Wednesday, 11 May 2016

Housing facts dissolve “foreign-buyers” bollocks

 

Housing1

For months now we’ve heard from apologists for the status quo that what’s goosing NZ house prices is not the central planners but foreign buyers, that without these nasty foreigners buying our homes all our central planning would otherwise have delivered nirvana instead of hell.

As you’ve possibly already heard, a report out yesterday puts the lie to that “narrative.”

Information released by Land Information Minister Louise Upston shows initial data from the Government's property tax measures indicate overseas tax resident buyers are behind 2 to 3 percent of New Zealand property transfers.

Now it’s true that even one buyer with a very high valuation on her purchase can sometimes skew a market. But the claim made over virtually the whole of this latest political cycle has not been the amounts they’ve paid but the number of these foreign buyers filling our auction rooms and bidding our houses away from our young couples trying to get into the market. Fix the foeigners, say the status-quo merchants, and all will be well.

The data (including the pie chart above) says that this is bollocks.

Over the six months from March 31, 97,800 property transfers of all kinds were registered with Land Information New Zealand.
Of those:

  • 1692 (1.7 percent) involved at least one of the buyers declaring an overseas tax residency;
  • 1695 involved non-resident sellers, so no net change in tax residency of property owners;
  • 38,061 (38.9 percent) of transfers involved only a New Zealand tax residency;
  • 27,333 (27.9 percent) were where buyers were exempt from reporting requirements, mostly because it was their main home.

Of the remaining transfers, buyers declared an overseas tax residency for just below 3 percent in the March quarter. For half of transfers, buyers only gave a New Zealand tax residency.

The numbers for Auckland are very similar:

Housing2

The responses to the data have been salutary.

The Herald doubled down on its bullshit. For weeks has been running the line that those bloody foreigners have been buying us out of our homes. Their response is to focus on the 60% of the 4% of overseas purchasers who buy Auckland homes, and point out this 60% of the 4% 9 (i.e., just 2.4% of purchasers overall) is Chinese. That’s the large purple part of that very small wedge in the pie chart above. That’s just 276 buyers! Peversely, the Herald calls this travesty of reportage “the truth about foreign buyers.”

This is of course just rank dishonesty. Which tells you all you need to know about both the Herald and its alleged journalists.

Others have attacked the data. Bernard Hickey, always at the wrong end of a problem, claims there could still be “up to 45%” of houses sold to foreigners—foreigners “hiding” within the NZ numbers..  Even Labour housing spokesman Phil Twyford snorts at Hickey’s response. He instead just damns the data as “shonky” ‘—truly ironic for a man who created a list of buyers with “Chinese-sounding names” just to wave the Yellow Peril flag

But the data is not “shonky.” If there is any issue at all it is not with the data, it is with the problem of defining “foreign buyers”: does it mean folk with foreign passports (and many NZers hold more than one), or folk with foreign tax residency (and many NZers also enjoy this boon). And how many “foreign buyers” are buying throught trusts (which aren’t captured here) or also have NZ tax residency,

All these problems are raised in the report itself, as every good report writer should do.

Nonetheless, on the basis of these figures alone there is no basis for holding that either a large majority or a major plurality of NZ homes have been “bought by foreigners”—the excuse used by upholders of the current planning system for the out-of-control house-price inflation Auckland especially is experiencing—and no other credible figures have been raised at all by any of the report’s critics.

Now, it seems we can put aside both the Yellow Peril (Labour’s claim) and a Land Tax (National’s threat) and return to putting under the microscope the three real causes of house-price inflation:

    • money has become too cheap
    • planning rules have become too numerous, and
    • it’s in the interests of the political elite to keep them that way.

More (non) news at six.

RELATED POSTS:

  • “The LINZ report does a good job explaining the real limitations of `tax residence’ as a criterion, but it’s a lot better than any previous data we’ve had.
        “There were also questions about actual residency and intention to occupy a home, but these were harder to interpret because of property bought by companies or trusts, where the questions didn’t have a good answer.
        “I’d suggest starting with the report rather than the news coverage.”
    Foreign real-estate investment – Thomas Lumley, STATS CHAT
  • “The concept that House Price Inflation (HPI) is strongly affected by money supply is not a new concept and brings to light many other related issues:
    * “Expansion of the money supply is in fact wealth transfer from holders of cash to debtors, holders of hard assets, holders of equities and the government (as a debtor). This wealth transfer could be viewed as theft.
    * “Governments use the expansion of the money supply (and the ensuing inflation) to reduce the real value of national debt. In the West governments are refusing to deal with debt in the traditional manner but prefer to inflate away the capital component.
    * “In many countries around the world inflation is partially hidden and price rises are attributed to GDP growth.”
    The Real Reason for House Price Inflation in New Zealand – Simon Knudsen, DATA SCIENCE
  • “’The solution to the housing crisis is lower prices. What politician will stand for that? They daren’t let this market fail because too many people’s wealth is dependent on the value of their home – and homeowners vote more than renters…
        “’The collapse of UK property prices between 1989 and 1994 made the Tories unelectable for half a generation. No party wants such a fate. Indeed if interest rates reflected 10% house price inflation, homes would become affordable pretty quickly, but then the whole financial house of cards would come crashing down too. Those responsible for that would become [totally] unelectable…
        “’However this ends – falling house prices or a generation even more excluded – it is going to be painful. But the sooner we recognise the causes of high house prices – our systems of money and planning – the sooner the problem can be properly dealt with.’”
    “Why younger people can’t afford a house” – Dominin Frisby, NOT PC
  • “My own position is that to promote affordability the city needs to grow both out and up – which recognises home-buyers have the right to choose, and land-owners have the right to build.
        “‘Out and Up’ should be the mantra.
        “But at least one mayoral candidate is loudly saying ‘out.’”
    Mayoral candidate says housing should grow ‘out’ – NOT PC

1 comment:

  1. ... but these figures are Jan 2016 - March 2016, aren't they?

    So where are the figures from before the new requirements were introduced in October 2015 (requirements like proof of identity and address lol)

    These pie charts could equally be said to show that the crack-down worked, couldn't they?

    To settle it, would need to see before and after figures, wouldn't we? Just to ferret out the bollocks :)

    ReplyDelete

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