Call for foreign ownership debate
A leading economist has called for a debate on whether foreign ownership is desirable in the overheated Auckland and Christchurch housing markets.
BNZ chief economist Tony Alexander believes the only way to solve the affordable housing issue is to fast-track the building of cheap houses or strip out certain types of buyers, such as foreigners and multiple house owners.
In his weekly column he said that minimum deposit rules as threatened by the Reserve Bank would make affordability worse, principally for first-home buyers because investors were often cashed up.
A more effective but radical measure would be to take buyers out of the market who were not considered deserving of affordable housing.
"That means something like a law banning second property purchases, banning purchases by foreigners, and forcing people to sell houses they own but are not occupying - perhaps because they are overseas."
However, he expected those moves would be "a bit too much like social engineering for Kiwis to tolerate" and "only a radical cheap supply boost will improve affordability".
Alexander has said he does not agree that foreign buyers are to blame for Auckland's soaring house prices but that a debate on foreign ownership restrictions probably should be had.
Given New Zealand's free trade agreement with China, "at the moment we can get away with it, but 10 years down the track, that may not be the case".
Alexander's research shows that only 9 per cent of house sales as reported by real estate agents are to offshore buyers.
Of those, 22 per cent were Australians, 20 per cent Chinese, and at least 40 per cent of all offshore buyers were intending to shift to New Zealand.
"We can state that at most, 1.2 per cent of dwelling sales in Auckland are to buyers from China not planning to shift to New Zealand and ... 2.1 per cent of dwelling sales in Auckland are to people living in China."
Various real estate agents have stated that although Asians are present and are winning many auctions in Auckland, it's unclear whether they are foreigners, New Zealand residents or simply of Asian descent.
Westpac economist Dominick Stephens agreed with Alexander that foreign buyers are not having a great effect on prices at auction in Auckland.
"A small minority of people coming from overseas just can't have that big an effect on the price of such a wide variety of houses."
Most of the ups and downs of the market occur at the lower end, populated by first-home buyers and investors, he said.