very poor and the very rich is wider than for other ethnic groups?
I think that’s largely related to the fact that a big chunk of the resident Chinese population are students.
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Russell Brown, in reply to
They do indeed. And it’s the most popular choice in the unscientific Herald poll, with the UK foreign CGT option a distant 2nd. And for the BNZ’s Tony Alexander.
They've just begun a crackdown after acknowledging they have huge avoidance problems.
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Steven Joyce responds by saying the government will finally start to collect data on foreign buyers from October 1st. Those who suggested that Labour's release of limited data would force National's hand have been proved right, although Joyce was a bit woolly on detail and couldn't say when that data would be released or in what form.
There's still no sign of any government restrictions on new builds, stamp duty on overseas investors, etc. So expect more of those of Chinese ethnicity in Auckland with lower than average household incomes AND local IRD numbers to be involved in expensive property purchases on behalf of uncles, cousins...
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Russell Brown, in reply to
Steven Joyce responds by saying the government will finally start to collect data on foreign buyers from October 1st. Those who suggested that Labour’s release of limited data would force National’s hand have been proved right, although Joyce was a bit woolly on detail and couldn’t say when that data would be released or in what form.
That’s because the legislation is utterly and apparently deliberately vague on that issue.
There are huge holes in the Taxation (Land Information and Offshore Persons Information) Bill, because it only requires a local IRD number and bank account. It will also allow property purchases via trusts, which inevitably will have the effect of obscuring the level of foreign purchases. It doesn’t require a register of foreign property transactions, merely allows for the possibility that LINZ might at some point publish aggregated information.
Irony: the way they’ve done it means it will capture New Zealand citizens with foreign tax status.
Louise Upston’s first reading speech has some of the detail.
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Alfie, in reply to
There's something else in that legislation which I find odd -- the so-called brightline test. That says income tax has to be paid if a residential property other than the seller’s main home is bought or sold within TWO years.
Brief backstory
Back in the early 2000s the IRD had a crackdown on property investors in the Wakatipu. They declared that anyone who had bought a property and resold within TEN years was a speculator or developer and they chased everyone in that category for back taxes. They pulled in tens of millions as a result.We were accidentally caught up in that trawl. I was injured on a skifield when a large Japanese snowboarder straight-lined me at speed, breaking my ribs and giving me a frozen shoulder which put me off work for more than two years. ACC wheeled out two tame surgeons who declared my injury "hereditary" and declined cover. Bastards!
So we sold our retirement plan -- a section we'd owned for three years -- to keep paying the bills. The IRD decided we were speculators and chased us for around $90k in back tax. It took me five years and a lot of stress to finally overturn that decision.
My point is, as ten years was the cutoff point a decade ago, why has the new legislation been set at a mere two years? Surely most offshore investors will have no problem waiting two years to take their tax-free capital gains? It seems to me that the Nats aren't serious about taxing foreign speculators, even though it could bring in hundreds of millions of dollars for the country.
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Hilary Stace, in reply to
There are probably many in minimum wage work such as retail, restaurants and hospitality. While many of the students might come from wealthy families. Demography is fascinating.
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Katharine Moody, in reply to
It seems to me that the Nats aren’t serious about taxing foreign speculators, even though it could bring in hundreds of millions of dollars for the country.
Yes, puzzling to say the least. That is the reason I think that if we are to continue down the road of welcoming foreign ownership of land and housing assets, then that direct foreign investment should be taxed (and heavily) on the way in (i.e., a stamp duty on purchase). Capital gains is an entirely separate matter - one that should apply equally to local and foreign property investors.
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Corin H, in reply to
There are huge holes in the Taxation (Land Information and Offshore Persons Information) Bill, because it only requires a local IRD number and bank account. It will also allow property purchases via trusts, which inevitably will have the effect of obscuring the level of foreign purchases. It doesn’t require a register of foreign property transactions, merely allows for the possibility that LINZ might at some point publish aggregated information.
You also have to provide the tax identification number from your home country if you are NZ nonresident.
Another loophole is the exemption for purchasers of 'main homes' from supplying an IRD number, which the IRD explicitly advised against.
IRD also said the requirement for a NZ bank account was superfluous as the Anti-Money Laundering screening they do when issuing an IRD number is as stringent as that of a bank issuing an account. -
Deborah, in reply to
My point is, as ten years was the cutoff point a decade ago, why has the new legislation been set at a mere two years?
The ten year cutoff would have been an operational decision within IRD about which transactions to target, just as they make operational decisions from time to time about which industries to investigate. For example, a few years back they made an operational decision to investigate tradies in northern Auckland suburbs where here seemed to be an awful lot of work going on, but not much income tax being paid, suggesting that lots of work was being done on a cash basis.
The two year brightline test will be law ie. they don't even have to investigate anything. Maybe as an operational policy they were already looking at these short term transactions, but now they won't even need to investigate.
/heading back to hanging my head in shame now
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Moz, in reply to
They've [Oz] just begun a crackdown after acknowledging they have huge avoidance problems.
But a fair bit of the avoidance is lawful, which makes it difficult. The two big holes you can drive a truckload of cash through are that residents can buy existing houses, and that no-one is actually required to track this stuff to enable enforcement.
All those foreign students can, and many do. I've been to a few inspections where there was a student arguing with parents that the house was too far from where they would be studying. Not many, because we were not looking for the sort of house that buy'n'hold investors find attractive (property developers, OTOH, we saw a lot of).
The enforcement is as much of an issue. There's no point in the process where you have to prove anything more complex than "I have the money", and if you have it in the bank the whole deal could be done by writing two cheques (possibly one, if you got your solicitor to handle all the paperwork). If real estate agents had to see proof of residence at some point that might help, but when we bought that was not the case.
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I am afraid that your over-reaction just shows your own personal oversensitivity, which is fair enough, and thus a warning voice, but I still do not get it, why people cannot accept that it seems quite logical, that of the many new rich Mainland Chinese, and some perhaps from Hong Kong, Singapore and other places, take opportunities to invest in Auckland housing, some simply to make gains, even leaving homes stand empty for periods.
I'm not sure how many times and in how many different ways I can say that the two issues - racist dogwhistles and overseas influence on the Auckland housing crisis - are not mutually exclusive. I think I'll have to leave it there because I want to retain my sanity.
In general terms, I must say it is a bit bloody rich to have both Keith *and* Tze Ming write great posts about the dodginess of Labour's approach *on this very site* and have their concerns handwaved away in *three* different threads. Unreal.
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In lieu of "like" button -- what Danielle said.
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David Hood, in reply to
I wonder whether the margin between the very poor and the very rich is wider than for other ethnic groups?
Not in income. from NZStat Selected ethnic groups (total responses) by total personal income (grouped), for the census usually resident population count aged 15 years and over, 2013 (RC, TA, AU)
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BenWilson, in reply to
I’ve always thought personal income is quite a dodgy figure for young people*. I was technically poor, working in McDonalds as an early student, just to pay for food and gas. But I lived in Herne Bay amongst the very well-off, with all the privileges that go with close association with highly educated upper class people. I knew that in the long run parental support in big capital decisions was guaranteed, something a poor kid from a poor family doesn’t have. When I fucked up a big capital investment in my early 20s, I had the support of family to avoid being aggressively pursued into bankruptcy by creditors. I had the surety that a probably high future income would get me out of the shit. I was able pay off that debt over time to them. Other people would have lost 20 years of their earning life over that – I only lost 5. Similarly when it comes to leg ups, kids can have no money of their own, but if they get the deposit given to them (even if they have to pay it back) they can get into the property market, despite technically having not enough income. This is exactly how it worked for me, and I fully expect it works that way for foreign students, a group very likely to come from middle to upper class families from their nation of origin.
*ETA: Dodgy when used as a way of guessing at their class, or their actual financial status in the bigger picture.
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Essentially what I'm saying is that when money affairs are managed as a family (even if somewhat loosely) then breaking it down to individuals doesn't really capture the picture. This comment goes not just for foreign Chinese, but local ones, and also everyone else. Family money is one of the main sources of social difference in NZ right across the racial spectrum.
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Labour could have avoided the racist tag by, instead of using Asian/Chinese sounding names, using Foreign sounding names. Then they would have been labeled Xenophobic instead. The report would have been totally useless and said nothing of any worth, apart from indicating that Maori are buying very few houses.
But the handwringers amongst us would still find a way of badmouthing Labour because... well, that's what we do here, slag off Labour and wonder why National is still shafting all of us.
Sigh. -
llew40, in reply to
Thats a fair point Ben, affordability is also a product of circumstance, and I'd certainly love to be in a position where I can use the equity in my home to give my (currently teenage) children a step onto the first rung of the property ladder (if they want to live in Auckland).
Its a natural thing to want to do, but it does feel like (while it will put my kids in the lucky category) it will also exacerbate the underlying structural problem.
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Rob Stowell, in reply to
the two issues – racist dogwhistles and overseas influence on the Auckland housing crisis – are not mutually exclusive
I’m distinctly uncomfortable here, because this is way too important to just ignore, and I support much more restrictive rules around foreign investment, but still can’t fathom how Labour stuffed things up so badly. It’s completely upsidedown to blame foreign investors for behaving legally in the way investors behave (looking for safety and return on capital.)
The main blame* lies with a govt that refuses to concede there’s a problem, won’t even measure it without great pressure, then only reluctantly and has no plan to deal with it. And blaming the govt is Labour’s main job ffs!!
Yet somehow the PRC investors are the shadowy phone-bidding villains (viz Andrew Little quoted this morning on RNZ), and Joyce is rubbing his hands and crying racism. I can hardly bear to look. Where’s the thunderous denunciation of a govt that’s doing nothing and will barely concede there’s a problem?
* the bigger picture has to do with the global build-up of extreme wealth for the few. there’s a still the sense – as before the gfc – of massive amounts of wealth sloshing around the world looking for safe haven and/or easy profit. what do you do with a huge pile of money? one option is to lend it back to the poor or relatively poor, as certainly happens. but the returns aren’t good and safety means faith in the financial system. buying property is an obvious option. it’s easy to understand; owning property feels safe (when did any nation last nationalise property, or group seriously defy property rights?); and while most countries have restrictions, New Zealand is not only safe and wide open, it offers the possibility of massive tax-free profit. at heart, on top of our ridiculous tax and investment law, this is another negative effect of the political and ethical problem of inequality. -
I agree with Danielle/Stephen, and furthermore, I think the whole discussion highlights an "empathy gap", for want of a better description.
For those who (in good faith, let's assume) want to explain away racism as secondary or a distraction ("that's not the issue"), it is enough simply to assert our own perspective ("I'm definitely not racist, therefore this isn't either").
For others, it's a wearying, familiar feeling of "here we go again". And again, and again, and again. Not so much a shock, as a reminder.
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Danielle, in reply to
the handwringers amongst us would still find a way of badmouthing Labour
If "listening to what Keith and Tze Ming and Chinese New Zealanders are saying about this instead of dismissing their concerns out of hand because they might make Labour look bad" makes me a handwringer, then guilty as fucking charged.
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BenWilson, in reply to
Its a natural thing to want to do, but it does feel like (while it will put my kids in the lucky category) it will also exacerbate the underlying structural problem.
As one of the black guys in Platoon said "Sheesh man, you has to be rich to think that way in the first place". However much I think changes should be made to reduce the wealth gap, I'm definitely NOT going to go about helping by making myself and my family poor.
It's a familiar paradox for anyone of socialist tendency but above average position on the social ladder. But it's not a hard one to resolve. You just have to accept that looking after yourself and looking after society at large don't work the same way. For yourself, your own efforts count for a huge part of your success. For society, your own efforts count for a miniscule part of society's success. So you can have it both ways - you can look after yourself, and look after others. Yes, you'd look after yourself a tiny bit better by being right wing, and wouldn't have to suffer any horrible paradoxes. OTOH, you have to be right wing, which could make you feel like shit for your whole life, which will have a direct impact.
This paradox is, however, quite a bit more prominent if you are left wing and powerful. You might actually have direct influence over decisions that could fuck with your wealth. It's a problem for Labour politicians, not me. You could argue that it's part of the reason neoliberalism has been so successful, because left wing politicians are themselves mostly a wealthy class. If not at the start, then certainly by the time they get any real influence.
The only solution I see is to pay politicians well, and scrutinize their finances hard. We do both of those already. The scrutiny bit, they do to each other.
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Handwringer and proud.
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Here is a new graph (so I am kinda out of retirement with this topic on this one). Based on the idea that the arcane REINZ house price index basically matches the house value total that QV produces and is available on the RBNZ site, we can use the QV total numbers as a representation of sales (since it makes the same graph as the REINZ sales graph), providing we do not claim it is the specific value of sales.
One thing a few people have asked is "but can you use household debt"- wouldn't mortgages be better. So I've taken the RBNZ C6 series, checked that debt for housing tracks total debt so I can go back to 1990 with the total, and graphed it.
If mortgage borrowing was controlling the price of houses, you would expect a quarterly increase of x in money loaned to buy houses to be associated with a fairly fixed y amount in the value of houses, so the two lines should track more or less together and up to 2001 they pretty much do (there is a late 80s dip that balances the early 90s rise that I have seen in other data sources. Once we get into the 2000s the NZ market is not being influenced by people getting NZ bank loans, it is being governed by capital from elsewhere. There is also z pretty clear trend going on at the moment. Shall we have a sweepstake on house prices as of October 2016?
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Once again, we have Labour with something useful to say (we have a problem with foreign investment in our housing market), but terrible framing.
Imagine if they’d said:
**Foreign Investors Skew Auckland Housing Market**
Anyone who lives in Auckland will have heard of anecdotal stories of non-resident Chinese investors snapping up Auckland properties and driving up the price of housing for hard-working Kiwis. Who blames them ? On current policy settings there are no restrictions on foreigners purchasing homes here, and with the lack of the capital gains tax, they stand to make a handsome, tax-free profit when they sell.
In typically lazy fashion, the John Key government has once more failed to even acknowledge a problem, let alone deal with it. They’ve sat on their hands while house prices get even more out of reach for ordinary New Zealanders. That National government won’t even collect data on this issue – because they know it’s real, and because it is not in the interest of the donors to make housing affordable for hard-working Kiwi families.
Instead, we have obtained some data leaked from a real estate firm. We analyzed the data to see if we could determine how many properties were being purchased by mainland Chinese. Our calculations show that the sheer number of properties being purchased means it is likely that significant proportion are being purchased by non-residents from China.
China is one of the world’s powerhouse economies, and home to some of the most successful entrepreneurs on the planet. These people are successful, wealthy, and discerning – in short, the very kind of people we love to welcome here as immigrants. We do not blame them for making a rational economic decision to make invest here, it shows real nous, which is why we think they would make excellent candidates to come and live here.
The reality is that if wealthy, discerning Chinese investors see fit to invest here, then the wealthy of other nations from Europe and North America will seek to do likewise. There is no way hard-working Kiwis can compete with the wealthiest investors from the rest of the world.
There is no housing crisis for anyone who lives in a Parnell mansion. But for the rest of us, we need a real solution to this very real problem.
Labour will stop foreign investors from all countries from investing here. You will need to a permanent resident or citizen to own residential property, and we will bring a capital gains tax on houses other than the family home.
If they’d framed the argument like the above, would we still be here talking about racist dog whistles, or would we be talking about the housing crisis, its causes and which solutions would work best ?
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Not surprisingly, Chris "Waitakere Man" Trotter comes in to bat for Twyford.
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