Foreign buyers lead charge on NZ property

NZ Herald·

10 May, 2016 05:00 PM5 mins to read

Four per cent of houses sold in Auckland during the first three months of the year went to non-resident buyers. Photo / Doug Sherring

Industry group says data shows foreigners account for only small fraction of market despite ‘scaremongering’.

A property lobby group says it hopes the release of foreign house-buyer figures will remove "xenophobia" from the heated housing-market debate.

Property Institute chief executive Ashley Church says the Land Information NZ data, showing 3 per cent of houses sold in New Zealand (and 4 per cent in Auckland) during the first three months of the year went to non-resident buyers, hits back at the scaremongering of last year.

Director of Auckland real estate agency Barfoot & Thompson, Peter Thompson, said the initial release period included the usually quiet month of January so longer-term numbers would paint a more accurate picture.

The Labour Party last year produced data showing up to 40 per cent of the city's houses were sold to people of Chinese descent, based on the sound of their last names.

The Chinese population makes up about 10 per cent of Auckland and Mr Church expected that over time, the Land Information figures would "pan out" to about 7 to 8 per cent of foreign buyers.

"I think, unfortunately, last year there was a fair degree of xenophobia that was entering the debate."

Mr Church hoped the new data would "put to bed" such commentary.

Collecting information was important and would enable good policy decisions and give a profile of what was causing demand.

It had been said the appetite in Auckland was driven by overseas buyers, but Mr Church said the figures showed it was because, simply, people wanted to live there.

He was not surprised at the figures, coming after the "blip" of last year's investor controls.

Property economist Rodney Dickens told the Herald it was reasonable to assume the number of foreign buyers could have been up to three times larger before new IRD disclosure rules were introduced in October.

He believed the slump in sales could be attributed to the new rules, but Mr Thompson thought the time of year had some bearing.

"It's most probably slightly less than I thought for the January, February period. Traditionally January is a quiet month for real estate sales everywhere," he said.

"I wouldn't think it's a true reflection until, most probably, over a six-month period. If I recall, through the heat of it last year, we were predicting between 5 per cent and 7 per cent. [This] is within the ball park."

REINZ chief executive Colleen Milne said the data added to a clearer picture for decision-making.

"We know that the Chinese are active. The figures show also that there are a lot of other buyers. We've got Australians also investing in New Zealand."

Asia New Zealand Foundation's executive director Simon Draper said its "perceptions of Asia 2015" survey found coverage of the foreign buyers' role in the housing market contributed to more New Zealanders blaming Asian buyers for rising house prices.

"This data suggests such fears are not based on fact," he said.

Liam Dann: Foreign buyers tally low - but for how long?

New data on foreign buyers in the housing market is not going to resolve the big debate on the issue just yet.

At 3 per cent nationwide and 4 per cent in the Auckland market the numbers aren't big.

At the margins of a tight market a few buyers prepared to pay a premium can skew prices - we see it on the stock market all the time.

But these figures were on the low side, even based on expectations of those in the property sector. And they certainly don't reflect levels of concern the issue generated last year as the Auckland housing market peaked.

Property economist Rodney Dickens says the numbers don't "ring any nationalistic alarm bells".

But based on the size of the sales drop we've seen in the Auckland market over the past six months, it was reasonable to assume the number of foreign buyers could have been as much as three times as big before the new IRD disclosure rules introduced in October, Dickens said.

He believes the slump in sales can be attributed largely to the new rules.

If that's the case, then the move to collect data may have effectively neutralised the problem. For how long, who knows? The numbers do show that Chinese nationals accounted for nearly 60 per cent of foreign buyers in the Auckland market. It is reasonable then to assume that foreign investment trends in China will have had some impact on New Zealand.

After US$1 trillion of capital flowed out of China in 2015, Beijing got worried and at the start of this year made it harder to move money offshore. China experts will also tell you the smart money always finds ways around the rules.

Opposition politicians have been quick to pick holes in the data, pointing out that it doesn't include trusts or business buyers.

Even Land Information Minister Louise Upton has admitted the data is "not ideal" and shouldn't be viewed as a foreign buyers' register.

So is it conclusive? No.

But these numbers are a start and regardless of flaws and loopholes they provide a baseline that will eventually help us measure any trend..