Cracker: Johnny Foreigner & the Auckland Property Market
108 Responses
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BenWilson, in reply to
And as I said, its not a magic bullet, just one in a number of tools that can be brought in, tried out, without collapsing the entire house of cards.
That I certainly agree with. We should still, at the very least, have the political independence that enables us to tinker with such ideas. If we can't tinker, the decisions will be mostly ideological, in the end.
who live in fairly unremarkable homes now worth a million bucks, being forced to forfeit them, because they’re still on the same unremarkable income that saw them scraping to buy the house for $200k not so many years ago
The compulsion would suck, but on the other hand, they would have $800k to play with. They could rent a very remarkable place with that for quite a long time, and have plenty left over to invest. Not that I think it's a good idea, but I wouldn't cry massive buckets of tears for the misfortune of millionaires being forced to cash up.
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9%.
From data compiled by Tony Alexander (pdf). That’s the percentage of houses sold which go to non-residents. Of those, about half say they intend to reside in NZ at a later point (how many do is unknown).
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Perhaps a better way of putting that is that if I had 800K, I would not be grizzling about it, I'd be really stoked, because I could buy the property I live in now and be freehold with about 300K to spare. I'd hardly consider myself a battler at that point.
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I wasn't advocating total confiscation of wealth over a mill, at least not before the revolution. The forfeit would only happen if you refused to file a (true) tax return or pay.
A wealth tax of 2% on net assets over a million, rising to 10% at 100mln would be reasonable and compensate for past untaxed accumulations. And deter wealthy foreigners from buying NZ rental property.
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andin, in reply to
I would not be grizzling about it, I’d be really stoked, because I could buy the property I live in now and be freehold with about 300K to spare. I’d hardly consider myself a battler at that point.
Funny thing, there's a lot of people who don't think like that. And surprise, surprise!
Some very wealthy people consider themselves battlers. Guess some can make anything suck -
BenWilson, in reply to
Some very wealthy people consider themselves battlers. Guess some can make anything suck
Once Were Battlers?
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BenWilson, in reply to
Funny thing, there’s a lot of people who don’t think like that. And surprise, surprise!
It is very hard to accept, admittedly. I struggle periodically to convince my wife that we'd be a whole lot better off if we just sold our place and rented for a few years while I'm retraining. But we'd be "going backwards". My plan is to turn up the heat on this idea when I get a stronger feeling that the Reserve Bank really is going to jack up interest rates. But since they don't have any other plan for the economy than to debt-fuel it, the critical moment has not yet come.
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I can't see any argument against restricting foreign ownership. Most other countries do it, and if it's addressing a problem which doesn't exist, as some are claiming, the law wouldn't hurt anyway.
I'm in favour of anything that emphasise that houses are houses first and investments second. Tax laws shouldn't favour investment properties and there should absolutely be a capital gains tax (again, just about every comparable country has one)--the family home should be exempted up to a point, but perhaps windfall profits should be taxed and profits realised in a short period of time (so 'flipping' would be taxed).
Another thing that could address the 'demand' side of the housing equation which I haven't heard anyone bring up is to strengthen renters' rights. In many European countries, a majority of people rent and renters are protected from profit-taking landlords by strong rent stabilisation laws etc. It is all very well to crunch the numbers and decide that renting is economically more sensible but who wants to rent if they have to move every year at the whim of greedy landlords?
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Isn't a foreign buyers ban trivially circumvented by using a New Zealand based company as an intermediary? NZ company invests in property, non-resident owns or is shareholder of company. Apply usual tax dodges to move all the income offshore.
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Sacha, in reply to
So does someone only have an ethnicity now if they're not white?
Our government appears to believe so, and has for a while. Pakeha culture is not well expressed.
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Sacha, in reply to
.. Bridgeman ..
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Damian Christie, in reply to
Perhaps a better way of putting that is that if I had 800K, I would not be grizzling about it, I’d be really stoked, because I could buy the property I live in now and be freehold with about 300K to spare.
If you had a family and bought a modest 3 bedroom place in Sandringham in 2000, say, that was now worth $1m, and you were forced to pay a tax which required you to sell, and resettle somewhere far enough out and/or considerably smaller, moving your children out of schools, leaving behind your community, making sure that your new house/assets never reached $1m again... well I don't think "stoked" would describe it.
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Damian Christie, in reply to
Demand’s ultimate source is “people who want to live in property”. Restricting who can own them doesn’t really much change who wants to live in them.
No, demand's source in this case is "people who want to buy property" regardless of whether they want to live in it. Removing foreign buyers would reduce the number of people in the market to buy a house - given that there'd still be a shortage, the number of houses being sold wouldn't change, but the price would (assuming the basic economic supply/demand model).
It *would possibly* reduce the size of the rental supply and therefore increase the cost of rental housing.
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BenWilson, in reply to
well I don’t think “stoked” would describe it.
In my case it would describe it very well. To me, 800K is a hell of a lot of money, and a house is just a house.
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BenWilson, in reply to
No, demand’s source in this case is “people who want to buy property” regardless of whether they want to live in it
If they're not going to live in it, they're going to rent it out. If no one will rent it, it has no value, unless someone else will buy it, which in turn will be a proposition based around whether they can live in it, or rent it out for money. Property investment 101 here. I expect most foreign investors who don't want to live here are professionals and understand this extremely basic piece of financial wisdom. It really does actually matter if people will live in the house, and how much they will pay to do so.
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My main problem with this policy is the apparent lack of analysis by Labour at least as to what the effect might be. That it took a 3rd party before any reasonable figures on the percentage of overseas owners was known speaks volumes. Regardless of whether it's good or not, if it's clear you've not actually investigated it properly, you don't get my support just for repeating an idea. This goes for any policy.
Regarding a CGT, why exempt the family home? That just creates unnecessary distortions. If you happen to be one of the "unlucky" that get hits by a large bill, then are you really unlucky? After all, you'd be thinking yourself pretty lucky if a CGT hadn't applied, and you had that extra cash in your backpocket.
To be effective you'd want it to be collected annually similar to rates - that way you start having an impact immediately. Any gains or losses over and above the annual rate would then be payable or credited at realisation.
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Hebe, in reply to
Aucklanders, young and old alike, who live in fairly unremarkable homes now worth a million bucks..... still on the same unremarkable income that saw them scraping to buy the house for $200k not so many years ago
There's the driver of the New Zealand property market. It's not complicated: where else can most people get investments that a) give such handsome return (even a hundred thou or two is creaming it for most of us)
and b) is relatively transparent and understandable compared with the sharemarket, money market trading, and finance company investments. -
Jim Welch, in reply to
In my case it would describe it very well. To me, 800K is a hell of a lot of money, and a house is just a house.
So you'd just move to a completely different community every time you could realise a profit from your family home? Sounds like pretty bloodless property-bubble thinking to me. I can see why your wife is taking some convincing.....
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Because China has been mentioned...
...Not sure it's about ease of credit here so much as the same demand that's driving China's real estate market to the moon and back. China's rich want something to do with their money, the stock markets look even more like casinos than other stock markets, and leaving it in the bank is just as good a way to see it disappear as hiding it behind the stove (it's been done. Paper burns). I've heard of real estate-buying tours to the US, wouldn't be surprised if there's a similar thing going on in NZ and other "Western" countries. Perceptions of relative stability and lack of corruption probably help. And, of course, in China you can only own land use rights which can be, and often are, taken away arbitrarily and your home forcibly demolished and you paid a paltry sum in compo - hence "nailhouses" and incidents of people setting themselves on fire on the roof as the police-escorted bulldozers move in.
And I've probably said this before, and will probably say it again a million times, but anyway: When we were last in NZ in February 2010 my wife developed a fascination with the property section of the Waikato Times, did a few calculations, and decided we could buy a lifestyle block in the Waikato for less than what an apartment in Beijing would cost.
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BenWilson, in reply to
CGT in Oz is taken at the sale, as far as I know. It's also nowhere near as much as most people think, because it is inflation adjusted. If you take it at the time of the sale, you know they've actually got the money, so no one is forced out of their home by the tax. It is practical - taxing assets before their profits are realized is not a good idea, IMHO, because the profit is a function of whatever method you use to guess the value. At the sale, there is no guessing, the profit is known. Property value can be guessed reasonably accurately, but some things really aren't like that, like businesses, or valuable art. Also, it's hard to break a piece off the property to pay the tax, whereas it's not hard to break a piece off the profits from a sale.
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Jim Welch, in reply to
Maybe a CGT should apply to the family home, but politically this would never fly. It doesn't apply in Aus at all (I think) and in the US only if you re-sell within a short timeframe. Maybe there are other countries where residential homes are subject to CGT, I'm not sure.
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Jim Welch, in reply to
I think you're thinking of stamp duty which is applied to home sales in Aus, not CGT.
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BenWilson, in reply to
So you’d just move to a completely different community every time you could realise a profit from your family home?
Not every time, but the value of the money could easily be a lot more than the value of the house, to me. My community is my address book anyway, I don't lose them by moving house. I have to travel to see people now. My neighbors are not my close friends, particularly, and if they were, I would make sure to keep seeing them.
Sounds like pretty bloodless property-bubble thinking to me.
I'm not sure if it's my kind of thinking that causes bubbles, or the kind that simply can't see a million dollars as a million dollars, and would genuinely find being given it a hardship. That's so alien to me that I couldn't understand why Damien used that example. I do not feel in any way entitled to live in a particular area. I'm not even entitled to live in my own house now, if I can't pay the mortgage, and that's the biggest bill we have every month. Someone who managed to buy in Sandringham and made a million dollars is not an unlucky person. You have to think completely differently to me to even begin to think that. I can think of one hell of a lot more useful things I'd do with that cash than merely "live in an unremarkable house in Sandringham".
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Chris Waugh, in reply to
If they’re not going to live in it, they’re going to rent it out. If no one will rent it, it has no value, unless someone else will buy it, which in turn will be a proposition based around whether they can live in it, or rent it out for money
Not necessarily. There's plenty of examples up here of people buying up many, many apartments as an investment and leaving them empty.
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"chris", in reply to
I'm not sure if it still applies, but I found this a little unreasonable, at least compared to what New Zealand has to offer in return:
Foreigners who intend to buy a house in Beijing need a certificate issued by the Beijing Municipal Public Security Bureau to prove that they have stayed in China for at least one year for reasons of work or study, according to a statement jointly issued by six ministries led by the Construction Ministry.
The rule required that foreigners only use and dwell in the house themselves and not buy a house for other purposes.
Foreigners were also required to use their real names when buying a house in China.
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