Housing affordability, especially for first-home buyers, continues to be a thorn in the Government's side. The apparent influence of foreign buyers is being blamed for another month's jump in house prices. Before the September election, the Government tried to sideline the subject by insisting it was too difficult to collect the data that might support or remove suspicion that overseas investors are dominating the market. Encouragingly, there appears to have been a change of heart. Deputy Prime Minister Bill English says the Government is "open-minded" about gathering more information.
It is clear the Auckland market has had a post-election surge, probably because it has been relieved of the threat of a capital gains tax from Labour and the Greens. The city's largest real estate agency, Barfoot & Thompson, says its median sale price has risen more than $20,000 to $756,909 in 30 days and is up 10.6 per cent on the same time last year.
Clearly, the need to assess the influence of overseas investors is not diminishing. The Australian Parliament's economics committee has recommended a national register of land title transfers that would record the citizenship and residency status of house buyers. Obviously, it does not expect collecting such data will be too hard.
The Australian committee was considering factors that have a strong resonance in New Zealand. House prices in some Australian cities have increased almost 20 per cent over the past 18 months, and there are fears that owning property is becoming out of the reach of many. A relaxation of rules for private Chinese investment in Australian real estate as part of the recent free trade agreement has heightened the anxiety.
AdvertisementAdvertise with NZME.
But, as in New Zealand, there is little hard evidence that foreign investment has had a major effect on prices. Low mortgage rates for a record period seem to have been far more important. Purchases by non-residents are already restricted in Australia; they can buy only newly built houses. The parliamentary committee wants to reinforce this by introducing civil and criminal penalties for those who buy a previously occupied home.
That is unlikely to satisfy Australians who believe their housing market has become unfair. A register of foreign ownership should be more effective. There will be quibbles that houses are being bought by residents using overseas money, but at least the numbers will be clearer and will provide an informed and reasoned basis for any action taken.
In New Zealand, too, available evidence suggests overseas investors play a minor role in the property market. Inland Revenue records show only 11 per cent of landlords live overseas. That number includes expatriate New Zealanders. A survey of real estate agents this year put the figure as low as 8 per cent.
But that did not placate those who notice a preponderance of Asian faces at auctions. Further, the Treasury has noted that the limitations of data mean it is hard to assess the extent to which overseas ownership rates are changing.
That underscores the need for a register of buyers. Overseas investment has clear benefits for the country's housing stock, but these must be set against any problem of market accessibility for first-home buyers, in particular.
Only with accurate data will it be clear if foreign money is creating an untenable situation for local purchasers. When this is available, restrictions can be considered or, more likely, the angst about foreign buyers can be laid to rest.