Of that 33% is the most restrictive single house ("The Single House zone currently covers around a third of residential Auckland and is very restrictive, allowing for only one dwelling on sections smaller than 600 square metres." according to http://www.stuff.co.nz/auckland/75219048/Aucklands-controver...).
5% is zoned for apartment buildings.
Here's 97% of your house pricing problem. Not foreigners, not low interest rates, not land taxing policies.
New Zealand has total population of ~2x Paris and land 1000x of Paris.
This is Venezuela style of fixing problems: instead of addressing underlying economics (limited supply meeting increasing demand causing raising prices) by increasing supply, find a political scapegoat (all nations are xenophobic so outsiders are always a good target) to get people to vote for you and create ineffective rules.
The real fix is politically unpopular. Unsurprisingly, Aucklanders are NIMBY with the best of them. The plan to upzone is "controversial" and anti-upzoning arguments are the same you see in SF and everywhere else where that comes up.
Melbourne is not much different in that regard (geographically massive with a relatively sparse population for a city of its population size). Sydney too.
Melbourne is also experiencing a housing crisis similar to Auckland's due to a boom in prices.
So should Melbourne also pull out all the stops to encourage new building? Interestingly, Prosper Australia has been tracking Melbourne's true vacancy rate for over a decade now, publishing their findings in their Speculative Vacancies Report[1].
Before you look at the report, a couple of questions:
1) Do you believe prices are being driven up due to a shortage of homes? (Your comment suggests you do.)
2) If prices were being driven up due to a shortage of homes, would you expect the areas that experience the highest capital gains to have the lowest vacancy rates? (I think most people would agree with this.)
Now, the most interesting finding from the Speculative Vacancies Report for me was that in fact, contrary to what most people would expect, areas with the highest capital gains correlate strongly with those areas that have highest number of empty dwellings.
My own suspicion is that the demand that is driving up prices is not demand for homes, but demand for investments. A speculative boom creates extra demand.
In 2007, the Irish thought they had an undersupply of housing. A short time later it was revealed that they actually had a massive oversupply (once investment/speculative demand was removed). The RBA in Australia is pointing to the same thing in Melbourne (Docklands has a vacancy rate of ~25%+, other sought after areas are approaching 15-20% according to the report mentioned above).
The best thing that Auckland can do to tackle house prices is to address the demand side of the supply and demand equation. There are tonnes of options for doing this but mostly this is an issue caused by easy credit and tax incentives for investing in property. That's the place to solve this problem. It would be folly to encroach on green areas or otherwise spoil our environment in a mad rush to build. If we do that... Ireland here we come!
All seems perfectly consistent with the OPs point to me.
Speculative real estate investment is a direct result of restrictive zoning. Consider for example an already developed area of a city that is zoned for single family residential. This makes it illegal for a developer to increase supply in this region by building, say a duplex. A developer is allowed to rebuild a house, but not increase supply.
So of course there is speculative investment! Owners have a legal guarantee of resource scarcity. It’s the reason governments everywhere try to avoid deflation; it causes everyone to hold onto their cash.
Now contrast the situation when a developer can turn a house into a duplex. Supply is elastic. There’s no legal guarantee of scarcity. Of course real estate is still an investment vehicle, but there is no longer the artificial constraint on supply.
I also think it’s weird to lump this in with environmental protection. Preserving natural areas is an unassailably important priority for any nation. What does that have to do with home owners that feel they have a legal right to not live next to a condo? I don’t think the parent (or really anyone here) is advocating we develop undeveloped land.
Finally, I wonder if this is all moot, because the issue at hand is a restriction of foreign ownwers. Won’t native NZ real estate companies be glad to step in to fill the void? Can’t these companies then just shell shares to international investors?
"""
As a result of these factors, prices for land in the Chicago Loop rose from essentially nothing in 1830 ($800 per acre in 2012 dollars) to New York levels by 1836 ($327,000 per acre in 2012 dollars), a 40,775% increase, with even higher prices around Dearborn Avenue and the Chicago River.[3] Furthermore, Illinois in general experienced a huge boom in real estate prices and town foundations. Walters estimates that the foundations of 1/3 of all towns ever created in central Illinois occurred between 1835 and 1837.[4]
In 1837, there was widespread panic due to credit tightening from England. On May 29, 1837, as depositors began to withdraw money en masse, Illinois banks suspended payments. As these banks fell into bankruptcy, Illinois’ internal improvements, like the canals that were supposed to be financed by the banks, stopped. This led to considerable uncertainty as to Chicago's future, and combined with a general lack of credit, caused Chicago real estate prices to fall approximately 88% from their peak by 1841.[3]
"""
> Speculative real estate investment is a direct result of restrictive zoning.
By definition, it's not. It's a term coined to separate out the impact on prices of people buying-to-live vs people buying-to-sell/rent-and-profit. And if foreigners are more likely to buy for speculative purposes, barring them from doing so will decrease speculative increases in house prices.
Right, but things with fixed supply make perfect investment vehicles, and when people investment in real estate that is speculation.
Imagine if the stocks of public companies were not fixed in supply. The company at any time could simply decide to have shares for 200%, 300%, or 1000% without compensating existing shareholders in any way. If that was the case, stocks would be total garbage as an investment. Prices would plummet to 0.
The reason metro real estate is so attractive as an investment is because supply is inelastic. If we want to encourage usage, as oppose to hoarding, we should do like we do with fiat currencies and allow more of it to be made.
Banning foreigners might have some tiny effect, but honestly seems a bit like arranging deck chairs on the Titanic. We can check in after a year, but all my money is on Auckland continuing to have an expensive housing market (unless they allow more rezoning). Further, banning foreigners of course is also banning a valuable export and will cut off a stream of foreign money that was previously flowing into the local economy.
> when people investment in real estate that is speculation.
Investing in real estate would be purchasing property for its income earning potential.
Speculating would be purchasing for capital gains potential.
You might argue that people do both at once but if you would only make the purchase if there is a potential for capital gains and not otherwise, then you are speculating.
From the definition of financial speculation cited elsewhere in Merriam-Webster:
> Speculation is a method of short-term investing whereby traders essentially bet on the direction an asset's price will move.
This is what most people would assume speculation to mean in the context of this discussion. It is quite normal to compare this type of speculative investment with other - especially productive - investment.
I'm very well aware of what he means, that's obvious from my response, one can be clear without misusing words and it's entirely appropriate to correct someone who's using those words wrong as if they're unrelated when they're actually both a type of investing. Try understating what's going on before you start quoting a dictionary.
Rent and profit is a great investment for the general public. Thats not speculation, thats straight down investment.
Buy to sell is speculation, in the sense that it might not be representing the underlying risks. But even then its doubtful: if you think construction materials will rise 20% in the next year, buying your house to day and sitting on it is a sound investment, one that benefits the whole.
Speculator is an overused word to depict an enemy that kills itself.
I always think of investment as chasing the dividends and speculation as chasing the capital gains. Investors prioritize Sharpe's and alpha, while speculators are more interested in beta. Investors want to grow a business, while speculators want to make money from their money.
While they may have the same meaning in a general sense, and are synonyms from a distance, once you get up close, you can distinguish meaning between them.
That's just how English works. Huge and colossal are the same until you pull out the D&D sourcebook, and then it turns out that colossal is bigger than huge.
You can't chase dividends without risk, it's all speculation. You're making a distinction without a real difference. All investment involves risk, all investment is thus speculation. Not all speculation is investment, gambling is speculating but not investing. That's just how English works.
Those words are different in my mind. They can be the same in yours, if that's the way you prefer it. We are not beholden to the Academy of English to use words only in an officially sanctioned manner.
And now Ireland is experiencing a housing shortage, with rental prices soaring and house purchase prices heading in that direction.
Market failure, policy failure, awful planning.
Living here, it's hugely disheartening to see a similar pattern emerging so shortly after a massive crash.
I live in Cork, population ~200k. In 2012, I rented a 2 bed apartment in the city centre for €750 a month. Now, I would be lucky to get a decent 1 bed apartment for €1000. And because bank lending rules tightened after 2008, opportunities to purchase a house/apartment have narrowed. Therefore, those (and families in particular) who cannot purchase have been on the receiving end of the spiraling rents. It took the government till late 2016 to put the brakes on the rent increases by creating "rental pressure zones".
The OP is hardly advocating encroachment on green spaces. The OP was pointing out the folly in attempting to mitigate one class of house buyers, when the zoning is egregiously sparse for a metropolitan area.
Auckland is adding apartments, albeit not at a sufficient rate. Their rents are high enough to make building them profitable. What does that say? It means that local resident demand is high enough to support investment of high-density residential areas.
Auckland's demand is significantly fueled by speculative investors, to be sure. What props up the house prices are the Kiwi families moving to Auckland for better work opportunities.
What Sydney and Melbourne are experiencing is a lack of rental support for their high house prices. That cannot be sustainable.
I'm amazed it was that low. I was inspecting recently and I was blown away, it was like a ghost town. I checked out the carparks of these massive buildings and they were basically completely empty, it was crazy.
This data is more accurate than the typical media-reported 'vacancy rate' arrived at by surveying real estate agents and asking "what percentage of the properties on your books are currently vacant?" - which usually results in a figure somewhere around 3%.
The methodology of the Speculative Vacancies Report involves gathering water usage data for all properties. That can mean that if a property is occupied for a single month it isn't counted. A lot of the Docklands apartments appear to be not only vacant investments, but also short-term rentals and 'city pads', so I'm not at all surprised that it appears more like a ghost town than the figures suggest it might.
Very well argued, bravo! I was about to suggest the same but had no data to support this interpretation, just anecdotal that IMHO it’s the lack of profitable investments opportunities and tonnes of cheap capital sloshing around that’s fueling these bubbles all over the world
" just anecdotal that IMHO it’s the lack of profitable investments opportunities and tonnes of cheap capital sloshing around that’s fueling these bubbles all over the world"
If there is excess capital, it's the fault of the central banks.
No.
The issue is corruption and lack of distribution of surpluses in developing economies, specifically China.
Think: China is poor on a per-capita basis. So why are so many Chinese trying to hard to get their $$$ out of there? Mass corruption etc..
Westerners send a lot of $$$ to China - and if there were labour laws, environmental laws (i.e. democracy) then those surpluses would be spread more evenly across China. 'Regular' chinese people want to buy a home, a car a TV - but since the money is so heavily focused on a small portion of citizens - they have 'mass surpluses' and want to get their money out. So it comes back to the West.
You mentioned 'lack of investment' - this can't be the case - as there are still hundreds of millions of Chinese people who still don't have proper homes and are way behind in terms of material standards of living.
If they were paid more - they'd have more surplus $ to spend on 'homes and stuff' and guess what? Local investments would make more sense.
We can't have free trade with nations that regulate their economies in fundamentally different ways than ours. If a country for example, allows mass pollution - well - that externalization is a massive economic advantage, kind of like a 'government subsidy'.
The best way to deflate the Western housing bubble - and to fix the internal problems in China is to spread the wealth in China. Arguably US needs a little more of this as well.
It does not matter if houses are priced in dollars or donuts, they are increasing in value because of an oversupply of capital sloshing around looking for investments.
Wealth is not currency wealth is things of value, and we have systemic issues with profits from investments being reinvested instead of being spent, as everyone is looking for returns. This inflates the value of things that create future income streams.
No, not an 'oversupply of capital' , rather a lot of capital in the hands of a few. And low interest rates.
It only takes about 5% of home buyers to be foreign buyers who are 'price inelastic' (i.e. they will pay above market/any price) to create a housing bubble.
If the capital were not in their hands, but more distributed through the NZ economy, I suggest that capital would be deployed differently than just in real estate.
Housing without renters is not a productive investment.* If it seems appealing it's only because there is a dearth of productive investments available.
*Like gold it can act as a hedge, but long term inflation they has negative returns when you include maintenance costs aka vaults are not free.
Ireland built a bunch of single family homes a million miles from anything with no transport connections bar already crowded roads. Now (for Dublin at least, where I live) rents are extremely high in the city centre and along the Luas and Dart, though I generally try not to mention too loudly that it still feels reasonable compared to urban California. There are still cheap homes in the middle of nowhere with shit transport connections, tbf (also Tallaght, which has other problems). It's a real shame they didn't try building housing that wouldn't effectively destroy the cities with cars. I'm not a big fan of Leo but hopefully relaxing height restrictions will help with getting more flats built.
Also, green space is nice but it is worth considering that the actual natural environment of this island was lost between 1000 and 500 years ago. It used to be nearly all forest, but grazing animals are death to forest as they eat the saplings.
I like forests also but Ireland has never had a natural (free of human intervention) landscape since it was scoured down to bedrock by glaciers about 15-20,000 years ago.
Oversupply is a problem for owners, not for renters and newcomers. The very people buying property and parking it are not making a sound investment, and they will naturally pay the price for it.
If what is happening is that speculators are dumping all this cash to make properties, then the best course of action is to do nothing. Eventually they will lose, but the buildings are still there. And there is plenty of space to build around. Housing is not a limited asset like its often portrayed. Its truly unlimited, thats why you can find land almost for free.
My main concern is that all of this is setting us up for an even harder correction, and that the people currently taking great speculative gambles are prepared only to own the reward but not the risk - we will all end up paying for that.
> I don't know if it has been covered specifically about NZ, but otherwise yes, many many times.
I'm still curious whether it has been covered in NZ. Canada, like NZ, is also a commonwealth country, and it's only recently that it is even remotely common that "reasonable people" dare broach such subjects. I find it rather interesting that my comment was heavily downvoted and flagged, as if there is an initiative to silence any voice that dare even suggest immigration may not be absolutely necessary. Is it truly possible that all countries on the planet need more immigration, and in all cases the need is greater than the associated harm?
This was the exact explanation of housing affordability issues in Sydney and Melbourne and apartment supply has been crancked up with building restrictions dropped to address this over the last 5 years. Number of cranes in these two cities has been compared to total number of cranes in all of Nth America. And still all of this supply has again been followed by constant growth in property prices with no dent in addressing affordability issues.
I think you greatly understimate global forces at play when it comes to speculation levels in this asset class in some major metropolitan cities.
Yeah but look at the apartments. They’re Bladerunner-esque cubes that nobody likes. I wouldn’t want to live in one. My girlfriend did (in Southbank) and hated it.
Southbank isn't the CBD - it's is a dump in general, terrible amenities, and the new apartments there and in the CBD tend to be tiny. I live in an apartment in the CBD and have done since 2009 and it's awesome; ~80sqm internal with a semi-usable balcony overlooking the state library and RMIT, but it cost me much less than twice what it cost the original owner 13-ish years ago off the plan.
Yes, but that wasn't the only option. They could have addressed the tax incentives that encourage people to speculate, but that is too politically unpalatable.
Coming from Vancouver I can tell you with certainty that Chinese will gobble up ALL apartment space if it's available and drive their prices to the insane levels too. This will result in a construction boom leaving behind fields of unoccupied residential towers.
Apartments are not the remedy and Chinese money is not a scapegoat, it's a hurricane-level force of real-estate.
if you think the situation in Vancouver and Sydney are bad, think again, think the situation in Shanghai -
a typical recently built 3 bedroom apartment in downtown Shanghai can easily cost you $3m CAD, a typical worker on average Shanghai salary will have to pay no tax, eat nothing, walk to work naked (no $ for cloth) for 300 years to afford that. not talking about luxury apartment with fancy view, just average apartment in an okay area next to busy & noisy roads.
Do workers in Shanghai generally live in 3bdr condominiums downtown? Because a 3bdr condo in downtown Chicago would also be nosebleed expensive (though probably not 2.3MM USD expensive) too.
Apartments 8-10km away from central Shanghai costs you $1.7-2m. To get a recently developed unit at $1m price range, you pretty much need to go 20-30km out.
Are they bought as speculation by foreign residents?If that's the case then just fix it by making it less attractive to buy for speculation. For example, a tax on property matched with a deduction on income. If you don't have any income then the property tax would be higher than any expected yearly gain in property prices.
> For example, a tax on property matched with a deduction on income.
You mean income derived from the property? Seems like that could inflate rental prices, and shift the affordability problem to another set of people.
The state government in Victoria (Australia) is planning to tax vacant properties, but it's self reported and seems easy enough to dodge. At first the proposed measuring water usage to determine if the property was vacant, but then you can only tax as much as it would cost to leave a tap on.
No, a regular property tax based on the value of the property. Such as 1% of the value paid in tax every year.
The idea would be that it would be zero net effect if you live in the country (i.e. it's a property tax + income tax deduction that effectively make them together be a "tax on properties owned by foreigners")
Tempting, but what if I live in the country and own two properties? Then do I get to perform the deduction twice? If not, then am I punished for having two properties? It would be pretty tough to fine tune this.
Yes you should be 'punished' for owning two properties. Or more specifically if you are well off enough to own two properties then you are well off enough to pay for them.
Property should not be an investment since it is an essential for living.
Yes, but the idea was to boost property tax for the purpose of avoiding foreign investment. I'm saying that this might suppress domestic land ownership as well. Someone is going to be the land-lord, it might as well be domestic.
I agree with you that tax incentives are the way to tackle it. I think the issue with this specific proposal is for people on low/fixed incomes (typically retirees). I think the normal way to do this is via a high property tax and then a "homestead exemption" that you take if you live in the property.
> "homestead exemption" that you take if you live in the property.
Exactly. But the idea is that it's very hard to check whether someone lives in a property, so you check for the next best thing: whether you have income in the country. So if you have income tax in the country then you can get exempt from one property tax.
Otherwise you end up having things like "self reporting" where you live, or local governments trying to check water/electricity use to see whether buildings are occupied etc, which are obviously both expensive and futile.
Good point. So what if homes have to have a single name/id attached to them, and a single identity can only claim one homestead exemption statewide (and ideally states would share data) and you have to file state income taxes to get them. No homestead exemption for company held houses, no second exemptions if you're a dependent or you file married/jointly. Still not sure how one could handle the case where someone lives in a state but pays no tax, since you can do that for nearly free in a state you don't live in. Maybe it could take age into account.
Yes I'm not saying property taxes are inherently bad, but this would need to be pretty high, such as property taxes of e.g. 5-10% of the market value. Probably a bit hard to swallow for e.g. people who have retired and have bought their homes ages ago for say $100k and it's now worth $1M and the pensions doesn't cover the $50k annual property. Moving would net the couple $900k minus a hefty chunk in profit tax, after which they can't afford buying a new home. We had this situation here and it's not good.
You could have a 10% market value property tax, and a deduction of 90% of that amount, for one home, on your income tax, then 75% for a second property etc, to make it both prohibitively expensive for foreigners, and a bit progressive for those owning multiple homes.
OK,fair call; I don't want to drive people out of their homes, I want to a) crash prices and b) keep them low, so I'd prefer to tax gains (even paper ones) in combination with other speculative disincentives (mainly the removal of the current incentives and special treatment). In an ideal situation no revenue is collected from capital gains because there are none to tax...
Your policy of "crash prices and keep them low" has the greatest impact on owner-occupiers. If you look at historic collapse of housing bubbles, it's the negative equity / underwater owner-occupiers who suffer losing their home or losing their mobility. Speculators simply shrug it off since they have the flexibility to move their investments.
An increase in average wage growth would support both owner-occupiers and first time buyers.
Most owners are not impacted by "crash prices and keep them low" because they have experienced enormous capital growth. Auckland prices have doubled in the last four years; a 50% crash would leave almost everyone in the property market before then no worse off.
Speculators can move their investments, but they have to accept the loss in order to do that.
An increase in wages without fixing the underlying drivers for property price growth will not support owner occupiers or first time buyers at all, because property price growth will match or exceed that growth.
Crash prices, keep them low and stable after, it will be rough and unpopular for a while but will eventually be the best outcome.
It's not a solution over any time period, because without fixing the drivers of the price growth in the property market any increase in purchasing power will be met with property price growth to absorb it.
Seems to be more difficult than leaving the tap on at least.
Further, if people are actually employed and paid, they also pay income taxes. So now the property is even higher cost. Since to pay a person a minimum wage over the year (and the taxes and added costs that gives) is probably more than the property tax for foreigners would have been. Most importantly, the cost of either the property tax or the income tax solution should be higher than any expected gains in the property value (or at least enough to make it useless as an investment).
The best way to game this system would probably be to shadow own it behind some 18year old that has a full time job but lives at home. They have the tax space to make the deduction.
If you’re trying to rent an apartment you’re screwed.
If you’re trying to buy a house you’re really screwed.
It’s not all Chinese money but it’s a lot of foreign and local investors. I can see investors being important for building or upgrading condos and apartments, but investors being able to buy so many single family homes and “flip” them just makes the whole Norman Rockwell picket fence thing seem pretty unattainable.
With the new football stadium going in there are “rundown” areas getting “gentrified” and it’s crazy to see one renovated 2 bedroom house in Baldwin Hills sell for $900k and be on a street with sales from the two years prior in the 200-300k range. [1]
I like your logic, but I feel a few things don't add up for me.
1. What are the benefits to a city and its local inhabitants of a foreigner buying an existing residential home that it will not inhabit?
It seems there are none to me, unless the city taxes that home way way more.
2. Why would foreigners invest in the construction of new rental homes or apartment buildings if the rental price wasn't high enough to profit from?
In that I mean, I feel you'll only get foreign investment to grow your city once its already too expensive to live in. As they build more and it becomes affordable again, they'd stop investing, and it will become unaffordable again. Keeping the city in a perpetual state of unaffordability.
> What are the benefits to a city and its local inhabitants of a foreigner buying an existing residential home that it will not inhabit?
What are the benefits of exporting any work whatsoever?
> Why would foreigners invest in the construction of new rental homes or apartment buildings if the rental price wasn't high enough to profit from?
This is a good question. There is an expectation that rents will rise in the next decade, so that could explain a healthy market reaction. An unhealthy one might be capital flight from China, so investors are willing to take a loss becaue its lower than the taxes/restrictions china has on that money. Housing has exploded globally, its not a local nz problem.
The advantage of course is capital flowing to the country: someone sold that house and now owns currency that was introduced from outside the system, which will now be spent or invested in the country.
And housebuilding is not linked only to rent, but rather to sale prices: if homeowning is culturally valued, people will pay to buy at higher prices.
"[..] now owns currency that was introduced from outside the system, which will now be spent or invested in the country."
With the current (in most countries) banking system, the money available for investing is not limited by the quantity of money in the system, but by the availability of projects with a good return.
A commercial bank can create money if they think that they will have a good return (risk wise). Banks don't lean reserves.
An investor can borrow money from a bank if it has a good project.
Interest rates are decided by the Central Bank depending of the goals for the country economy.
So, the idea of "money available for investing" doesn't make sense in the current fiat economies.
Creating money by borrowing has a cost (interest rates for the bank and for the developer, plus a loss in credibility of the currency value); attracting foreign investment does not. Otherwise all countries would simply close their borders to capital, and they don't - they are actually desperate to attract foreign capital. The most dynamic economies, like China, hoover foreign investment which they then keep in the system, growing internal liquidity and reserves at no cost and strengthening the currency credibility.
Housing isn't like every other good that you can sell. It sits on land which is extremely scarce. At what point does selling housing abroad become a bad thing? When 5% of homes are empty? When 10% of homes are empty? 50%?
Land is not scarce at all. Its virtually unlimited. You can find and buy land for dirt cheap, sometimes even free.
The value of land is proportional to the income you can get from using it, so the forces that regulate land value and rent are irrelevant to the amount of land, but with what you can get from them. If tomorrow Auckland duplicated wages, rentals would skyrocket there, without changing demographics or land.
The advantage of course is capital flowing to the country: someone sold that house and now owns currency that was introduced from outside the system
Assuming it was true that this is such a net positive benefit to a city, it sounds like it stops working very quickly. The second sell on the property is now a foreigner to either a city local, which would siphon the money out of the city, or from a foreigner to another.
So this would only work to increase the city's cash flow temporarily, or in the case where the property depreciate and the foreigner incurs a less.
If the problem is (reportedly) that foreigners hold too much property, it means the money entered the system and remained there, so the bonus has become permanent (one-off, yes, but permanent). You also assume a foreigner selling property will move the money out of the country, which is actually unlikely - if he's done good business, chances are that he'll reinvest in the same market, so the money again stays in the system; and if he's done bad business then the locals effectively skinned him, which is again a bonus. Plus, every transaction is typically taxed, so even just an increased amount of activity is a bonus for the system.
As long as authorities crack down on loopholes (like foreigners buying property through a fake company, and then selling the company to avoid real estate tax over property sales; or keeping properties empty for an unreasonable amount of time in the face of housing shortages), it's a net positive.
What are the benefits to a city and its local inhabitants of a foreigner buying an existing residential home that it will not inhabit?
It supplies a property for rent (i.e. it's not like the property disappears), and the extra demand increases the value of properties the locals own.
I think it's only really problematic if capital is cheaper for foreigners than locals.
In that I mean, I feel you'll only get foreign investment to grow your city once its already too expensive to live in. As they build more and it becomes affordable again, they'd stop investing, and it will become unaffordable again. Keeping the city in a perpetual state of unaffordability.
I don't see how this logic is restricted to foreigners. The argument seems to be universally applicable, which makes me suspicious: why wouldn't investment grow the city until rent falls to the cost of capital + maintenance etc.?
(I think the argument doesn't actually work because of the nature of property: location, amenities, services, community; things whose supply isn't easily increased simply by capital. But if it did work to some extent, it would still apply to nationals just as well.)
> the extra demand increases the value of properties the locals own.
Which is exactly the problem. Housing is for living, not speculating. Basic human needs should probably not be subject to such speculation.
That said, regulations in building new housing can also exacerbate this problem. At the very least, density should be increasing at approximately the rate of population growth in a region, or you will obviously have a growing sprawl problem.
> Which is exactly the problem. Housing is for living, not speculating. Basic human needs should probably not be subject to such speculation.
You are looking at the wrong culprit. If there is a piece of undeveloped land, and a foreigner builds a house completely uninhabited, the housing stock in the market has a delta of 0.
If there is an owner that sells their house to a foreigner and buys a new one, the housing stock is till the same. They dont affect supply in abstract, they affect supply if there are significant zoning restrictions that do create artifical scarcity.
> If there is a piece of undeveloped land, and a foreigner builds a house completely uninhabited, the housing stock in the market has a delta of 0. If there is an owner that sells their house to a foreigner and buys a new one, the housing stock is till the same
We're not talking about supply, we're talking about price. The OP said, "and the extra demand increases the value of properties the locals own." Increasingly unaffordable housing is exactly the problem.
Indeed, because you've now just exacerbated the infrastructure, commuting and transport problems. There are lots of negative externalities to consider.
> Basic human needs should probably not be subject to such speculation
It's a vote-winner though, and property is most people's biggest investment asset. It's a Ponzi scheme, but it's hard to avoid.
My main point was addressed to the economic argument being put forward, however; that it wasn't specific to "foreigners". "Foreigners" as a culprit are a red herring.
> My main point was addressed to the economic argument being put forward, however; that it wasn't specific to "foreigners". "Foreigners" as a culprit are a red herring.
Right, that's why I said "speculation" and not "foreign ownership" in my reply. Holding periods for ownership, non-residential use must be rented out, etc.
The problem? They don’t really rent them out. Even if they do, they are highly unlikely to rent it for a below or market price. Basically many of these investment aren’t really asking or looking for return. They are like buying a brand new car and let it Stay there until you use it. Which rarely happens.
There was talk that that was the case in London, but it's not really true when you look at the statistics; it turns out that no more than 1% or so (usually ultra-high-end properties) are bought by foreign investors and not let out. And I think London has this problem far worse than most other places.
This is always the opinion parroted by people in SF. Come live in NYC, and you'll see how well expansive development of massive condo buildings helps housing affordability. (Spoiler: it doesn't)
The buildings are built with promises to investors of huge target rents. New developments typically rent for 20% more than smaller/older buildings, and the rents will be increased annually for the unfortunate ones who rent in these new buildings. These buildings use many tricks to make it seem affordable, like 2 months free rent, free parking, etc. But they're expensive, and they drive up rent in the surrounding buildings.
SF, please wake-up and realize that the city is not the enemy in the housing crisis, it's the profiteering.
Do a little more research. NY has not built nearly enough to keep up with demand and much of the outer boroughs are not zoned to build as dense as needed. That's before even getting into the weird economics of rent control.
Today's luxury housing is tomorrow's affordable housing. Being angry at lux high rises is like a dog being angry at its owner after a bee stings its ass. Without those high rises for the hedge fund bros to move into, they occupy merely nice apartments, pushing the rest of us into tenements and everybody else out to the fringes.
Anecdotally, the huge developments in Downtown Brooklyn are driving down prices, not raising them. We negotiated a 15% lower rent by threatening to move to a fancy high-rise a few months ago just one subway stop away.
NYC has a long history of rent control, which is Venezuela style. It is not directly linked to immediate affordability (your point), but I make the point because NYC is not a strong example of a functional zoning culture.
It always blows my mind that there are masses of single story houses within a couple of kilometers of the Sky Tower and the rest of the CBD. There's still single story buildings within a 10 minute walk of the center of the city.
The referenced article from 2015 is out of date - the unitary plan was updated to reflect higher density in 2016. Still nowhere near what it should be though.
I live in a 5 story complex next to downtown - it's an amazing place to be here in Auckland.
This page really freaked me off not knowing it was autoplaying sounds. The sound itself was unexpected, I thought something was happening with the room.
Or reducing demand, I suppose, if they value their current way of living. Of course, discouraging population growth, if that is doable, is more long term, and might not have much effect immediately.
Is there any evidence that relaxing zoning restrictions drastically reduces housing prices in a somewhat short timespan?
Wouldn't developers stop investing in new projects as soon as prices became stable or started dropping slightly, causing the same cycle to start again when demand catches up in a few years?
Developers would stop investing in projects as soon as projects became forecasted to be unprofitable. If the housing supply is being artificially restricted below its clearing price, there's a gap between minimum profitable housing unit, and the housing units that can currently be sold. The idea behind lifting the zoning restrictions is to allow supply to reach market clearance.
And if it turns out that if new housing wouldn't be profitable, there won't be any changes. (Though a pattern we see in cities with less strict zoning (see: Montreal) is that we get expensive, cramped apartments near the city center, with lots of empty land around the edges. This is okay too! It's good for other reasons, by reducing commute times and making mass transit more affordable. Density is good!)
I don’t see where the paper you provided implies what you say it does. In fact, from the conclusion:
“As we have documented, despite many careful and thorough empirical analyses, drawing firm general conclusions about the linkage between local regulations and housing prices is not possible. Many careful analyses report some effect of regulation on housing prices, but many exceptions exist.”
The pro-market argument falls on deaf ears. We don’t need to deregulate, we need to regulate smarter. Low density uses such as low rises and houses are wasteful and unsustainable, and should be as difficult to get approval for as skyscrapers are today. Public policy should not back down. It should seek to lower-bound density rather than upper-bound it.
I think there’s a decent contingent of YIMBYs who do oppose development - the suburban kind. I think it would be productive to reframe as pro-density rather than pro-market.
Tokyo is a case study in how zoning and deregulation on developments in urban centers has created a healthier real estate market:
In Minato ward — a desirable 20 sq km slice of central
Tokyo — the population is up 66 per cent over the past 20
years, from 145,000 to 241,000, an increase of about
100,000 residents. In the 121 sq km of San Francisco, the
population grew by about the same number over 20 years,
from 746,000 to 865,000 — a rise of 16 per cent. Yet
whereas the price of a home in San Francisco and London
has increased 231 per cent and 441 per cent respectively,
Minato ward has absorbed its population boom with price
rises of just 45 per cent.
And this is for a particularly popular part of Tokyo.
In the 1980s, Japanese cities were experiencing the same
inflated housing bubbles that U.S. cities are today. Their
planning methods, moreover, were rooted in Western notions
about separating uses and limiting density. The federal
government recognized that these regulations were the
problem, so in 2002, it passed the Urban Renaissance Law.
The law stripped municipalities of the ability to control
private property. As a result, owners can build a variety
of uses on their land, regardless of resistance from local
bureaucrats or neighbors.
It's less deregulation (Japan still has strict zoning and housing regs) and more improved regulations e.g. less exclusive zoning (no zoning for only single-occupancy, residential zoning allowing small commercial buildings like offices & shops, …)
This is in fact completely western zoning, just not american zoning which I expect is what Forbes really means when they talk about "Western notions about separating uses and limiting density": these concerns exist in european zonings but not even remotely to the extent that they do in "Euclidian" US zoning.
Japan has had a falling population for a long time now.
London has added 1.7 million people in that time period.
Property in Japan also isn't as attractive to foreign buyers.
People seem to forget that property isn't like other investment classes. Everyone needs somewhere to live and it can only be built on land which is very scarce where the jobs are.
A little disingenuous to compare London to Japan. Population in Tokyo has also been increasing yet house prices not so much (1)
Japan and Tokyo do housing right. Pricing largely stays the same, quality of living increases.
I absolutely don't mean this about you, but the general sense that I get is people largely don't want to admit someone else is doing things better. People are convinced that their city/state/country is really special and any problem they have are just problems that clearly have no solution. If a solution did exists, obviously, they'd have it. It's ego and pride.
People seem to forget that property isn't like other
investment classes.
Other investment classes provide value from services or production.
Speculative real estate relies on artificial scarcity (local laws preventing building upward) is extracting value from suppressing more construction for more people.
>Other investment classes provide value from services or production.
Like gold or bitcoin?
>Speculative real estate relies on artificial scarcity (local laws preventing building upward) is extracting value from suppressing more construction for more people.
There are many cities where they build upwards massively but the property prices increase massively. See Beijing or Shanghai. Actually compare China now to Japan in the 80s and you see lots of similarities.
When I say property isn't like other investment classes I mean it shouldn't be. People need places to live and if left to the market the lower end of the market will just be left out on the street or in horrific housing conditions. The only solution will be government building of housing. IE compare Singapore with Hong Kong.
If development were a monopoly out behaved similarly then they might collude to reduce housing stock from the efficient amount, but even then it's likely at a significantly higher amount of stock than there is now.
Actual developer response would depend on how much price changes with supply.
This is definitely a major contributor and absolutely needs to be addressed, but it's not the only thing. Improving supply by permitting an increase in density has to be part of the solution, but without also fixing the tax incentives it's only a partial fix.
You cant compare New Zealand with other countries and their solutions. Condo's and apartments don't work for Auckland, the entire premise of the country is outdoor living, why would you move to a country in the middle of nowhere, the only attraction is the natural beauty, to live in a artificial environment with no outdoor space? It would be like moving to the rain forest and living in a sky scrapper. Condos make sense in America where it's always to hot or to cold but New Zealanders are shamed if they spend too much time indoors. The enjoyment of condos comes from online shopping and restaurants, but NZ has the highest shipping costs and the culture is to cook at home.
The whole point of NZ is everyone gets their slice of paradise, but once you move to apartment territory your just dealing with population management, quality of life goes down and disconnection with the land breeds mental deficits that bleed into policy (every country has it's hatred of people from Paris/Toronto etc). One of the nightmares of NZ is that it's beaches turns into Hawaii's with giant hotels and thousands crowding the surf.
It's a fundamental difference in thinking that foreign investors are not aware of, they just try to shoehorn their learnt development strategy into the place. It has bad effects on the locals on many levels and turning NZ into another branch of starbucks just makes it loose all appeal.
The problem is for the quality of lifestyle NZ'er expect, there is a population limit. Fortunately increasing population is no longer needed for economic growth.
While this argument is used a lot, downtown Auckland has risen from essentially no people to 50,000 in 15 years or so. Meanwhile the city is 40% born overseas, let alone people who have spent considerable time overseas. We don’t all want to mow the lawns in the weekend, and people come from all over Auckland to enjoy the waterfront that is on our back door..
Well, some people are born here so they don't need to move countries.
And there isn't a "point" of NZ. We're a large island in the South Pacific - we have huge problems with poverty, family violence, and (I believe) the worst teenage suicide rate in the OECD.
Japanese zoning (which you'd expect to be quite concerned about quake standards) does not distinguish single-occupancy houses and apartment buildings, as a result non-central urban residential zones have a significant mix of houses and apartment buildings of 2~4 floors and 4~10 flats/floor e.g. this is a typical apartment building on the outskirts of Tokyo City: https://www.google.be/maps/@35.6352621,139.6260533,3a,75y,20...
In much the same way, "inner-city" parisian appartment buildings mostly follow the Haussmannian standard of 5 floors.
It's not xenophobic, it's reality. There are large numbers of wealthy+ Chinese who basically want to own something the Chinese government can't take away on a whim. Can't say I blame them.
Because China is big and we are little this has a disproportionately large effect on our house prices - which makes them look like a good investment etc. etc.
So, you don’t think foreign demand has all that much to do with it? If 97% of high prices comes from zoning and regulations restricting supply, then I have a get-rich-quick scheme for you. All you have to do is buy some cheap property in a small town somewhere and convince the locals to pass regulations. The prices will just rise.
> I mean, what people want should be accounted somehow, that's the point of a democracy, isn't it?
What people want is often contradictory. They want affordable, nice housing near their work, but given most people work near other people, they don't want high density housing like condos. You can satisfy all of these demands simultaneously.
The ideal solution would be to eliminate the concept of a central business district entirely and arrange businesses into office parks thoroughly dispersed among suburban sprawl.
I might agree, but you still have the same density problems, and you now also have the problem of people commuting into residential areas with schools and such. I'm not sure, while the idea seems appealing at first glance, it seems fraught with problems.
+1 if the people of nz prefer to preserve their state of life over market demand that's their collective choice to make. Not everything in life must be ruled by a supply/demand curve
However, as whatever they're looking to buy has dropped as well they're no worse off, and given that they've almost certainly still made a tax free killing (unless they're very recent purchasers) they're probably still ahead.
"It is the government itself that is creating the problem,"
I don't agree.
The government should have never allowed non-citizens to buy property in the first place.
Zoning is not the issue, there's plenty of space, granted, they could change that if they had to.
Massive surpluses of cash from wealthy 1%-er foreigners is the issue really.
Here's an idea: you can't have 'free trade' if one side is willing to allow de-facto slavery, corruption and externalization of things like pollution etc..
Because that means jobs are lost in 'high regulation country A' and move to 'corrupt and low regulation country B' - particularly into the pockets of their 1%-ers who can then rule their own country, and then come ton country A where surpluses are more evenly distributed and also take over and use their wealth as leverage.
No.
Just like you need certain things in order to have a common currency - you need certain things for free trade.
We understand that 'strategic dumping' and 'government subsidies' are generally not allowed in 'free trade' - but we should be aware that 'government allowing pollution' etc. - is like a form of subsidy.
There is already a trade war with China, so it would be best if the West simply added a tariff for imports that reflected these things, and certainly had capital controls. Nothing heavy, but domestic property ownership should definitely be regulated as well.
> The government should have never allowed non-citizens to buy property in the first place.
Why allow citizens to leave the country while we are at it. Lets just close all the borderds, never allow foreigners in, or locals out. That is the recipe for economic prosperity!
You are forgetting the foreigners have let their cash into nz. They gave it to homeowners, to construcion companies, etc. Those in turn spend it and reinvest it locally.
Why not let foreigners pay our politicians to make legislation - the money goes to lawyers, consultants etc. i.e. right into the economy!
For the same reason we have borders, that we don't allow foreigners to buy some kinds of assets (i.e. wireless spectrum) - or do some kind of banking, own certain kinds of companies.
"No, it's Kiwis that will ultimately pay the price, as it's Kiwis that are getting screwed by unaffordable housing"
?
If you take away foreign investment in homes, then housing prices will be affordable.
The only way housing is not affordable otherwise is if there is 'bubble like activity' - like the Silicon Valley - and even then, this has a lot to do with foreign money flowing in, just as LP's and investors and not as home owners.
Point blank.
Toronto and Vancouver have massive foreign investment and have unaffordable homes.
Montreal - with similar economic conditions - has a little less immigration, and no foundation for Asian buyers - and guess what? It's super affordable.
Everywhere you see a lot of international speculation - you see affordability problems.
Ban foreign ownership of property unless it's commercial. There's absolutely no reason to be speculating with our homes.
FYI - this creates a serious problem: Toronto and Vancouver are Ponzi schemes - construction is a big part of the economy. If the zillions of homes stopped getting built, it would mean a 'reality based economy' that Canadians can't deal with - because we don't export valuable things and we are addicted to an ever-increasing number of warm bodies.
I think you've misunderstood the context of my comment, as it seems we agree. I'm saying that foreign speculation (and local speculation) are bad for Kiwis and should be acted against, so it seems we're in agreement.
My comment should be read in context as "No, it's Kiwis that will ultimately pay the price, as it's Kiwis that are getting screwed by unaffordable housing [caused by unfettered speculation, foreign and local]".
Person A has property and wants to sell it to person B, and person C wants to get the property at a lower price, so he forbids, by force, for person A to sell it to B.
Why do you think person C is getting screwed if A sells to B?
A thought experient: What if the landowners went the opposite way: property can only be sold to foreigners that are poorer than nzlanders. How would that go in this scheme of things.
The average price of property grows due to the additional demand from speculators, foreign and local, pushing up the price that C has to pay for any other property as well. It's not that complicated.
The primary purpose of housing is not to make people money, it's to house people. To serve that goal the lower the price is the better.
In that context it's clear that it's not the relative wealth, or even foreigner vs local that's the problem, it's speculation of any kind. So no, in your thought experiment it's no better to sell to foreign speculators regardless of their relative wealth.
A more interesting thought experiment is what happens in an economy when property speculation doesn't happen. House prices are lower, as demand is only from those that want to live in them and those that want to buy them to lease them out. With lower prices paid, there's more money (on average) in everyone's pockets - including those that rent, due to lower rental prices. This increase in money stimulates the economy, especially because most of the relative benefit accrues to those on lower incomes that spend most of their income to live. The economy is further benefited as much of the money that would have otherwise been dumped into non-productive real estate speculation instead flows into real investment.
The end result of discouraging property speculation is enormously beneficial to the country. Investors can speculate in the stock market or whatever else they like, because people don't live in shares, but the housing market exists to serve a purpose... and that purpose is not to make people money. That's an acceptable side effect so long as the primary purpose is fulfilled, but in NZ and AU it's failing.
Sure, there are a some that would be disadvantaged (new home buyers that end up in negative equity would also be in a bad situation) but they're dwarfed by those that benefit. A government with the nerve to crash the market through sane taxation would be able to reap a sufficient dividend to compensate those genuinely disadvantaged through negative equity, but it seems unlikely to happen.
> A government with the nerve to crash the market through sane taxation would be able to reap a sufficient dividend to compensate those genuinely disadvantaged through negative equity,
Ha!
The government is already collecting taxes because of home sales, it doesn't need to restrict it to solve it with its magical redistribution powers.
I don't think you understand the NZ situation very well; the government collects very little from property sales compared to most parts of the world, because there's no stamp duty and there's practically no capital gains tax.
That said, government revenue isn't even the problem, the excessive cost of housing is the problem.
The government is already interfering in the housing market by not taxing it at the same level as normal income; by making it tax advantageous to earn capital gains rather than by labour it pushes money into that market.
I'd prefer that they stopped messing with the housing market by treating it the same.
That’s not only attributable to this single item. There’s more such as exchange rate, salary levels and savings rates... that you’re stuck in an economic tarpit because you can’t speculate freely on housing (a primary necessity, btw) is a bit disingenuous
I'm not sure what sort of call you think I'm making here, it's just an observation of the economic effects. If you've bought a house to live in and the market doubles then halves again, you didn't benefit from the rise nor suffer from the fall. The main losers for a drop in prices are speculators, the main winners are practically everybody.
However home owners that are not actually benefiting from higher prices are incredibly attached to their paper gains and so any policy that threatens that will be wildly unpopular.
> I'm not sure what sort of call you think I'm making here, it's just an observation of the economic effects. If you've bought a house to live in and the market doubles then halves again, you didn't benefit from the rise nor suffer from the fall. The main losers for a drop in prices are speculators, the main winners are practically everybody.
A person that moves from one city to another, a person that sells their home to go back to renting, a software engineer thinking of moving to nz for a job has now found that he might never be able to purchase a home. The effects on pricing are not in par with wages: someone downsizing their home will get a smaller difference, and someone upsizing has found it is cheaper. Real estate agents income drops, tax revenue drops, tourism drops, etc.
There are more circumstances that we can imagine and my point is that is very presumptuous to think all those people have been benefited. Lots of landowners would vote against it, and they get no compensation from the ones that voted in favor of restrictions. The principle is not to benefit a majority. If we wanted to do that, we would just seize things from the top 49% and give it to the bottom 51%. There is no fundamental value satisfied here but the capacity of landowners to get use the government to tell what other people can or cant do with their property.
I reiterate: this is not about what nz wants, its about what some people want.
> If we wanted to do that, we would just seize things from the top 49% and give it to the bottom 51%.
No, we wouldn't, because that wouldn't achieve it.
> I reiterate: this is not about what nz wants, its about what some people want.
Reiterate all you like, you're attacking a strawman of your own creation because nobody is claiming otherwise.
> a software engineer thinking of moving to nz for a job has now found that he might never be able to purchase a home
It'll be a lot easier for him after a crash in the NZ property market, doubly so if foreign money is pushed out leading to drops in the NZD on top of the crash.
"If you've bought a house to live in and the market doubles then halves again, you didn't benefit from the rise nor suffer from the fall. The main losers for a drop in prices are speculators, the main winners are practically everybody."
This was what I said and you haven't actually disagreed with that anywhere. Yes, there are some that will be worse off, but increasing prices harm more than they help. Decreasing prices help more than they harm. It's not possible to do nothing, because doing nothing is doing something by continuing the current policy mix which inflates prices.
Crashing the market is the only way to improve the situation, but is politically untenable because people are very attached to paper gains even though they don't actually benefit from them. The end result will be an uncontrolled crash in the market that will leave the government with no revenue with which to help those that are harmed by a falling market; deliberately crashing prices through appropriate taxation would leave most unharmed, but would extract money from those that had benefited from a bad situation to help those that were really harmed.
It's the right thing to do, but no government will do it.
if only there was a process for collective decision making. perhaps we could delegate the more complex decisions to representatives chosen by the people using this process.
somebody should invent that.
(sorry for the snarky tone, but why is this even worthy of discussion here?)
The NIMBYism being referred to isn't about foreigners buying property, it's about zoning preventing higher density housing and therefore constraining supply.
If, not counting foreign buyers & speculators, low density housing is enough to meet demand and keep their country the way they like it, is it really NIMBY? Supply can only be considered constrained if there is excess demand.
Agreed that the relevant factor is the "real" demand absent the additional demand from speculation, but what reason do we have to think that "they" (which includes me) want it that way? Some do, and they're the ones with the money and influence, but "they" are not a monolith and have a range of opinions.
Auckland does appear to have legitimate supply constraints even absent demand (see articles with families living in tents, cars, etc in this first world country) and the geography does put constraints on efficient sprawl.
> existing property owners have more rights, incentives, and skin in the game then potential residents.
To be fair though "existing property owners" would also include people who own land in low-density-zoned areas and would like to build high-density housing on their property, but are prevented from doing so by neighboring property owners. It seems like their rights are also being infringed upon, no?
I would argue that zoning laws are not infringing on your rights as a property owner, no more than property taxes are an infringement. They are conditions of property ownership you agree to when proceeding with a transaction to acquire property.
And similarly, a condition of living near other people is that you must accept the presence of other people and infrastructure designed to accommodate them, even if you’d rather it wasn’t there. If you don’t want to be bothered by evidence of human habitation, move far away from the nearest human.
No, that is not the case. There are no requirements that we must have density, that we must accommodate everyone who wants to live on a block or in a zip code. That's not how property works.
Yes, there is a social contract that ends up codified into zoning/code, but that is governed by local government, which is governed by local property owners.
EDIT @ closeparen: I'm really sorry to hear that you feel that me supporting property rights are cartoon villainy. They are the foundation of modern civilization unfortunately.
EDIT 2: > What you're really talking about here is the political power over others that's embedded in property rights. This power is ultimately delegated to property owners by states, and the correct response (and what we're starting to see in CA) is the state seizing that power away from property owners and granting it to the population at large.
You're suggesting subverting democracy. Again, in violation with a democracy that is the foundation of modern civilization. To deprive someone of living in your own home is not a violation of their rights. Socialism I can support, but not communism (ie "the state seizing that power away from property owners and granting it to the population at large").
If you don't want to a skyscraper built on your land, don't sell your land.
Your neighbor's land isn't "your own home," it's his.
>You're suggesting subverting democracy.
Subverting a council of the landowning aristocracy (local city govt) with a democracy (state government).
>the foundation of modern civilization
Single-family-home zoning, FAR, parking minimums, sunlight plane, height limits, etc. have barely been around 100 years. Laws dictating that all places must look like modern American suburbs are certainly not "the foundation of modern civilization."
We're all going to learn some surprising things about "how property works" if cartoon villains such as you are permitted to ratchet up the homelessness rate towards 100% for much longer. In practice, though, responsible adults will step in long before that. California is already stripping local property owners of their anti-neighbor tools.
If we want to regulate population growth, fine. But we will have to start rationing birth the way we ration condos if it's really so important to us to avoid the scourge of homes.
EDIT: supporting property rights would be supporting the rights of property owners to build on their land. What you're really talking about here is the political power over others that's embedded in property rights. This power is ultimately delegated to property owners by states, and the correct response (and what we're starting to see in CA) is the state seizing that power away from property owners and granting it to the population at large.
I interpret the contrary of property rights. A land owner should decide what happens on his land, but what he can ask of his neighbors should be very limited. A person with a land in nz can't sell it to a foreigner, he is being deprived of his property rights.
I wouldnt be surprised if a measure like this ends up unconstitutional (no idea about nz constitution)
NZ doesn't have a real, single constitution, more a collection of case law[1].
I'd argue that if a person can no longer reasonably expect to buy a house in their own country then they're being deprived of their rights and that this is a more significant loss than others losing their "rights" to tax free profit from their property speculations.
Yes, every city where rents are high (so skyscrapers are economically viable) should be skyscrapers as far as the eye can see. The person who has the most stake in the land is the one who owns it, and that person should absolutely have the right to build a skyscraper on his land if he so chooses.
That's a false dichotomy; you can allow more density without skyscrapers as far as the eye can see.
The problem is hard because existing property owners have more rights, but those without have plenty of incentive and skin in the game too, as the overall cost of never owning a home is significant. Arguably the property owners should have less rights than they do when those rights are causing significant hardship and economic damage, which is the case.
New Zealand is geographically quite large (about the length of France and Spain joined together, and a little bit less wide) and we have half the population of London!
The land isn't owned collectively. It's owned by individuals. It seems strange to pass laws that say those individuals aren't allowed to sell to people that are willing to pay more money.
It only seems strange to you because you are probably American. Not everyone views land this individually. Nor does your approach make any sense. So you're against the government telling me I can't build a toxic waste dump on my land next to a school?
If you build your waste dump next to the school it creates negative externalities for the school. That's not the case for simply selling a piece of property to a willing buyer.
Buyers that don't actually live in the house and let it sit empty create a negative externality. Enough empty houses and you end up with empty neighborhoods.
(This happens with domestic buyers too but the problem of huge empty investment properties seems to have come along with foreign investment?)
" That's not the case for simply selling a piece of property to a willing buyer."
Not quite.
A wealthy citizen of a 3rd world country has used the fact that he can pollute and treat his staff like slaves - to make tons of money.
He can then go to another country wherein surpluses are spread more evenly - buy up property - and start to dominate those people economically as well.
One could make the cases that 'you cannot buy homes in our country unless you're a citizen of a country with similar rules regarding externalities like the environment, human rights' etc..
Because a lot of this money is coming from countries where all sorts of externalizations are made.
Same thing for manufacturing: we 'stop hiring' in locale A and go to 'locale B' where we can pollute and have slaves. You can't really look at it solely from the context of locale A.
For the same reason different nations have separate currencies, I think we need to separate domicile policy.
Nations have separate currencies because if they didn't some regions with experience inflationary monetary policies while others would experience deflationary ones. It would be impossible for central banks to do their jobs. You can see this in action in Europe with the Euro which was, and is, a bad idea.
" some regions with experience inflationary monetary policies while others would experience deflationary ones. "
Housing - and capital inflows/outflows - are primary drivers of inflation! (FYI I know housing is generally not included in inflation targets, but it really should be because it's where inflation can effectively be hidden).
Ergo - strongly related to the issue at hand.
Put simpler: those who come from countries with a different currency should not be able to buy residential property. :)
cultural factors may play a role, of course. quality of life is better when you have more things in common with your surroundings. this is about preferences, not perceived superiority though. at the very least you'd want your kids to have a common language with their classmates though.
Well, you've minimized the preceding argument while adding hyperbole to the responding argument. Of course we will agree with you that the straw man you have constructed is nonsense.
The parent arguments are both far more reasonable.
this doesn't qualify as a case of reductio ad absurdum because the original argument was not "why don't we allow duplexes?" but "why does the collective have a say in this at all?"
and the answer to that is "because of negative externalities"
American here, and I'm all in on the idea that we live in a society and our choices and decisions are constrained, to some extent, by the people around us.
The challenge for every generation and every society is to decide where to strike the balance between the individual and the group; it's never all one or the other, but always somewhere in between.
And I like this "your land isn't actually yours to do with whatever you please, no limits" idea. Count me in.
Why does that seem strange? All laws are the group imposing on the individual - what they aren't allowed to say, what they can't do, what they have to do, who they need to hire, where they can dig, when they are allowed to build, etc. None of that is far from "who isn't allowed to buy."
Ya, but most of those laws are about protecting the rights of individuals. I can't hit you because you have a right to bodily autonomy. What's being protected here?
The overall well being of the society as a whole. Plenty of laws have causes as vague even if you don't realize it is so and you arguably can't build a functioning society without laws stemming from vague but significant causes.
You don't have a right to buy a house at a particular price.
If someone else is willing to pay more the seller should have the opportunity to sell it to them. These laws privilege the desires of some buyers over both the desires of sellers and non-native buyers.
Not every sell is equal if you look at it like at social contract. A family buying a house is different from investors looking to park their money.
It looks like ban will apply to non-residents rather than non-native. If you're non resident, why do you want to buy? Rent to check out the city, get residency which you'd need to live in a country anyway, then buy.
> You don't have a right to buy a house at a particular price.
I never said that I did.
> If someone else is willing to pay more the seller should have the opportunity to sell it to them. These laws privilege the desires of some buyers over both the desires of sellers and non-native buyers.
And if the areas in question had been rezoned to increase supply instead of reducing demand, that would have privileged the desires of a different group of people.
All laws privilege a certain set of desires over other sets of desires.
Why shouldn't people who live in an area have the right to decide how they want to collectively structure their lives and economics?
Housing is a human right, and lots of US cities have all kinds of regulations around affordable housing. I think we're not far at all from "you do have the right to buy a house at a particular price," we just dress it up in fancier language.
Because we’re not trading figurines or pretty pebbles here, but homes, a Primary Necessity that we humans need for survival.
Therefore we need to consider other subtleties to the act of trading such assets: how are my assets impinging on other assets nearby? Is it butt-ugly, does it fit the local decor, does it drive insane density in the neighborhood, does it drive prices displacing neighbors at an unsustainable pace, does it disrupt the local community, anonymizing neighborly relations, does it damage residents’ way of life?
Some people are better than others because they are born closer. Let the others burn because as part of the ultra rich (almost all NZ people) I want to be richer and this seems to be the best way.
And nationalism isn't always bad, a group protecting members of that group (say based on geography) to the exclusion of the out-group is just how groups function.
one would think so. it is so weird to me that this is called racist and xenophobic by so many people. collective delusion happens all over the spectrum.
I guess we will see. New Zealand has gone from a comparatively equal society to one with a large divide in a relatively short time. Housing ownership is no longer possibly for many. This didnt seem right to a majority of voters.
Refer to the country's founding document, the Treaty of Waitangi[0],
> The Treaty established a British Governor of New Zealand, recognised Māori ownership of their lands, forests, and other properties, and gave Māori the rights of British subjects.
Although it was and remains a stark contrast to the way the British approached the natives and land of other colonies, there are ongoing issues with implementation today, see the link.
> Because the English and Māori versions of the Treaty differed significantly, there is no consensus as to exactly what was agreed upon.
So it does little to clarify. The Maori are a minority now. Anyone arguing that some of the land of NZ should not be sold to the highest bidder may want to explain how that relates to the not-so-ancient trade of all the land in NZ for compensation of a disputed nature and extent.
Here in bavaria, the supply and demand curve would have ruined the alps, in particular the allgäu. Everyone wants to live in a beautiful place- the problem is, the place is gone, once everyone does.
Only a vocal few are 'blaming it 100% on foreigners'. I say this as a foreigner in NZ.
What is recognized and being responded to here is that foreign investment in property/land in NZ is A factor contributing to the current housing bubble in the country. A factor. One factor. Not the factor.
How much of a factor? Difficult to establish since there has been wilful obfuscation of the facts. Right now the gathered official information on foreign property market activity in NZ puts it at anywhere from 3% to 57%. Yes, the data really is that flawed and it's likely not an accident.
Alongside this is a high rate of immigration (this is different from foreign investment land/property holdings, but the two do intertwine especially when it comes to properties being purchased by overseas students on temporary visas, which appears to be fairly widespread).
That's about it as far as factors that the racists and anti-racist racists can jump on board and shout about. Another factor is the geographic realities of NZ (while Auckland's low building height zoning seems unnecessary, it's very much a necessity for most of the rest of NZ which is one of the most earthquake-prone regions of the world).
Yet another factor is the expense and complications of constructing new housing stock here. First, the country's remoteness means a great deal of materials required must be shipped great distances and this costs both dollars and time. Second, there is a stranglehold monopoly on the supply of many building materials wherein a single corporate entity has managed to lobby for esoteric compliance requirements for said materials, to the point that they are functionally the only possible provider of said materials. Third a great portion of the building workforce has been tied up with the Christchurch rebuild (that little thing six years ago that pretty much levelled the third largest city in the country). This drove a reduction in workforce, materials and equipment availability for the rest of the country and so development has been consequently slower since. That rebuild is by no means complete.
Finally, zoning is not as simple as 'just do it'. Aside from the tectonic risk mentioned earlier, New Zealand maintains high percentages of protected green areas within it's cities, and aside from the aspirational and cultural reasons behind this, it's a important element of maintaining the country's overseas reputation as a clean, green tourism destination. Since that's 4% of GDP here (9% if you count the downstream stuff), it's important to maintain it, and chucking up dense residential, commercial, or industrial actively harms that reputation and will reduce GDP. On top of this, you can't simply change zoning and expect infrastructure to keep pace. It must be built to accommodate higher density and then the higher density can follow. As mentioned earlier, NZ's remoteness is a significant barrier to the kind of infrastructure investments required (and ten plus years ago too, if you want to look at solving the problems of today).
So, this is just a slice of what is a very complicated situation. I have by no means covered all the major factors above, just a few. This move to reduce foreign property speculation in NZ is sound, but only part of the picture. With any multi-faceted economic issue the impacts may not be exactly what is desired and the second-order effects of this might bring things that are even worse.
You can build tall buildings in earthquake-prone regions. Building height does not need to be limited because of earthquakes. Building codes can accommodate their likelihood. It makes the buildings more expensive, but there are standard ways of designing buildings to accommodate earthquakes of particular magnitudes.
What gives someone born in New Zealand any more rights than anyone else? This myopic nationalist mindset is ridiculous. We were all born on the same planet.
NZ is a country of immigration, and gives full rights to all citizens. This has nothing to do with where anyone is born.
> What gives .. any more rights than anyone else
Property rights are laws. They can be made, altered, and revoked. What gives NZ citizens the right to buy existing houses will be NZ laws, promulgated by a democratically elected parliament.
> This myopic nationalist mindset is ridiculous
There's a perfectly reasonable non-nationalist approach to this kind of law change, based on trying to keep housing available for people who can't bid against the global rich. I'm sure plenty of NZ progressives would love to protect the world's poor from the depredations of the 1%. But given the NZ parliament's limited jurisdiction (viz., to NZ), this seems like a reasonable start.
I normally similarly dislike the myopic nationalist tendencies but disagree with you here. When countries/people say "bring back jobs from China" I hate it. Chinese are humans and they aren't taking the jobs to screw you.. They are doing it to put food on the table.. How can you begrudge someone that? Particularly when the standard of living it so much lower on average there than the countries the complainers come from e.g. US, Australia. However, this is a rule preventing NON-RESIDENTS from purchasing. So long as you actually live in NZ a Chinese national could still buy property. I can understand why you'd prioritize residents being allowed to purchase over non-residents but of course this doesn't address wealthy residents buying their 20th investment property so it is at least a little distasteful in my opinion.
What constitutes a transient visitor compared to someone who lives there? I don't know what I will be doing and where I will be in a year. Never have. Does that mean I shouldn't be allowed buy property anywhere?
NZ citizens aren't under any obligation to put your interests before those of their fellow citizens. It would be generous for them to consider you, and generosity is good, all things being equal (and NZ has an admirable record as a generous polity). But the side-effect in this case it to allow poor New Zealanders to be predated on by the global rich. They have clearly decided to attempt to prevent this predation.
The best balance of policies to deal with fair & equitable housing supply has been the subject of vast tonnages of reports and research over many decades. It's hardly going to be resolved in a comments page.
That's a different topic from what I was commenting on, ie. NZ's putative duty to write its laws for your lifestyle convenience.
Clearly hardly any governments have read or paid attention to the "vast tonnages of reports and research over many decades" relating to fair & equitable housing supply or they wouldn't be resorting to the level of populist BS that is prevalent in the world today.
You have not provided any further details on why this is better.
And you mention living a transient lifestyle. Please tell me more about the property you own in Singapore then, because i'm sure you're happy paying a double digit percentage stamp duty in a not entirely stable market for 1-2 years of living here.
administrative divisions on multiple levels make sense. this way i can politically participate in shaping society around my physical location. this has nothing to do with rejecting foreigner's ways of live, it's about having a voice in how your own surroundings work and then see how these compare to other places based on other choices on a wider stage.
I agree on the philosophy around organisational structures. In relation to housing this is also a solved problem (hint: it's not solved in the way NZ are doing). In Singapore where I am currently based they have high quality subsidised public housing that is only available to citizens and permanent residents.
Blanket banning foreigners from purchasing does 2 undesirable things. It stops people being able to lay foundations to eventually migrate and it deflects attention from the real solution (perhaps a third is that it encourage cross-border trade but I'm not sure of the reality around that). The real solution is to build denser urban areas with a suitable supply of high quality subsidised public housing. This allows the poorer inhabitants to firstly live in areas that are economically feasible and, secondly, it is well documented that higher density cities have increased economic output of a non-linear nature compared to low density cities. An added benefit is that by fitting more people into less space we reduce our environmental footprint. It should have been part of the Paris climate accord to force cities to zone for building up not out.
Ehm, no immigrating individual ever buys property before having actually immigrated. Unless you’re obscenely wealthy, normals usually immigrate and get ripped off renting a couple years. In the meantime they stabilize, build enough credit data to get a mortgage, explore and learn where they want to setup permanently and then - finally - buy.
Sure they do. If you plan to move somewhere in 3 years and the property market is too expensive where you currently live it's cheaper and makes more sense to rent now and buy where you plan to move (especially since you can't afford local prices in any case).
You forgot to mention that the HDB scheme in Singapore covers about 80% of the population and the private market is also heavily regulated/taxed and prohibitively expensive. Immigration barriers are high and the immigration system is purely based on the needs of Singapore and not any sort of moral obligation towards the rest of the world. (To be clear: i consider the last part to be a good thing). People who use the term "racist" when discussing immigration policies would have to apply it to Singapore as well.
I also live in Singapore, and the high density here has a severe impact on quality of life (i'm using this term in a very wide sense here). I would never use this as a model for my home country. If anything, living here made me much more aware of the benefits of low population density.
Your 2 undesirable things might not be that undesirable for everyone.
If the lower income citizens are taken care of I don't see the issue with heavily regulated/taxed and prohibitively expensive property. It's supply and demand. It couldn't work any other way and it's a much better way to deal with the issue than ridiculous and ineffective knee-jerk blanket bans like in NZ.
Singapore offers a great quality of life. If you don't like it why do you stay here? High density has it's unique characteristics that may be less desirable for certain personalities but if you care about the environment and bio-diversity even in the slightest you would understand that taking a self-centred "I like my garden" approach to housing is absolutely the wrong way to go. This mindset has totally and utterly destroyed Ireland, my home country.
Even if we accept that the white people "own" NZ, the foreigners are buying it from the willing seller citizens. So the government does not get to decide on behalf of all citizens.
There's a huge gulf between "single-occupancy houses" and "concrete jungles". Inner-city Paris is mostly apartment buildings and a far cry from a "concrete jungle" (despite being the highest-density western metropolis), Tokyo's outer special wards mix small appartment buildings and single-occupancy houses and are no "concrete jungles" either.
Just because you house multiple families in the same building does not mean you head straight for highrise central or ultra high-density concrete slabs.
> On the other hand, not everyone wants to live in or look at apartment buildings concrete jungle.
Most people don't. Unfortunately they also want to live close to work, which is probably closer to city centres, which is where almost everyone works, which means you can't simultaneously satisfy both desiderata. The greater good here is higher density housing, not aesthetics.
The greater good is less population or spreading out places of work so they aren't in the same location. It is really less population though, which is probably why New Zealand voted in someone who is reducing population growth. Also, moving from a house to an apartment sure isn't just aesthetics. It is a massive drop in quality of life.
> The greater good is less population or spreading out places of work so they aren't in the same location.
Why? It's clear that efficiency drops precipitously with increased latency, which increase with distance. Locality is thus critical to efficiency, not to mention resource distribution is far more efficient in denser areas.
> Also, moving from a house to an apartment sure isn't just aesthetics. It is a massive drop in quality of life.
Only if your apartment complex and neighbourhood was poorly planned. Focus on that.
> 75% of Auckland is zoned for 1 or 2 story buildings
Sounds like a great place to live
> Here's 97% of your house pricing problem. Not foreigners, not low interest rates, not land taxing policies.
Not really, you can still have a small city and keep it a that way if you keep the population under control and avoid speculation, which is sounds like what they're doing.
You could turn it into a big city like Los Angeles or Vancouver but that just creates different problems - and as they show - doesn't even keep prices low.
If you want to live in a low density city, there's plenty of other smaller cities, suburbs, and sparsely populated rural areas where that makes sense.
If you're seeking to artificially limit growth and prohibit buildings from being developed in the largest urban area in the country, than it'll inevitably suffocate economic growth as younger generations and entrepreneurs turn elsewhere.
It will help local younger generations to get affordable housing. What it will turn away is foreign investors in real estate, just seeking where to park their money (e.g. Vancouver). It will limit only unsustainable growth which would lower (possibility of) crisis usually following influx of cheap money (e.g. most of Europe in '08).
> It will limit only unsustainable growth which would lower (possibility of) crisis usually following influx of cheap money (e.g. most of Europe in '08).
>You could turn it into a big city like Los Angeles or Vancouver but that just creates different problems
Funny, I was reading the statements about Auckland and thinking, this sounds exactly like Vancouver's problem. Parts of downtown are quite dense but the vast majority (80%) of the city is zoned SFH.
Apartments suck. Most people vastly prefer not to live near them or in them if they have the option. If they have 1000x the land (still remembering that a lot of that is grazing land), then what they need is transport, houses, shophouses, townhomes, and lowrises. If the land price is higher in the the middle of town, then so be it. At least the current residents aren't having the sky systematically parceled away by a corrupt bureaucracy for paltry favours.
I'm not totally fond of the way NIMBYism ends up working, but the fact is that these people would otherwise have their land value degraded by amendments to local zoning. The rules for projects like this should at least include compensation for the decrease in assessed value of their property.
Hell no there should be no compensation; the entire goal of the government should be to crash prices hard and if increasing density achieves that by simultaneously increasing supply _and_ decreasing values due to people having to see higher density property then that's a double win.
As an aside, apartments can be awesome, precisely because of the services that higher density housing allows. I own and live in one in the Melbourne CBD, I have amazing views, no need to drive for any services (groceries, doctors, liquor stores, restaurants, cafes and more in the same block). While a house might be tempting in some ways it terms of convenience it would inevitably be an enormous step backwards.
> While a house might be tempting in some ways in terms of convenience it would inevitably be an enormous step backwards.
This is really what I was trying to get at: if you have a lot of land to potentially develop, and a relatively clean slate, you can get the best of both worlds in terms of convenience and hominess.
I think the world's most connected sprawl would inevitably be a better place than the world's tallest city core.
I think that's inherently wrong; you need a mixture of densities, but everything low density sprawl is a nightmare. Increasing average density has benefits even for the left over areas of low density, e.g. reduced traffic, lower infrastructure costs per resident, lower average distance to amenities.
This comment reminds me of the old Yogi Berra gem: "Nobody goes there anymore. It's too crowded." If people didn't want to live in downtown apartments the prices wouldn't be so high.
This is a non sequitor. The “nobody likes high rises” argument is about the people who don’t want to look at high rises. Obviously their aesthetic satisfaction is more important that others having places to live.
The OP mentioned living in them, so the reply was on point - clearly some people _do_ want to live in them. I love my apartment, but would admittedly be less keen on suburban apartment living as the convenience factor would probably not be so hot.
This would qualify as them having no option. If they want to live in the city, they want to live in the city; but if you're trying to make a city that people will continue to want to live in, apartment buildings may be the worst way to accomplish it.
I have a hard time labeling it. A sprawling continuous town centre is really what I'm thinking of: low rises, shophouses, some mid-rises. But ideally fewer mechanistic glass plinths blocking out the sky. I just think you can justify the amenities and convenience of a well developed city without half the buildings being forty or more floors.
I like such places and I think they should exist. I grew up in one. The problem is insisting that global centers of industry and culture should also be that way.
You would need huge increases in transit capacity to do that, and it would probably also push car-accessible streets to the point of total uselessness, wrecking any bus service that doesn't have dedicated lanes. The buses and trains from San Francisco's low-rise districts to its downtown are already crush loaded and Muni doesn't seem to be capable of adding capacity.
Towers in/near the central business district have the distinct advantage of getting lots of people within walking distance of their offices. SOMA et al. also have low-rise commercial uses that can be converted to mixed uses. It's important to get as many units as we can out of this rare land, because tearing down existing housing is so destructive (and a total political non-starter). Our west, almost everything is already residential and is cheaper than whatever new construction would replace it (in the immediate term, which is all voters care about).
Yes, curiously enough, increasing density does require increasing infrastructure, including transit capacity.
This has been recognised going back ... quite some time. A century or more, for cities. Millennia, at the scale of nations, empires, and/or tribes, back when "transit" generally meant some form of water-borne craft.
Muni hasn't had the will to add capacity. The physical possiblity exists, as evidenced by numerous cities around the world with far higher-capacity transit systems. (Though, admittedly, effectively none in the U.S., outside NYC.)
The most straightforward approach for SF would almost certainly be transit-designated routes, with no non-transit or non-emergency traffic allowed. There have been multiple plans for developing additional dedicated subway capacity, though in the case of SF, the common congestion and lack of a bypass trackway (either a third bypass route, or full dedicated dual trackage in both directions) along the Market Street route especially is a particular problem.
Longer trainsets (possibly breaking to two-car trolleys above ground, or remaining as, say, four-car systems on dedicated rights of way) would increase capacity.
Dedicated rail along major corridors (Geary, Irving, 3rd St. Market, Columbus, Sunset, etc.) might also help.
I like apartments, and would probably still live in one if I lived in an area with reasonable rent control. The last time I lived in an apartment, the rent raised 20% one year, 20% a year later, and then I left when they wanted to raise it nearly 30%. (original rent was $2000, the last rent increase pushed it over $3500)
Housing prices rose during that time, but not commensurate with rent. I ended up buying a condo outside of town. But I'd rather have the flexibility of an apartment -- if I get a job farther away, I'm pretty much stuck with the condo, but if I had an apartment, I could live closer to work.
Living in low rises is by no means not living around people. Nobody builds shophouses or townhouses in the boonies, to think that is to have a truly distorted view of the world.
The presence of high rises ultimately screws you in the end. Paris is cool (despite it being basically impossible to live there for real) because it's low-rise and cohesive. There is one big shiny eyesore of a plinth which has haunted the place since its construction. Sure, if there's a concentrated business community, a block approved for high rise development is going to be valuable to them, but it degrades the surrounding area.
We might be talking at cross purposes to some extend; Paris is not what I would call low rise, it's far more dense than Auckland is (and Auckland is low rise).
A continuous genuine low rise city like Auckland is a nightmare, and a hypothetical continuous high rise city (does one exist?) would be similar. Continuous mid rise like Paris, Barcelona etc is probably better than either, but having a good mix would improve things.
> instead of addressing underlying economics (limited supply meeting increasing demand causing raising prices) by increasing supply...
This is an economic solution. They chose to lower demand to keep prices down. If you would do something differently, say raise supply to keep prices down, how would you do that? Would you make more land? What would happen to people who you rezoned out of their houses?
Did you read the statement you're replying to? The problem is not lack of land, but the way the land is utilised. This isn't unique to New Zealand either, Canada has done the same, rewarding established people who lived there for a long time and punishing newcomers, young, or otherwise not so well established.
> Did you read the statement you're replying to? The problem is not lack of land, but the way the land is utilised.
Yes, I did read the comment I replied to. I asked how supply would be increased, because I want to know how he would do that. Hence, why I asked him what he would propose.
You didn't answer the question either, simply restating dissatisfaction with how people live. So, what would _you_ do to increase supply instead of decreasing demand?
Now we are getting to the actual discussion. Of couse, land can be rezoned, but _why_ do that? Why is it a 'better' solution to increase supply through effectively removing people from their homes instead of decreasing demand through denying purchase of homes?
> What do you think bans on duplexes, apartment buildings, and row houses do in a city?
What point are you trying to make? The article doesn't talk about people being banned from building houses but about a ban on foreigners purchasing homes.
Emotional logic and snap-decision making is kind of a staple in NZ. For example, it's illegal to grow an avocado tree. They're still banning books there and good ones at that. A pro-democracy advocate was targeted by the NZ gov to win favor with Fiji.(1) Government over-regulation, permits and licensing on everything under the sun. A man set himself on fire to protest the horrible family court system, and a woman thrown in jail after letting her kid ride an ATV. Frankly, it's kind of terrifying.
>Emotional logic and snap-decision making is kind of a staple in NZ. For example, it's illegal to grow an avocado tree.
Oh goodness, have you been suckered into the 'illegal gardening' joke?
>A man set himself on fire to protest the horrible family court system
That man's wife had left him and taken their kid to Japan. I'm not sure what kind of non-horrible family court system you imagine NZ could have, which would be able to direct outcomes in the Japanese system.
Haha, I'm actually aware of that gardening meme, but it looks like I could very well be wrong about the avocado ban. There was a legitimate largscale theft of avocados in recent history, and I was sure from that I had learned it's illegal to begin growing your own. I did a quick Google search and can't find a source for that. It may be a totally erroneous idea, or it may be related to difficulty getting permits to grow them commercially.
As for family court, you know in NZ it is a frequent but macabe quip: it is easier to kill your wife than divorce her? People say that for a reason, and people don't just light themselves on fire so easily.
> you know in NZ it is a frequent but macabe quip: it is easier to kill your wife than divorce her
I live in NZ and I've never heard anybody say this. You should think twice before repeating horrible comments on the internet. Particularly comments about violence against women.
Also, I grow a number of avocados at my NZ home. They are not illegal.
What if New Zealanders don't want apartment buildings?
They just want to be able to live in affordable homes?
I'll give you a more direct economic argument: when a foreigner 'buys a home' in say, Toronto - what they are benefitting from is the 'stability of the economy' - which is paid for by the local citizens. The legal system, justice system, heck - even the education system - all play a factor in 'keeping those home prices up'. So it's only fair that foreigners pay more taxes - otherwise they are externalizing those costs, just like a company dumping Co2 in the air.
Having lived in SF, Toronto, Paris and London - I'm acutely aware of how this globalism issue is working out.
I also lived in Germany were real estate prices are very stable.
We do not want 'free trade' for our domiciles - this is not a solution.
If you are not living in a home - it should be taxed - if you are not a citizen, taxes should be higher.
If's funny people are accusing Jacinda of 'Venezuela' i.e. socialism - if Donald Trump did this - they'd call him a 'Nationalist' or 'Fascist' or whatever.
There will always be 'internal problems' but the globalization of homes has to be addressed.
Speaking as an Australian, , where we already have nominally similar policies, and keeping in mind the metro house price phenomenon is repeating in several places in the world in a similar fashion, there's just one small problem with these policies:
There's limited evidence available that it's foreign buyers primarily responsible for our high house prices :/
The primary cause has always been local steady employment, low interest rates combined with liberal access to debt with households culturally disposed to pumping that into housing.
It's very easy to blame this on Chinese money (which I'm sure is a common story in many parts of the world where house prices are taking off), but the far bigger cause had always been leveraging afforded by local households combined with a low interest rate environment.
Just replying to myself now to add: the solution to high house prices is, like much transport policy, boring and well known but not implemented for political reasons. On the housing front: tax capital gains, limit leveraging ability, implement a land based tax and zone/invest appropriately to encourage new supply. This will bring housing far more in line with what people expect.
This brings us to the other awkward point though: truthfully, I'm sure many New Zealanders, just like many Australians, neither want their housing prices/investments to drop in relative price or to return to closer relationships with local use.
Which leads us to the policy/political pantomime game so often involved in these areas where people want to have their cake and eat it too: "I want afforable housing for my children that doesn't make my property prices drop!"
I would hate to be agreeable on the internet but I think you've covered this from an Australian perspective fairly accurately.
Simply removing the capital gains tax discount would help to prevent speculative investments.
There has been much talk of negative gearing being the issue but those with a short memory don't realise it has been around since the 80s and operating with out much fuss. It was the CGT discount combined with negative gearing that really got the property snowball rolling.
Further, I believe a land tax would help to cool the market in perhaps a more controlled manner.
Just one element missing, it's CGT + neg-gearing + low interest rates.
Not that I can really complain, as we just managed to do really quite well for ourselves off a single year's speculation. But I still think the system's broken.
I talked to my accountant and he suggested CGT + lower personal income tax.
So, someone who owns O(1) house, pays CGT, but that's compensated by O(1) less income tax.
Someone who is flipping houses is paying CGT but in the end, it's not offset by less income tax if they are flipping lots of houses. They pay tax O(N) on it just like everyone else, and they gain O(1) less income tax.
Currently when you sell a house, you are not taxed on the profit that you make.
It's one of the few forms of income which is not taxed. Everyone else pays income tax.
I think the point of introducing CGT is to tax people who are buying and selling houses as their sole form of income.
Given two people, if one person earns 100k through hard work, and another earns 100k through flicking property, the first person would be at a major tax disadvantage, currently.
However, introducing CGT would essentially mean less money in everyone's pocket. It's possible by reducing income tax, that in the above scenario, hard work is encouraged over being a property middle-man while still maintaining some semblance of balance. I guess you could leave income tax where it is at, but that would make it even harder for people to climb up the property ladder after CGT was introduced, IMHO.
> However, introducing CGT would essentially mean less money in everyone's pocket.
On board with you up until this point, but this is where I disagree with you; by smashing property prices you'd actually end up with more money in (almost) everyone's pocket. By pushing prices down and implementing policies that keep them there you're having no impact on most home owners and massively benefiting all non home owners (which is all future generations), as well as stimulating the economy by pushing money away from non productive real estate speculation and into other areas.
Putting income tax and CGT on the same level seems like the sane place to start to me. A CGT should be assessed annually on paper gains at the marginal income tax rate, then any corrections should be made when a transfer of ownership is made by calculating the total profit over the number of years held. This would mean that income from capital gains would be treated the same as income from other means and seems like a fair way to start.
I agree with you. Thanks for taking the time to reply with something meaningful. It's not an area I'm really familiar with so it's great to hear other opinions and learn about different perspective.
I think by adding CGT, you increase everyones tax liability a bit, so by reducing income tax, you'd ensure that everyone was basically in the same place, except for people who were abusing the system in the first place.
I'm not an accountant so I should just defer to those who know better :)
Yeah, that's a fair enough approach. I don't necessarily want to increase the overall tax burden, just distribute it more fairly. Ideally the policy mix should put such downward pressure on prices that people end up paying very little in capital gains taxes.
I don't think offering an offset for capital gains tax is the right thing to do though; you're still essentially taxing capital gains at a lower rate, e.g. someone that earned a 100k from their job would pay more than someone that earned 50k from their job and 50k from capital gains. Instead the income tax brackets could be adjusted to account for the new income stream such that the total tax take remained the same, then both 100k earners would pay the same rate but on average nobody would be paying more.
Not sure if you're Kiwi or not, but TOP had a very interesting tax policy this election - http://www.top.org.nz/top1 - along those lines, no increase in tax take but a massive change to where it comes from, which would have meant large income tax reductions.
Aucklander here: you're right. One of the effective political tactics against the Labour Party was to suggest they'd threaten house prices: most of Auckland home owners need high real estate prices, either to keep rents (investment cashflow) up, to continue to leverage their retirement real estate Ponzi scheme, or for the simple reason that nobody wants to have to move for work and lose money when they sell their house. These all make it hard for a government to be effective at lowering house prices without the needed-but-deeply-unpopular introduction of a Capital Gains Tax.
The "no sales to foreigners, let's curb immigration" is a sop to affronted New Zealanders of European and Māori descent, who are increasingly finding themselves outbid by recent (last 20-years) Chinese migrants who not only want a house for themselves but also want to participate in the only economically thriving part of the NZ economy that doesn't require a dairy farm: real estate.
I don't see any issue with NZ putting up that block to keep out Chinese 'investors', considering the roadblocks foreigners have to face to do business in China.
There's not going to be any change in money coming in to buy property from foreign buyers.
What you're actually going to see is a cottage industry of lawyers setting up citizen-owned shell corporations to funnel this money through -- minus their fees of course.
Welp, then, a law will be erected that forces lawyers to report info of shell companies if they are involved in real estate deal.
Just a few months ago, US govt started a program where if a foreigner buys real estate of a certain value ($4 million?) in certain hot markets like Los Angeles, NYC, they have to report it to Treasure or IRS. As of now, that value is too high to be effective imo, but there are ways.
So my family had a house in Forest Hills Gardens (NYC) that we were selling in early '07 listed at $4.5mil. August-September of that year happened and we had to take an immediate $2mil haircut (eventually more like a $2.4mil one). Luckily it was owned since the 50s and not some crazy leveraged investment vehicle.
It still took an additional 6 years (roughly) to sell, but throughout that whole process, 99% of the potential buyers, including the eventual purchasers, were Chinese nationals. I lived in that house and met everyone that came through (including the time Anna Chapman came through to show the house...wow).
There's an entire class of real estate here that just has no market without Chinese money coming in.
Isn’t another way of looking at this to say that the presence of Chinese money artificially inflates the prices of some classes of real estate past what the rest of the market will bear?
It's possible. It's also just possible that the average American family in New York doesn't have much need for a house with 5 bedrooms. I don't have enough data points to draw conclusions here.
Ya, try buying a house as a foreigner in china (first tier city). It isn't impossible, but they put up a lot of obstacles to do it (lots of residency requirements, which seem fair enough).
To be fair, Chinese non-residents of first tier cities also face restrictions, and even residents may face limits on e.g. the number of houses they're allowed to own.
Yes, though foreigners have additional hoops to go through to show residency. Also, foreigners can never
obtain hukou even if they are resident for a long time and own property, nor do they get school benefits. so there is little incentive for us to buy rather than rent.
There's reasons for these sorts of policies that go beyond housing prices. For instance, too many vacation/investment properties makes it harder for cities to provide services. How do you forecast demand for electricity, gas, water, trash removal and schools when non-resident owners are using those services sporadically or not at all? These kinds of services all benefit from higher population density and ownership by absentees makes it harder for city governments.
It would be nice if these laws were written in a less xenophobic fashion (i.e. allow ownership for citizens and permanent residents who've lived a certain number of years in country), but these kinds of policies have their purpose, even if they don't solve the housing affordability problem. It's in the interests of a city/country to have the people who own property in it be people who are committed to living there and caring about the community.
Wouldn't you also need numbers to arrive at the implication that foreign investment is?
The numbers, at least historically, have always been hard to find, but the macro economic theory and indicators are generally quite boring and straight forward: employment stays high and household incomes improve, interest rates drop, lending and leveraging increases to household, supply is inelastic, house prices rise.
Everything lines up pretty well, so why look to blame foreigners (who, even at the most generous estimates on what data does exist, are still a minority).
Well, one can use ockhams razor and plug the aggregate finance stats and household numbers in for each country: foreign investment will likely be related to the residual. That is, whatever amount is left over after domestic statistics and aggregate lending are taken into account. We don't have an accurate primary source for foreign investment, but we can reason.
The rba website would be my first stop in aus for aggregate finance stats available publicly. The Abs has some construction/hiding investment data, but there are some issues with definitions you'd need to take into account. And our neighbors across the pond, although I'm not a kiwi, I imagine will have very similar structures and data.
Additionally, such a simple model explains house prices quite well since the 1990s, across various markets with various levels of foreign investment, so we would need very good reasons to insert a "foreign investor" cause in there.
People in Canada blame foreigners too for house prices in Vancouver and Toronto but recent surveys show that foreigners only make up about 10% of purchasers. We've had low interest rates too and a vibrant economy. The federal government raised interest rates, changed mortgage terms and increased fitness requirements to stop people acquiring mortgages they can't afford.
The 10% figure that is constantly tossed around is garbage, it was calculated by counting number of owners that voluntarily declared they were foreigners.
Many new condo developments in Vancouver and Toronto are offered for sale in Asian countries exclusively before Canadian citizens can even make an offer on them. If you drive around Toronto there are real estate signs openly advertising areas that don't have a 15% foreign buyer tax.
The RCMP recently busted an elaborate Chinese money laundering ring in Vancouver that was processing $500 million/year in foreign cash alone. Much of it was being used to purchase real estate in Canada. The last article I read mentioned Canadas laws are so lax the authorities couldn't even seize the real estate directly involved in the scam because it was owned by Chinese citizens through shell corps.
yeah but 10% is huge when you consider that's all inflow, not people selling one house to purchase another, not to mention historically low vacancy rates in both cities.
It's per year. Before the foreign buyer tax in Vancouver, there were parts of the city where 20% of purchases were made by foreigners (Burnaby and Richmond).
Yet I've heard from one realtor that in some suburbs of Great Vancouver 15% of properties stay empty - pure investment.
Vancouver is not the city to live in anymore. Problem is that it is not the city to work in too. Too long commutes - 2 hours to spend on road. That means work day is not 8 hours but effectively 10. That means people asking and company offering higher salaries.
That housing situation hurts all other businesses except of real estate quite a lot.
10% is a lot for driving market prices only if they live in those houses or leave them empty or massively overpay.
But most foreign buyers in these markets are buying to profit, and rent out the properties, and so only really contribute to balancing rental and sale prices.
A lot of them are not buying to rent out, especially if they are Chinese where in china renting out doesn't make sense. They sit on the properties empty as pure speculative plays.
I don't know Australia or New Zealand, but in London that is demonstrably not true: The proportion of empty properties in the areas that are attractive for investment is the same as elsewhere, and the proportion of empty council housing is pretty much the same as empty luxury housing. As it happens, most long term empty properties are empty for other reasons, such as waiting for re-development of the property, or large scale renovations and the like, or issues with sorting out ownership following death etc..
Sure, a few are left empty by owners who just don't care, but there's very little indication this number is high. Especially as in most countries there are rental management companies that makes it trivial to rent out a property even if you're an absentee landlord.
I don't know about London, but in lots of these places, occupancy is determined on the honor system. They don't check power/water consumption or lights on at night like other places. In china, you just need to count the lights on at night to see how big the problem is, or peep through the door to see that the unit is still not even renovated. They did a study a while back using power consumption stastistics that was quickly hushed up as a state secret.
In Vancouver, the problem is so bad that local shops are going out of business for popular speculative properties because their just isn't enough residents to use them, even though prices are sky high and the developments are all bought out.
If you’re well capitalized it is often cheaper and less hassle to leave them empty. Renting is a pain in the ass and makes unloading the property harder.
Example: I want to hire 10 developers. There are no places to live with price tags less than 1.5 mln in 1 hour commute radii from here. What would be my options? To pay them enough salary so they can afford mortgages?
Cheaper to move the whole business to Eastern Europe / Russia then.
I don't understand what you think the relevance of that is to the effect foreign buyers have on house prices.
The house market is split between people buying and renting. When people buy as an investment, it does drive up purchase prices, but unless they leave it empty rather than rent out, it drives down rental prices by increasing supply. Rental properties also tends to provide more density, as they are more likely to be occupied by sharers, and so increasing the rental supply is likely to soak up more demand than the reduction in purchase opportunities. Eventually the prices reach some degree of equilibrium, because bidding up the purchase prices much quickly becomes unprofitable as rental prices are pushed down.
Ultimately what is driving the cost up is mainly down to more people with enough money who wants to live in a given location, not investors, as if there wasn't demand to live there it'd quickly prove a bad investment.
Obviously, it's very hard for me to be specific to each market, so those are high level principals.
It gains for the new buyer an average falling of house prices, under the assumption that we are talking about a later period market that has seen asset prices rise due to leveraged investment by primarily high net worth holding entities looking primarily for capital gains of of asset price movements in an illiquid and inelastic-supply market, rather than fundamental connections to longer term investment/income flows and local income opportunities. The logic is that this disproportionately targets the leveraged investors regressively compared to the local home buyers.
Now there's also an argument to be made that if you encounter a market that is not in such a state, it could be individually rational for a new buyer to buy into said market, then lobby for policies which increase demand while removing said policies/barriers for themselves, thus trying to turn such a market into our common current situation now they have become a property holder, but in short, we have to try for policies that allow openness for sensible new investment while still tying values to local incomes, services and infrastructure funding, and long run returns.
Consider negative gearing: This is a tax break given to investors who do not live in the house. Eliminating this tax break would be beneficial to people who want to buy a house to live in because they would suddenly be competing with fewer investors.
More generally, harmonising the tax rates between real estate and other asset classes would also lead to more efficient allocation of resources, benefitting everyone.
Well yeah, obviously. Anything that reduces the profitability reduces the appeal to investors, which decreases price pressure, which leads to price falls, which ideally falls into a virtuous cycle of falling prices and falling investor demand until you have sane prices again. You'd have to hit it pretty hard to actually get that going though; this policy won't do it alone.
For new home buyers lower prices is great. For the economy lower prices is great (the initial massive losses will be rough, but going forward it means far less overhead on all Kiwis with that interest money going elsewhere in the economy, and in general the money going into non productive real estate speculation will go to more productive areas of the economy).
Increases taxes to "lower" the price doesn't lower the total cost of ownership, it just hides it by reducing the potential gains (which are _priced into_ the sale price).
I wonder how society functions at all, with the "solutions" I see ...
> Increases taxes to "lower" the price doesn't lower the total cost of ownership, it just hides it by reducing the potential gains (which are _priced into_ the sale price).
That is true, but you're missing the point. Given that the reduction in potential gains means that speculators will (to some extent) exit the market this means that demand and therefore prices will drop further.
Additionally non-investors cannot typically realise their "gains" (they don't exit the market to cash them in, they move to other houses which have had similar gains and so have no net gain) and so they're useless to them. Losing those gains doesn't harm them, but the lower price does help them.
I wonder how society functions at all, with all of the poorly "thought" out criticisms of solutions that I see...
There are a lot of weird arguments about this that seem to work of the idea that because there aren't really that many foreign buyers, ergo they don't have much effect on the market.
Agreed that capital gains and leverage have a lot more do to with it, but I don't think Australians are necessarily ready for "zone/invest appropriately" (and fair enough - so we have to watch our cities transformed to megacities?)
As another Australian, our housing prices is broken for multiple reasons but foreign investment is a _major_ contributor.
Credit Suisse research indicates that "foreigners are acquiring 25 per cent of newly completed supply in NSW and 16 per cent in Melbourne, or 21 per cent if we combine the two states". The total value of new houses in both states was $39 billion over the relevant 12 months.
After the Chinese government cracked down on monetary restrictions (i.e. Citizens of China can normally only convert US$50,000 a year in foreign currency and have long been barred from buying property overseas), Lend Lease reported 30 to 40% of foreign purchases now being cash settled.
Transparency International consider Australia the worst money laundering property market in the world.
Foreign investment, especially for countries which avoided the 2007 housing bubble such as Australia, is a major issue.
A friend will be posting an article on the multiple bubbles he sees in the Australian economy, and property is potentially the most concerning of all given how exposed our banks are to housing loans.
We may find Australia finally seeing their house bubble pop like the US in 2007.
Can hacker news link me to the credit suisse research? I only ask because I work a bit in this area, and I've gotten into the habit of ignoring all reporting in the press because they neither link to or critically engage with their sources.
Incidentally, I'm not saying foreign investment plays no part in such markets, but that its relative contribution has always been overstated. Adittionally, the policy responses I suggest which address house prices work irrespective of foreign/local mixes for most markets.
> I'm not saying foreign investment plays no part in such markets, but that its relative contribution has always been overstated.
If anything it has been understated.
1) House pricing is incredibly demand sensitive. A sustained 10% drop in demand would crash house prices.
2) Local buyers expect capital gains. It is the reason they buy.
Rental returns on Sydney property for example are roughly the same as fixed deposit rates.
Where do buyers expect these capital gains to come from? For the most part from rich foreign investors (and to a lesser degree very wealthy immigrants).
This means a large fraction of the local investment market is also driven by foreign actors.
The Credit Suisse doc says foreign investment is 25% of the state of NSW, and 16% of Victoria.
But I wonder what the percentages are for Sydney and Melbourne. My anecdotal evidence is that foreigners don't really buy outside the capitals, so I expect it to be much higher.
Which would have a stronger effect on property prices, as the capitals tend to drive prices for the smaller towns.
The figures are specifically for newly completed supply, the vast majority of which is also in Sydney and Melbourne. They aren't building teetering 30-story apartment towers in Dubbo or Wagga Wagga.
> But I wonder what the percentages are for Sydney and Melbourne. My anecdotal evidence is that foreigners don't really buy outside the capitals, so I expect it to be much higher.
They might not be interested in country towns but they are very interested in booming coastal towns like Gold/Sunshine Coast in Queensland, I'd assume the some would hold in places like Byron Bay and Coffs Harbor.
Not to mention that the skilled migration program that the Federal Government is running (while we have some of the lowest wage growth, and some of the highest levels of underemployment and labour underutilisation in our history mind you) is absolutely massive - one of the largest in the developed world in proportion of our population. NZ is right up there with us in that too.
Nothing like huge population growth to keep the demand for housing up. Sadly the discussion has been so poisoned by the racists and xenophobes (like One Nation etc.) that we can no longer have a rational conversation about it...
I think you're correct on the large scale but anecdotally, the first 3 houses I put an offer on were purchased by the same Chinese couple at a price much higher than I'd have expected. I stopped putting offers on house when I saw them at the open homes. I have nothing against them they are acting in their own interests and good on them for having the money to buy property. I just can't compete with them and am glad that our government will manipulate the market in favour of people living in the country. I suspect that foreign ownership of land could have a negative impact on our economy as it only extracts money from our economy.
You were outbid by people who don't look like traditional NZ inhabitants (Māori or European) but that doesn't mean they're foreign purchasers. If they've emigrated to NZ, then they're not foreigners any more, and that couple was just doing what plenty of European New Zealanders I know are doing. Namely, buying a bunch of houses as rentals. (Whether investment properties should be a thing, and whether Capital Gains Tax would curb that, are left to a different discussion)
No, they are foreign nationals. They have a child studying here are and are investing in property while they're over here settling their child in. I agree that once you emigrate they're as much a New Zealander as I. But these people have not.
The only problem I have with foreigners buying property here is that they are not in our economy they take any gains out of our economy. It increases the cost of living here without adding value.
I’m totes down with blocking foreign buyers, for the same reasons as you. I just wanted to note that not every Chinese home buyer is a foreigner. Sounds like you were already aware of that. Awesome!
But they add cash value because the native seller now has whatever amount extra coming from a different economy. It will raise the prices of homes in the area as well. This will fuel growth.
For another anecdote, we were regularly outbid by young couples with large deposits offering way over valuation prices helped by parents gifting them large deposits.
This is the thing, why does one person need multiple houses when other folks can't afford one house. As someone that hasn't bought their first home, I'd be happy to see a tax on non-primary residences.
In California you get $7,000 off the assessed value of your home with the homestead exemption. So ~$70 off your yearly taxes. Must have been much more important value when this was passed into law but almost nothing now on the usual $10,000/yr prop tax bill.
Where I live it’s a straight property tax reduction. In my current house I pay 1500/year in property taxes. If it was not my primary residence the property tax would be between 6k-8k.
Instead of changing the assessed value, it lowers the percentage of tax paid on the value.
You can add value by being a good landlord. Some people want to rent. If you provide a service great. But housing is funny as it's seen as such a safe investment and seems to be inflating too quickly.
>"There's limited evidence available that it's foreign buyers primarily responsible for our high house prices"
There's actually lots of evidence that hot foreign money is driving the prices up. There's also been a trend by developers to develop properties to attract this type of buyer.
There is lots of anecdata that Chinese real estate speculation that is obviously rampant in china is spilling out into international markets, like it did with Japan 30 years ago. When I was living in china, I knew people who were looking abroad for real estate investments. But anyways, vested interests in those target markets don't want it to go beyond anecdata, so they operate under a "don't ask, don't tell" policy.
New Zealand is a classic case where housing prices have far exceeded normal incomes. When asked to consider NZ for a job, I ask is the pay better (no); is the cost of living cheaper (also no....). It definitely isn't tech salaries driving the housing bubble there!
Yeah, NZ national living in Melbourne, there's not much that could tempt me back to NZ. Property prices in Melbourne are more reasonable than Auckland, and salaries are far higher. Cost of living not much lower either.
Salaries didn't seem much higher when I was looking - I found a job in provincial NZ for the same salary inner city melbourn jobs seemed to be offering. How many years experience before you break 100k AUD in Melbourne? And where's the ceiling in terms of non management position?
I have no idea about entry level rates, but I wouldn't think it would take many years to break 100k in IT. I know many non-management people making well over 100k/year.
The cost of living calculator they put up[1] suggested that I'd be losing money as a single income earner for my wife and daughter in Auckland, while I can support them here and bank literally 1000s on top of my living costs and mortgage here.
I don't know exactly what I'd get in Auckland though, I assume it's estimates are middle of the range, so it's not quite a fair comparison but the general picture fits; in general living costs in NZ are a bit lower (excluding Auckland housing, which is more expensive than anywhere in AU except for Sydney) and the median salary is _far_ lower.
Also, preferences may differ, but I grew up in rural NZ and inner Melbourne is a much more interesting place to live as an adult; the country was pretty fun as a kid though.
The issue is it's extremely easy to hide foreign ownership through trusts, companies and relatives who are Australian residents. Anyone with a the means to pay top dollar for an investment property can easily afford hiring the right people to get around this restriction. Which makes it even more shocking when you see statistics like 21% of supply is purchased by foreigners.
Same thing in London. Foreign buyers is the big bogeyman, but the reality is that prices are sky high even in areas where foreign buyers are not the slightest bit interested in putting their money.
The reality is that most foreign buyers here rent out their properties - it's an investment after all - and it's only on the very, very high end of the market that people leave their properties empty for any amount of time, and that's a very tiny proportion of the total market.
But it is convenient to be able to blame someone else and avoid making the hard policy decisions requires to boost construction.
(while I agree leveraging makes it worse, though, the underlying problem is still competition for a too constrained supply of housing - I don't know about Australia, but in the UK house-building has trailed demand for decades at this point; to a large extent because of short-sighted policies which focuses infrastructure investments in already overheated areas and makes it even more attractive to move there, coupled with lack of willingness to open new areas for construction or relaxing restrictions on new developments in terms of height etc. outside of very small areas)
> prices are sky high even in areas where foreign buyers are not the slightest bit interested in putting their money.
That shouldn't matter. Foreign investors bidding up property in place A forces English buyers into place B, and prices naturally rise there as a result.
It's the same in Canada. Everyone blamed the Chinese for the increase in housing prices. When they actually got the data, non-resident purchases of residential real estate in metro Vancouver barely broke 10%. It's much lower than that in the suburbs of Vancouver and Toronto.
It's the 90% of Canadians with access to cheap debt and fueled by "real estate never goes down! It's now or never" that pushed prices so high.
That new demand is on top of already high demand. It’s probably magnified as foreign investors want premium property and drive the top of the market up.
10-14% of buyers SELF REPORTED as foreign, across METRO VANCOUVER, not some fancy neighbourhoods. That's the base minimum possible percentage of foreign buyers.
Then the 15% tax was introduced and dropped foreign purchases down to to 3-4%. Do you really think the ~8% stopped buying? No, they just used one of the trivially available loopholes like sending in their astronaut family or buying through a trust company. And many buyers were doing that even before the tax was introduced.
So if they are using loopholes to continue to buy, why are housing prices dropping? Maybe because foreign buyers don't have that much of an impact on the market?
I would love a portal to that universe in which Vancouver housing prices are dropping.
There was a short drop due to uncertainty around the tax and the elections / new government, but it is over, and it was tiny compared to insane price increases that immediately preceded it.
I don't know why you keep saying things that aren't true and yet can be checked online in under a minute.
And after they were kicked out from Toronto they moved to Montreal. Prices/Sales in Mtl had increased by highest percentage on record (and that after 5 years being flat)
Australia's policy is weak with regards to enforcement and penalties; NZ's may or may not end up being more effective.
Agreed that foreign speculation is at most only part of the problem and that the drivers you mention are a large part of it, but you missed out the other significant factor in the "cultural" inclination to invest in property, which is that the favourable taxation policies (CGT discount, negative gearing, family home CGT exemption) and benefit policies (family home exemption from pension means tests) drive money into property.
In NZ's case it's even worse as there's close to no capital gains tax on any property speculation (no requirement to actually live in a property to claim it as an owner/occupier style non-investment property).
I wouldn't bother, because my preference is to tax capital gains on all property including family homes (and to apply this tax annually based on paper profits too).
That said, occupancy requirements are reasonably common elsewhere (e.g. to claim first home buyer benefits in AU, to prove that it's your primary residence to avoid capital gains taxes in AU, to get owner/occupier interest rates in AU) so I assume that they have some means of enforcement, but haven't really looked.
Property taxes already tax based on the paper value of the house (well, an assessed value, which may or may not be fair).
Tying it to appreciation and paper profits could quickly drive someone out of their home (e.g. Seniors). Heck, this is why prop 13 was initiated in the first place, for all the damage it did.
Different situation here in AU, but the idea would be that you put so many dampeners on capital growth that there isn't really any (and so nobody gets driven out of their home).
See the other comment re: multi millionaires collecting the pension; my taxes paying for benefits with far more wealth than I'll ever have, it's a frustrating situation.
Pensions and SS aren't considered welfare in the states so it wouldn't matter how much wealth they had. The problem that the USA Californian seniors were having is that they had a fixed income (SS, pension) and couldn't keep up with rising property taxes (problem when your taxes go up but your income doesn't).
I don't know that they're generally considered "benefits" here, but that's what they are. There is a means test (i.e. if you have enough in the way of assets then you don't get the pension) but it totally omits the family home; someone with a million dollar house vs a million in cash have the same assets, but one will get a full pension and one will get none.
Speaking as an Australian as well. I'd say 1 house per person and no negative gearing in addition to stopping overseas investment in residential property would be a better policy.
I lament that lack of business in Australia because everyone is fighting over the scraps of our property market.
Acow_Adonis, I think you've failed to consider a few factors.
A quarter of new NSW properties were sold to foreigners the past year and 89% of those foreigners are Chinese [1]
70% of Chinese are buying property with 100% cash [2]
$3.8 TRILLION USD of "capital flight" escaped from China in the past decade
[3]
Australia's property prices doubled this past decade, from an already high base [4]
Australia has no Anti Money Laundering laws for Realestate Agents, Lawyers and Accountants, despite a committee "considering" implementation every two years for over a decade. Transparency International ranks Australia as having the weakest anti-money laundering (AML) laws in the Anglosphere, failing all 10 priority areas
[5]
Prices for property are set at the margins (recent sales are used for valuation of upcoming sales)
[6]
As per another comment in this thread, I really want/like links to original sources for figures, not second hand reporting.
But let's accept some of those reports on face value. In Australia, you have to take into account both that we have laws that limit foreign purchasing of established properties, and that those figures are commonly for newly established properties.
Firstly, that's exactly what the policies were supposed to cause.
Secondly, new sales need to be measured relative to turnover and funding within the local established market. This gives you an idea as to the relative scales. Under the observation that many of these investments will be in high rise inner city apartments, again, it's not necessarily such an alarming figure, and arguably, might even be what policy was set out to achieve.
The most feasible take away I think is your link no 6:pointing out that the price set in a market is a complex play of expectations and marginal prices.
But, as with most of these articles and points, this all had to be taken in context of the behavior of locals and he size of their operations.
I don't say that foreign investment plays no part. While no rain drop considers itself responsible for the flood, I think it's a curious analysis and interpretation that focuses on the 10% and blames them, when there is enough explanation to be found in the behavior of the local 90%, given that obviously market outcomes are in truth an interplay of both.
> There's limited evidence available that it's foreign buyers primarily responsible for our high house prices :/
It doesn't matter if it is the primary cause, it is one of the causes. And it is the one to change that causes the least problems to the people of the country you represent.
In Australia, things are compounded by the incredibly greedy negative gearing rule, which also needs to be banned.
Negative gearing is when the house is run at a loss and the loss taken against regular employment income.
That would be when the rent doesn't cover the mortgage interest + maintenance costs.
The benefit is that the dominant form of income in the investment is the capital gains, which is under your control to take at a later date when you'll pay a lower tax rate.
Wait, so you can get paid to renovate a place above what the market will pay in rent and deduct the difference from your taxes, but then eventually sell the palace later and make cap gains on that?
No, but you can claim interest and repair costs as a means of lowering your income and other taxes. Taken to an extreme there are some people who pay net zero tax on millions in net income (they don't mind the loss as there is no tax and the long term plan is to make a capital gain on sale).
The original idea was that people would lower the rent to make renting more affordable. This rarely ever happens in practice because tweaks to the law mean that you can claim interest and expenses without actually renting the property (set the rental at an unaffordable price point and leave the house vacant).
No, you can't deduct capital expenses like a renovation from your personal income, but you can deduct those capital expenses from the eventual capital gain so that the capital gains tax is only paid on the net profit.
The negative gearing only applies to ongoing expenses (e.g. maintenance, interest, depreciation) not to capital expenses.
That’s really not the case. The issue, however, is broader - there are so many people speculating on property in Any Arrakis we are heading for an absolutely enormous crash. Chinese investors are getting targeted because there have been quite a few of them in an already incredibly overheated market.
That doesn’t mean that overseas speculators aren’t part of the cause this problem.
A house with an absent owner overseas is usually still occupied by somebody, so still contributes to housing supply. I don't really think the measure will have much if any affect.
There may be some houses that are left vacant, the owner could be in NZ or somewhere else. Perhaps it would have been more useful to take measures against that instead.
There's limited evidence available that it's foreign buyers primarily responsible for our high house prices :/
Correct.
The primary cause has always been local steady employment, low interest rates combined with liberal access to debt with households culturally disposed to pumping that into housing.
If you access the ABS web-site and download the house price index for each state and capital and map out long term growth excluding the years after 2000. Then calculate the growth of housing that has been typically matching inflation or 3.3% per year (depending on state).
Then you over-lay immigration, births, deaths, and interest rates. You will find that that most of them don't really correlate with the boom in house prices.
Even accounting for the Negative gearing introduction it didn't have `that` much of a impact.
The only correlation I have found that triggered the whole entire cluster f we have now. Is if you go back and look at the introduction of Capital Gains Tax Discount.
After the introduction of CGT Discount that is when the vast majority of high to middle income earners turned to housing as a investment stream to avoid tax. Then on-top of this you had the Howard Government introducing the `User Pay` system where instead of the tax payer fitting the bill for new suburbs and infrastructure for housing, the developer and home owner now has to pay for housing infrastructure.
I live in Darwin, and did recently purchase a house.
Yes good :) that's the kind of data driven analysis we should build on.
Additionally, we have to explain why house price rises correlated strongly across particular international areas at particular times (and that's one area where international investment should not be struck off the initially unfeasible list of options until our data/theory suggests otherwise).
And additionally, if house prices are increasing, why these cities/areas and not others. If there is a reason money and investment is flowing to these places, do these policies address those fundamental reasons. If not, policies may just have to watch effects flow around policy like water flows around obstructions.
The "supply argument", and I start by admitting I cannot do this debate justice in the space of a HN comment, reminds me of the futurama joke: "you are technically correct, the best kind of correct".
If budgets/demand increases, and supply does not adjust, then prices rise. It's Econ 101, and it's technically true. But like most technically true answers, there something unsatisfyingly unhelpful about it.
Tokyo is likely strange due to the particular timing and history of housing and economic bubbles in Japan, vis a vis the millenium bubble and post gfc story that's been playing out for most English speaking nations.
From a later year Economics point of view though, we can start asking some bigger questions:
-what factors contribute to increased demand
-should supply increase to match demand?
-could any market have increased supply sufficiently to avoid price increases in any meaningful way given the relative liquidity and elasticity of funds and demand increasing policies vs the structural inelastic nature of housing supply
- are lagged over/under supply problems possible?
- from a public policy and prudential perspective, what should we be doing to manage these issues? should policy be set by locals or by money flows (and I don't think there's an easy or universal answer to that last one)
Forgive my ignorance, but if it's easy to build homes (as has been for a number of years) due to low-interest rates and steady employment wouldn't that lead in an increased supply hence dropping prices?
You're correct, but missing one major factor. The price of land. If you have a look the countries with housing market bubbles have high regulation with zoning and release of land to build houses on.
Take for example Australia. We have one of the most highly regulated land zoning regulations in the world. That and the high price of land where you can build a house on. If you track construction cost vs land prices you will find that land is one of the major contributing factor's to the price of houses.
For example, the house I recently purchase I purchased for $330,000 AUD, but the land is worth valuation is $315,000.
Anecdata: as a first time Oz home buyer relying on a bank loan, I was consistently excluded from house sales by foreign investors who could pay cash up front.
Vancouver would like a word with you. Foreigners were buying homes sight unseen to park cash. Vancouver passed a foreign buyer luxury tax for those who arent living in their homes full time... and Lo and Behold! Sales decreased a ton and things have been cooling down.
The real reason this is happening is in fact much simpler than outlined in the comments: Kiwis quite simply don't have an asset class in which to invest sensibly that isn't property [1]. In America, I'd cheerfully put the majority of my income into an index fund tracking things like the S&P 500 but New Zealand tax laws heavily penalise this and incentivise property ownership by giving a pass on capital gain tax. The result? House prices are driven up artificially; a problem adroitly obscured by not appearing on an RPI index.
The current political developments present an interesting situation; a Labour campaign pledge was to impose capital gain tax on personal property investment (already sanely capped for anyone considered a property developer). I don't see other asset classes being taxed differently to compensate, thus exacerbating the already dire talent drain the country is experiencing. Ironic, given the endemic NZ aspiration to 'get ahead'. It's certainly an interesting time to live here, but I'd prefer bubbles to confine themselves to the Bay Area!
"We have agreed on banning the purchase of existing homes by foreign buyers," said Ms Ardern
My point is that non-residents will still be able to build new houses. This policy brings New Zealand in line with Australia which already has a similar policy.
Australia's is toothless though, in that enforcement is minimal and so are the penalties. NZ's may be equally crap or it may be quite effective, but I haven't seen details on the above and so it's hard to compare the policies at this point. A policy like Thailand's, where those found to be buying against the rules have their property taken off them without compensation, would be ideal.
The next step would be to require that those that do not meet the rules sell up, which should put a bit of supply into the market and achieve some meaningful price movement.
Another good step would be to finally bring in a decent capital gains tax, ideally charged annually on paper profits at whatever your marginal tax rate is, and with no family home exemptions. Ironically taxing the family home would, in this case, actually make them more affordable by exerting further pressure to move speculators out of the market.
> A policy like Thailand's, where those found to be buying against the rules have their property taken off them without compensation, would be ideal.
You can't do that in an open, globally connected economy though. As great and beautiful as Thailand is, it is still for the most part a corrupt developing country. You want to hold Australia or NZ, which should be open for business and wants to attract global investment by better protecting investor rights, to a much higher standard.
I'm not proposing that we take on board the corruption, but of course you can have a law with appropriate penalties for violators of it in an open, globally connected country.
We want people to invest; we don't want them to break our laws. Their rights (and the penalties that would apply to them) would be laid out under the law, so no problem at all.
Australia's policy does not prevent people buying residential houses through trusts or corporations. Ultra-wealthy and money laundering buyers can walk around the law and often do. The only buyers stopped are those closer to median buyers (which for Sydney and Melbourne is around the 1 million dollar mark).
Overall the policy is largely ineffective at even slowing price increases.
Thailand and Australia are not comparable markets, sure foreign buyers want access to both markets but Thailand is a corrupt military junta and Australia has a mostly functional court system (but increasing levels of corruption at the top end).
Also, it appears that residents of New Zealand (who may be foreigners) can buy existing homes [1]. So apparently it would still work if you can move there and establish residency, but not for buying a second home while living elsewhere.
No, it seems toothless, with obvious loopholes. A sane housing market is way more important than allowing temporary residents to buy a home. They can rent until they either leave or become permanent residents.
Just look at Vancouver where incomeless foreign students are buying supermansions.
Obviously they're buying other houses as well, and not only students but other foreigners as well. This example is just a good illustration of toothlessness.
Also obvious is that increasing demand on one type of housing puts upwards pressure on the prices of other types of housing because they are (in part) substitute goods.
Agreed. Funny that everyone is focusing on that point, which probably won't have much affect. I expect other policies such as below, will likely have more affect. Encouraging more housing at the lower end of the market seems like a good idea. Rather than pushing low income earners into the exurbs.
"LABOUR WILL PARTNER WITH THE PRIVATE SECTOR TO BUILD 100,000 AFFORDABLE HOMES
KiwiBuild will deliver 100,000 affordable houses over ten years for first home buyers. Half of these will be built in Auckland. That is a ten-fold increase in the number of affordable houses being built in Auckland each year, from 500 to 5,000."
The main price driver is speculation, so I'm not confident that increasing supply in anything except for absolutely massive numbers (which 10k/year is not) would have much price impact.
I think speculation is part of the equation, but not the only part. There is also lack of reasonably priced rentals and housing within a reasonable distance from transport infrastructure. Current build out is focused on the high end of the market, or green field sites in the middle of nowhere.
As an immigrant New Yorker, I welcome this step and kudos to the local government of NZ for taking such initiative. For example on NYC foreign investors have ruined the prospect for an average hard working New Yorker couple to purchase a property at a reasonable price. Foreign investors (Chinese, Russians and Middle Easterns, nothing personally against all of these demographics) have been pouring in capital via greedy American established real estate management agencies. Often owners do not want to deal with the hassle of loan approval, waiting times etc and they mostly take the offer whoever pays the quickest cash. Same thing is happening in Vancouver and other major metropolitan cities across the nation and the world.
Oh bullshit. New York City is the poster-child of bad housing policy. It's amazing Tokyo can fit 38 million people into its city but New York City can't find room for 1/5 of that.
You look at any major city and you'll see rent control and stabilization, restrictions on building and eviction, and a thousand other well intentioned policies that "help" the poor or "save" our "historic" neighborhoods. What a great job its doing...
You can't compare Tokyo and New York. Tokyo has wayyyy more land area than New York. It's a build wide instead of build tall city. Source: Live in Tokyo
I'm just wondering: Can't foreign money create a company in New Zealand, buy real estate with that company and then rent it out or just let it stay there.
It says it is banning non-residents. But a New Zealand company owned by a foreigner is considered a resident entity, right?
Probably - the equivalent law in Australia has enough loopholes to make it largely pointless anyway... particularly sending one of your children to study then buying through them.
Nothing; this is what I was going to suggest. If you are the sort of person who is wealthy enough to cause housing prices to inflate to the point that it becomes a national crisis, I would be rather surprised to learn that you are NOT buying your real estate through a local shell company of some sort.
Why not just allow more or denser housing to be built? You could take all that foreign cash and turn it into high paying jobs! I mean sure construction jobs aren't high paying, but with enough automation, those jobs could turn into high paying software jobs. Just get rid of all the building and zoning laws and allow companies to innovate as much as they want.
Optionally, you could still ban foreigners from buying in places where things are already built out.
It just seems such a shame, to see so much economic loss on both sides (both for purchasers and those who'd have benefited from more jobs or higher paying jobs).
This is a disturbing pattern I've been seeing playing out in many countries: politicians and the sometimes the voters that elected them have insufficient economic education to make optimal decisions, leading to economic losses - the prime example being what happened in Venezuela.
I'm happy that National is out, but concerned about Winnie being in. This policy might be a good start, but so far looks like window dressing that's not going to achieve much.
Why? It already cost foreigners NZD$30,000 in extra foreign buyer approval fees (no guarantee) which was a cash cow. This will kill that cash cow. The best thing about NZ has been immigration. This is just going to funnel money to large construction companies building apartments, and turn NZ in to an apartment farm.
>New Zealand’s overseas investment legislation only affects transactions that include sensitive New Zealand assets, including land that is considered sensitive.
Sensitive includes half the country, eg. anything naturalesque with "covenants", government proximity, foreshores, historical sites, etc. Source: Real estate expedition to NZ, 2015.
Every single article about housing affordability on HN has the same comments. I don't know who actually writes these comments, but their solution is to just reduce the quality of life of people by increasing housing density. They think that somehow this idea has escaped everybody and they are geniuses for thinking of it. Everybody who doesn't want to smell other people's shit is called a "nimby", and infinite population growth is supposedly the only rational path forward.
Are the people making these comments the same people that will happily live in this situation? Are they rich people that will never live in this environment, or are they young progressives who think they want to live in a high-rise and have sex with robots or whatever despite being 20 and not knowing anything? Or are they immigrants trying to get into a country?
It just makes sense that when many people want to live in a small area, that you allow builders to meet that demand. Having sex with robots?
What are you even talking about? Plenty of people would rather sacrifice the large spaces of a single family home so that they can be close to an urban core. It could be because they want to be closer to their work or just want to enjoy the environment of the city. It's just as much a quality of life issue when they are priced out of that.
No. New Zealand's most common form of housing (not "rich people") is a stand-alone house. The solution always proposed on HN is to increase density. To convert housing into apartments. Meaning the new standard in a decade will be apartments. You are decreasing the quality of life of the average person and not the quality of life of rich people, who live in a mansion with a giant yard.
Not across the whole country, just in the area around Aukland's urban core. And I'm not convinced it actually decreases the quality of life of the average person. In fact, I'd wager that it increases it, by reducing cost of living.
This debate is simply that of liberalizing or controlling a nation's capital account. There are benefits to both.
The benefit of liberalization (i.e. no limits on foreign investment) is that it can provide "a higher rate of return on people’s savings in industrial countries by increasing growth, employment opportunities, and living standards in developing countries." [1]
The benefit of controlling (i.e. limit foreign investment) is that it can reduce market volatility and risk. "International investors are willing to lend to them in good times but tend to pull back in bad times, thereby amplifying swings in the domestic macroeconomy." [1]
I don't understand the concern with foreigners wanting to buy real estate. If a bunch of people want to import money from another jurisdiction and use it to buy something that is literally impossible for them to repatriate, more fool them! Let's take as much of their money as they'll offer.
They don’t want to repatriate it; they want to get it out of their country as the first step of getting themselves out of their country. (Though, they want to stay as long as possible to squeeze as much dirty money out of their corrupt regime as they can before they do, which is why they aren’t just arriving alongside the money.)
>use it to buy something that is literally impossible for them to repatriate
The asset being fixed in place does not prevent capital outflows. Plus it depends on the purpose of the investment - If it's a means of just parking money, then the only real impact of the purchase is to deny the same purchase to a citizen of the country. That's not a massive issue unless you have a housing shortage (which NZ does, not aided by it's high level of immigration).
If on the other hand a return is expected on that investment then you end up with a situation where house prices raise due (in part) to foreign investment, but people still need to live somewhere and so they rent those houses back from the foreign landlord. This absolutely leads to rent extracts which flow out of the country.
Why not simply introduce foreign ownership surtaxes instead of this ham-handed (and loopholed) approach? Wouldn't that be a win-win? Either you have more tax income, inflating housing prices cool off, and/or more vacancies for citizens. What's not to love?
It's not really loopholed; those that actually live in NZ _should_ be able to buy property there (our voting laws are similar, those with permanent residency are also entitled to vote).
Perhaps I should have clarified. Too much prime real estate in almost every country is purchased by wealthy foreigners who either sparsely live there or hold it for purposes of speculation. The result is chronic housing shortages and economy-ruining rents. In that case a hefty surtax is certainly justified.
It sounds like this policy would not achieve that, because it's claimed that the policy would only apply to "non-domiciles" which would presumably include temporary residents... so in that regard I would have to agree that it is loopholed :-/
While overseas investors (or even local students etc) would have no taxable income to offset against, why would this be preferred over simply banning it?
Try the obvious and simple approach first. If not working, revise.
Instead of trying to balance between too many factors, slumping in decision making and consensus gathering, and in the process, all the smart people already exploited or even corrupted the system.
Actually this hasn't been the first approach, there's been a gradual tightening of access to mortgages via what's called the LVR, by upping the deposit amount required for mortgages to buy a house and differentiating between the family home and investment properties. Arguably this has slowed down the rampant price rises in the past 6-12 months without crashing the market. Currently LVR rates are 20% owner occupied and 40% for investment properties (ie rentals). There's some exemptions and some other tax rules that have been put in place also. Anecdotally we're not seeing the craziness of 24mths ago. Auction pass rates have increased and the number of for sale signs have dropped dramatically. This new policy is probably more politically motivated than will actually have an effect.
The main obvious thing is to make property speculation neutral with regards to tax, rather than the tax avoidance hole that it currently is. Hopefully they'll address that too, but given that Adern has been quoted as saying they're not looking to push down prices in AUckland I'm not all that hopeful that they'll actually take the steps that need to be done.
TOP's policies with regards to taxation were very interesting; no change in overall rate of taxation but broadening the tax base in such a way that would have significantly increased the tax on assets and decreased it on income. Too painful for the National base to take on and too radical for Labour to consider (even though it would significantly benefit their base) though.
Yes TOP made a lot of sense. But did not do well enough to get in. Politics is often more of a popularity contest than a way of selecting the best party based on policy.
The 5% threshold has a lot to answer for; needs to be either removed entirely (minimum threshold to be whatever the % is required at the time to get a single list MP into parliament) or, to appease those terrified of small parties, at least to have a transferable vote so that in the situation where your first preference fails to cross the line at least your vote transfers to your next preference.
Both would improve support for minor parties, the first directly and the second by reducing the risk that your vote gets "wasted". Implementing both would be ideal (and, to add to that, adding an STV system for the electorate vote as well).
My guess is something sensible like this would have zero chance of happening in the USA. It would be killed by the Real Estate lobby before a single pen hit paper.
There are multiple factors driving up housing prices in New Zealand (and Australia as well), and foreign buyers are a significant contributer (just not the sole cause).
Keep in mind that there are single cities in China where the population matches the entirety of Australia, and is five times that of New Zealand. There's a lot of cash floating around our budding new superpower, so...
I don’t live in New Zealand, but I assume this is good for locals. Would love to hear your thoughts if you live there!
I live in LA and I’d welcome it here - not for all “foreigners” but at least to block foreign investors in residential homes and condos (not the actual buildings but the units). I bought a home last year and I put in 36 offers all 5-15% above asking and was outbid by investors on all but one that I ass-backwarded into.
I feel like this is something that would also be welcome in Barcelona with the issues they are having with investors buying up all the housing and renting it on AirBNB.
Price of real estate is insane everywhere. Here in Brazil there are not many foreigners buying houses but prices are completely unrelated to income since 2010. It has more to do with cheap money, lack of other investment opportunities (at least the perceived lack of) and the good old Ponzi scheme ("la vivienda nunca baja"). Government loves that because it is an easy way to swell up the economy (now we are paying the price for this kind of disingenuous measure) and also the payment of certain taxes like property and real estate transfer.
Someone suggesting relaxing zoning restrictions is not inherently suggesting no restrictions. It doesn't mean "sky scrapers" at all to suggest zoning could be relaxed from single story. It certainly doesn't mean sky scrapers as far as the eye can see. Nor does it mean you should be able to build a toxic waste dumps. You can move the line without removing it, to suggest otherwise is irrational and weakens you argument IMHO.
I’m surprised that no one is considering taxing (highly) unoccupied flats. The issue is that foreign (I’m assuming that’s dog-whistle for Chinese) money is looking for investments but that those crowd out people who work there. By making renting meaningfully advantageous, you can keep the investment (and have modern, state of the art real estate) and housing for families.
Detection via water, gas or electricity consumption; postal mail to the address with a suggestion you might have to pay the higher rate; challenges of that letter lead to visits where you are expected to provide evidence of living (water, gas, electricity, internet bills).
Similar things are being monitored rather effectively: TV fee in the UK, child welfare, cannabis cultivation.
The point is not to be perfect but to tell people that they can’t own an asset with large externalities and not use it.
> Detection via water, gas or electricity consumption
So we punish people who might just be conservative environmentalists? These are all metrics that can be spoofed if the expected return is high, which it certainly seems to be in real estate.
- Would we punish people who consume so little water, electricity or gas that they appear as not there?
Of course not, but people who save enough to not product garbage are still quite rare; they still use water and electricity. Some people have their own well and solar array/windmill, those rarely live in a densely populated city where raising the level limit hits the local Nimbysm. Once again: that’s the first step for detection, city inspectors would most likely be happy to flag you for a medal if you actually save resources that aggressively.
> These are all metrics that can be spoofed
Indeed, but wasting water to save tax sounds quite egregious. Once again: finding a renter that pays you is financially far more beneficial. The point of the tax is to signal it’s not OK to sit on a property and speculate, not collect more tax.
Sure, signaling is fine, as long as it's effective. Dealing with tenants is tedious and laborious. Someone who can speculate on multiple properties probably places a higher value on his time than the cost of utilities. But I suppose we'll see, since some governments are going to try these controls.
Australia has had a very similar rule (foreigners can only buy newly built property) and prices kept soaring. The problem in Australia (and I suspect in New Zealand as well) is that the offering is limited due to regulation.
As a data point, here in Denmark, EU citizens need have been residing in the country for at least five years in order to buy. I don't know what the minimum time period is for non-EU citizens, but probably longer.
It would be nice to see the West do something like this in the major cities like LA, NY, etc. Foreigners shouldn't be able to come in and buy competitive property when they don't play by the same financial rules as us. seems unfair
Why oppose a Russian millionaire buying an LA townhouse, but not a Texan millionaire buying the same townhouse? After all, both millionaires earned their millions thanks to low taxes and lax regulations in their native land. Isn't it unfair for an LA native to compete against either of them?
Why oppose a Russian millionaire buying an LA townhouse, but not a Russian millionaire buying a Degas painting? If LA residents deserve laws to help them buy a townhouse in a good neighborhood, don't they deserve laws to help them buy other luxuries?
Why oppose a Russian millionaire buying an LA townhouse, but not a Russian tourist buying a ticket to Disneyland? Tickets to a venue of limited size are the most inelastic of goods. If you ban foreigners, won't that help lower demand for tickets (and therefore ticket prices) and reduce lines for native LA visitors?
> Why oppose a Russian millionaire buying an LA townhouse, but not a Texan millionaire buying the same townhouse?
A Texan resident is subject to the same federal financial rules and regulations when earning an income in the US as a LA resident. The Russian millionaire can earn millions in a different country under unknown rules.
> Why oppose a Russian millionaire buying an LA townhouse, but not a Russian millionaire buying a Degas painting?
Buying a Degas painting is a luxury, having a home for your family to live in is a necessity.
> Why oppose a Russian millionaire buying an LA townhouse, but not a Russian tourist buying a ticket to Disneyland?
Again buying a ticket to Disneyland is a luxury, not a necessity.
> having a home for your family to live in is a necessity
Yes, I agree with you that having (not necessarily owning) a home (of some sort) is a necessity. However, my point was that owning the sort of city townhouse that would interest foreign millionaires is a luxury and a choice.
Canada closed down a foreign-worker program. Now I see help-wanted signs in all these stores and some stores are closing down or scaling back service. I don't think Canadians were clamouring to work at a Tim-Horton's, ski hill or farm.
mostly because the pay is shit, raise the prices and pay people more, or go out of business, and someone will replace you if the demand is there. That's how it's supposed to work.
One of the main problems with this policy is that it's addressing something that isn't actually a problem.
The main driver of house pricing is land use and building regulation, unsurprisingly. If it's harder and / or more expensive to build housing, houses will cost more.
I can't comment on the worldwide situation, but it's pretty clearly the main AU + NZ driver and it's one that's very easy to address; removing the tax perks would be fairer even if it had no effect on prices at all anyway, so it's a win win scenario.
The only difficulty (and it's a biggie) is that actually doing something meaningful on housing affordability requires knocking down prices and that's political suicide, so nobody is willing to do it.
This is the result of negotiations between a party called New Zealand First, led by notorious xenophobe[1] Winston Peters, and a socialist PM who has described capitalism as a "blatant failure"[2].
In fact, Peters has already confidently predicted an economic crisis post-election, and begun distancing himself from it[3].
My current bet is on the coalition collapsing, with new elections held in October 2018. A few of my NZ friends and family are placing similar bets; closest guess wins.
The full quote from the 'socialist PM' was 'If you have hundreds of thousands of children living in homes without enough to survive, that's a blatant failure', which is accurate; the reason why we have government regulations is to address market failures.
The Australian is hands down one of the poorest quality news sources in Australia: It is pretty much the direct mouthpiece of Rupert Murdoch and is notorious for being grossly inaccurate and terribly biased.
It's getting increasingly hard to deny that we are starting to see the cracks in capitalism, so I don't think it's wrong of him to say that.
Huh. Funnily enough I don't follow Australian politics; I checked out of politics almost entirely after leaving NZ (where I was quite involved with the LibertariaNZ).
Been doing a bit of reading about the last election in NZ, though, as you can probably tell :)
It should be an entertaining coalition collapse. Apparently they have a 31-MP executive!??!?!
75% of Auckland is zoned for 1 or 2 story buildings (according to http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&o...).
Of that 33% is the most restrictive single house ("The Single House zone currently covers around a third of residential Auckland and is very restrictive, allowing for only one dwelling on sections smaller than 600 square metres." according to http://www.stuff.co.nz/auckland/75219048/Aucklands-controver...).
5% is zoned for apartment buildings.
Here's 97% of your house pricing problem. Not foreigners, not low interest rates, not land taxing policies.
New Zealand has total population of ~2x Paris and land 1000x of Paris.
This is Venezuela style of fixing problems: instead of addressing underlying economics (limited supply meeting increasing demand causing raising prices) by increasing supply, find a political scapegoat (all nations are xenophobic so outsiders are always a good target) to get people to vote for you and create ineffective rules.
The real fix is politically unpopular. Unsurprisingly, Aucklanders are NIMBY with the best of them. The plan to upzone is "controversial" and anti-upzoning arguments are the same you see in SF and everywhere else where that comes up.