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Speaker: House prices and the "Magic Money"

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  • Katharine Moody, in reply to Steve Barnes,

    It needn’t be offshore money, it could just be that the “Magic Money” is coming from those that made the “Big Bucks” since the 80’s on spiraling house price inflation, trading down to the cheap rural properties and buying an “apartment in town” for the kids,

    This is the question - is this gap, this "magic money" (300/800 - roughly 37%, more than a third of our residential housing stock!) owned/purchased directly by people who live/work/earn/borrow and pay taxes offshore? If so, and the Reserve Bank knows it - then obviously the government knows it too - and neither are prepared to admit it to the people of New Zealand. If we did know it via this kind of statistical analysis - then why are we even talking about a foreign ownership register to find it out! The Government already knows but they are not telling us. What they are telling us is that they don't know and can't know because they don't have the right data, Which, if this analysis is on the money about the "magic money" - then our Government and the Reserve Bank are lying to us.

    That to me is astounding. Doesn't that really, really upset anyone else?

    Wellington • Since Sep 2014 • 798 posts Report Reply

  • David Hood,

    Just noting it is 3/8ths of the growth. This is not the same thing as 3/8ths of the houses. If a house has never been sold in the period it is impossible for it to be part of the growth, if a house has been sold 15 times in 15 years, that one house will have contributed strongly to the growth in prices. 3/8ths of houses would be the upper limit if all houses had been sold once, and gains were distributed evenly among them.

    Dunedin • Since May 2007 • 1445 posts Report Reply

  • chris, in reply to Katharine Moody,

    is this gap, this “magic money” (300/800 – roughly 37%, more than a third of our residential housing stock!) owned/purchased directly by people who live/work/earn/borrow and pay taxes offshore? If so, and the Reserve Bank knows it – then obviously the government knows it too – and neither are prepared to admit it to the people of New Zealand.

    When you account for this:

    New Zealand’s diaspora is significant and our expatriate community is seen as an important contributor to New Zealand’s economic prosperity.[4] The number of New Zealanders living overseas is estimated to be in the range of 700,000 to 1million, of whom 495,000 are living in Australia.[5] The latter figure equates to greater than one in ten New Zealanders living in Australia.

    or this:

    According to the Australian Department of Immigration and Border Protection, an estimated 640,770 New Zealanders lived in Australia on 30 June 2013.

    and then this:

    New Zealand’s overseas-born population has continued to increase. In 2006, 23 percent of people usually living in New Zealand (879,543 people) had been born overseas compared with 20 percent in 2001 and 18 percent in 1996.

    this:

    although around 220,000 of those have been resident in the country for less than five years

    “The people of New Zealand” becomes a fairly fluid concept when you’re shaving off 20% on one end/ adding another 20% on the other, it suits New Zealand’s unique style of democracy to a t. If one favours a more protectionist style there’s NZF, but the system is largely geared against them so it’s round round round we go. I’m not sure a foreign ownership register would provide an easy scapegoat as much as expose to what extent New Zealand and New Zealander are abstract constructs.

    Mawkland • Since Jan 2010 • 1302 posts Report Reply

  • David Hood,

    Chris, I would absolutely agree that New Zealand is a diffuse, geographically spread entity. Though I think that to use that as the "magic money" why could do with some fleshing out about how that could cause the sudden change in the early 2000s when there were, to my knowledge- no equally dramatic demographic bubbles coming through among the expats (for lack of a convent label), and how does it explain the directions of the variation since then.

    By limiting the explanation from "anyone in the big wide world" to "this specific set of people in the world" to convince me you would need to have a pathway that matched the changes in the data over time to specfic changes in that particular group over time.

    Dunedin • Since May 2007 • 1445 posts Report Reply

  • Ian Dalziel,

    'Magic Money' & slippery customers...
    Maybe it's just the logical outcome of us becoming a 'BananaRepublic', and this is money laundering as Cameron says is happening in London's property boom...
    ...by all and sundry, oligarchs of many stripes and proletarian P Pushers - who knows?

    Christchurch • Since Dec 2006 • 7950 posts Report Reply

  • David Hood, in reply to Russell Brown,

    People do it in Germany

    Just as a thought experiment (since the Government has not exactly overwhelmed us with data and actions pretty much any thought experiment solution is about as likely to happen) I was considering a hypothetical Germany+++ which is an environment where renting was so utterly tenant friendly that owning was not a desirable choice to anyone living here. Now, I think there is absolutely no political will for a "Germany to the max" model of security of tenure, inability to raise rent faster than inflation, requirement to be prompt about fixing things , insulated, etc, (but then there is not a lot of political will for anything else) but such a hypothetical situation where renting has all the benefits (and more) would mean that not being able to afford houses would not be a problem.

    But that is really just thrown in as a musing about the nature of the problem.

    Dunedin • Since May 2007 • 1445 posts Report Reply

  • Steve Barnes, in reply to David Hood,

    If a house has never been sold in the period it is impossible for it to be part of the growth, if a house has been sold 15 times in 15 years, that one house will have contributed strongly to the growth in prices.

    I can't see this. Surely, if the value of a house has increased by(x)% over (y) Years what difference does the number of times it has been bought or sold mean?.

    Peria • Since Dec 2006 • 5521 posts Report Reply

  • Michael Homer, in reply to Steve Barnes,

    The "total house value" metric is an estimate based on sales prices and total number of houses. If it doesn't sell it never gets measured, but if it sells multiple times they all drag the average sale price towards themselves.

    Wellington • Since Nov 2006 • 85 posts Report Reply

  • Steve Barnes,

    So why not use GV, or is GV the product of the sales numbers?.
    Is it like counting your chickens in the basket you shouldn't have put all the eggs in?

    Peria • Since Dec 2006 • 5521 posts Report Reply

  • David Hood,

    GV is based on the QV total value (it is the individual values). The revaluation of an existing house is a symptom of the growth, but the house doing nothing was not the cause. the cause is actual sales events. So where Katherine was worrying it was that proportion of the housing stock, that is not likely at all, as it is only sales events (which can happen several times to a particular house) that cause the increase.

    Dunedin • Since May 2007 • 1445 posts Report Reply

  • chris, in reply to David Hood,

    For sure David, my post was talking around the data and was specifically in response to Katherine’s as I’m not convinced the drivers could be attributed to a single demographic as much as they are a perfect storm of the many factors that contributors have mentioned. For example this:

    by people who live/work/earn/borrow and pay taxes offshore?

    Which may encompass a range of situations and some certainly don’t conveniently tick all those boxes. e.g. offshore based landlords paying NZ rental income tax.

    Mawkland • Since Jan 2010 • 1302 posts Report Reply

  • Katharine Moody,

    Wellington • Since Sep 2014 • 798 posts Report Reply

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