HN Gopher Feed (2017-10-26) - page 1 of 10 ___________________________________________________________________
New Zealand to ban foreigners from buying existing houses
73 points by wslh
http://www.independent.co.uk/news/new-zealand-foreigners-buy-pro...___________________________________________________________________
ACow_Adonis - 1 hours ago
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.
stirlo - 25 minutes ago
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.
elyobo - 1 hours ago
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).
ACow_Adonis - 1 hours ago
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!"
gardnr - 57 minutes ago
I would need numbers to be able to agree with you that foreign
investment isn't a driving factor in housing costs.
ACow_Adonis - 42 minutes ago
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).
chris_wot - 36 minutes ago
If the numbers are hard to get, then it?s difficult for you
to say whether foreign investment is or isn?t part of the
problem.
sushid - 16 minutes ago
That's literally what your parent commenter is getting
at...
ACow_Adonis - 5 minutes ago
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.
msie - 36 minutes ago
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.
soperj - 14 minutes ago
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.
afinno - 4 minutes ago
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.
glangdale - 36 minutes ago
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?)
elyobo - 33 minutes ago
Nailed it.
xupybd - 1 hours ago
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.
maccard - 57 minutes ago
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.
gardnr - 54 minutes ago
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.
freedomben - 3 minutes ago
This is how we get such a complex tax code that is abused by
special interests. It's so easy to say, "go tax that person
over there. He can afford it"
bogomipz - 8 minutes ago
>"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.See:https://www.nytimes.com/news-event
/shell-company-towers-of-s...andhttps://www.theguardian.com/comme
ntisfree/2015/jan/25/planne...andhttp://www.miamiherald.com/news/
business/real-estate-news/ar...
refurb - 6 minutes ago
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.
megy - 1 hours ago
> 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.
gardnr - 53 minutes ago
What's the negative gearing rule?Edit: from an American
ACow_Adonis - 29 minutes ago
Quickly: income tax deductions on investment losses into
property.The general strategy is to pump money into a
property at a technical loss and make it up the difference on
capital gains later.
jpollock - 40 minutes ago
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.https://en.wikipedia.org/wiki/Negative_gearing
[deleted]
Smerity - 1 hours ago
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.http://www.smh.com.au/business/property/australian-property-
...https://www.transparency.org/whatwedo/publication/doors_wide..
.Updated to include direct link to Credit Suisse: https
://research-doc.credit-suisse.com/docView?language=ENG&...
ACow_Adonis - 53 minutes ago
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.
jseliger - 3 minutes ago
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.This
part is incorrect; the primary cause in the last 40 years has
been supply restrictions: https://jakeseliger.com/2015/09/24/do-
millennials-have-a-fut...Tokyo is a notable exception:
https://www.vox.com/2016/8/8/12390048/san-francisco-housing-...
chris_wot - 37 minutes ago
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.
[deleted]
sparrish - 54 minutes ago
That will pair very poorly with their incentives to get foreign
tech workers to move to New
Zealand.http://markets.businessinsider.com/news/stocks/Foreign-
Exper...
ng12 - 53 minutes ago
It only applies to non-residents.
[deleted]
lwhsiao - 4 hours ago
Why not link directly to the full story [0]?[0]
http://www.independent.co.uk/news/new-zealand-foreigners-buy...
dang - 1 hours ago
Thanks! Url changed from
http://marginalrevolution.com/marginalrevolution/2017/10/see....
duncan_bayne - 1 hours ago
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.http://pc.blogspot.com.au/2014/01/australasia-world-
leader-i...
elyobo - 1 hours ago
The main driver in AU and NZ is property speculation, driven by
terrible tax and pension policies in combination cheap money.
duncan_bayne - 1 hours ago
That is certainly a driver, but I'm not convinced that it's the
main one in Australasia. Certainly, it's not the main one
worldwide.
elyobo - 22 minutes ago
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.
colordrops - 1 hours ago
Wish they did this in Los Angeles.
thrden - 1 hours ago
it'd likely be found unconstitutional on the basis of
discrimination against someone due to nationality.
sxates - 48 minutes ago
Not if it was equally applied to all nationalities.
ryandrake - 1 hours ago
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.
donatj - 37 minutes ago
I really doubt it's foreign buyers driving up housing prices
anywhere in the US? Let alone in New Zealand.
msie - 20 minutes ago
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.
soperj - 7 minutes ago
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.
rm_-rf_slash - 1 hours ago
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?
duncan_bayne - 1 hours ago
Because Winston Peters is a xenophobe, and has a long history of
playing on 'yellow peril' politics w.r.t. Chinese investment and
immigration.
elyobo - 1 hours ago
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).
rm_-rf_slash - 1 hours ago
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.
elyobo - 1 hours ago
I'm OK with that on principal if the "foreigner" is someone
that has the right to permanently reside in NZ (basically the
rules as for the right to vote -
http://www.elections.org.nz/voters/enrol-check-or-update-
now...).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 :-/
mustntmumble - 4 hours ago
Title is too broad."We have agreed on banning the purchase of
existing homes by foreign buyers," said Ms ArdernMy 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.
dang - 1 hours ago
We've added 'existing' above. Also changed the url from
http://marginalrevolution.com/marginalrevolution/2017/10/see....
elyobo - 1 hours ago
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.
charlesdm - 34 minutes ago
> 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.
elyobo - 28 minutes ago
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.
xxgreg - 3 hours ago
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
HOMESKiwiBuild 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."http://www.labour.org.nz/kiwibuild
elyobo - 1 hours ago
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.
skybrian - 2 hours ago
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.Seems pretty
sensible?[1] "The country?s proposed ban on foreign buyers, which
would only apply to non-domiciles"
https://www.theguardian.com/world/2017/oct/25/new-zealand-to...
raquo - 1 hours ago
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.
elyobo - 1 hours ago
Yeah, if they're planning on allowing those with only
temporary residence rights to continue to buy then the policy
is useless.
msie - 31 minutes ago
It doesn't matter who's buying supermansions. Most people
aren't looking to buy supermansions.
raquo - 8 minutes ago
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.
soperj - 5 minutes ago
everything in vancouver is priced as a supermansion.
justicezyx - 1 hours ago
I like this approach.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.
RowanH - 1 hours ago
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.
elyobo - 1 hours ago
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.
xupybd - 1 hours ago
The tax loop hole in housing is something that needs to be
addressed. If we have income tax we really need to tax all
profit, including capital gains.
elyobo - 1 hours ago
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.
xupybd - 49 minutes ago
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.
elyobo - 26 minutes ago
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).
charlesdm - 43 minutes ago
Can't this easily be avoided by purchasing through a New Zealand
company?What stops NZ residents (or non-residents) holding RE
through corporate entities from selling their shares and indirectly
transferring ownership?Will be interesting to see how it's
implemented.
xupybd - 1 hours ago
I'm a New Zealander that was deeply concerned by the new government
winning the election but this policy gives me hope.
elyobo - 1 hours ago
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.
pascalxus - 5 minutes ago
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.
PatientTrades - 38 minutes ago
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
dogruck - 1 hours ago
Is this fairly common?Once I casually shopped for houses in Bermuda
-- but they had a similar rule.
Cyph0n - 39 minutes ago
The UAE has a similar law in place, but with a twist: you can buy
property in? certain "free zones".
duncan_bayne - 1 hours ago
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.I'm glad I left for
Australia in 2007.[1] http://thewireless.co.nz/articles/winston-
why-are-you-like-t...[2] http://www.theaustralian.com.au/news/world
/jacinda-ardern-ca...[3]
https://www.stuff.co.nz/business/industries/98061685/Winston...
patrick-dd - 1 hours ago
Welp, Australia's coalition may collapse on Friday too!
elyobo - 22 minutes ago
Got my popcorn ready for 2.15PM AEDT.
duncan_bayne - 1 hours ago
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!??!?!https://
www.kiwiblog.co.nz/2017/10/strengths_and_weaknesses_...
elyobo - 21 minutes ago
To be fair, it was likely doomed whichever way Winnie went,
because both outcomes would have still had Winnie in there.
AdeptusAquinas - 49 minutes ago
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.