Editorial: One more measure of the housing crisis
OPINION: New Zealand's house prices are the most overpriced in the developed world, The Economist says.
This is so whichever way you dice it. New Zealand prices have grown the most, in real terms, since 1980. They are the highest when set against rents or against average incomes, recently topping Canada and Australia on these counts.
The consequences of this surge are profound, slow-burning, and corrosive in a country that has long prided itself on a measure of egalitarianism.
There are several important causes of the housing crisis, including unusually low interest rates, a failure to tax property investment fairly, overbearing local body regulations and market failure.
But there is also one more, which has been muted in the housing debate since the Labour Party's questionable "Chinese-sounding names" stunt. That is the purchase of houses by people with no other connection to this country.
The case is strong for a ban on such buying. When all the other problems are combining to leave supply badly lagging demand, then there can be no good reason to allow overseas buyers to park their money in New Zealand houses.
Strikingly, this is the factor that The Economist, usually an unflagging champion of foreign investment, zeroes in on. "A growing horde of rich foreigners see New Zealand as a safe haven," it says. "In 2016 overseas investors bought just 3 per cent of all properties. But their purchases were concentrated at the expensive end of the market … [which] helped push prices in the country up by 13 per cent over the past year."
In fact, even this widely cited 3 per cent figure is a flawed and inadequate one that does not give a true picture of overseas buyers. There are options available for building a clearer picture of that – the IRD's "offshore person" category, for instance – but the Government shows no interest in such a portrait.
Even if the 3 per cent figure were correct, it would be a more material number than it might seem. Small changes in demand at the margin can raise prices significantly. What is the excuse for allowing even a fraction of buyers to keep making a buck from New Zealand houses from afar?
Of course, to ask this will provoke howls about xenophobia from certain cosmopolitan politicians. But it is not racist for countries to prioritise their own citizens and residents; they do so often. Many have taxes or bans on foreign house-buying.
A restriction applied widely to non-New Zealanders is no slur on any race. It is what the economist Larry Summers calls "responsible nationalism", and it's right for the moment, when tides of capital are flowing from a neighbour like China and so many New Zealanders have no hope of owning a home.
Nearly everyone can see the problem, from the teachers who can't afford a house in Auckland, to the employers calling for a huge public house-building programme, and perhaps even to the writer Eleanor Catton, whose next novel, announced last week, centres on – what else? – billionaires buying boltholes in picturesque New Zealand.
Why can't the Government see it?
- The Dominion Post