Auckland house prices dropped $20,000 last month

August 13th, 2015 at 2:00 pm by David Farrar

The Herald reports:

The median Auckland house sale price dropped $20,000 last month, according to the Real Estate Institute out this morning, following Barfoot & Thompson sales data which also showed the same trend.

The latest REINZ figures showed the Auckland region’s median price fell from $755,000 to June to $735,000 last month, down 2.65 per cent.

Shouldn’t read too much into a monthly change, but if it continued for another couple of months that might indicate the bubble is bursting.

Later this year the new tax rules for investment properties take effect, and also the Reserve Bank’s stricter lending rations for Auckland and for property investors. They may have an impact also – or may even be impacting already.

UPDATE: Once again Labour’s curse may have worked. They declare something to be a crisis, and it immediately improves.

Tags:

PM on foreign ownership and houses

July 22nd, 2015 at 3:00 pm by David Farrar

Stuff reports:

Prime Minister John Key has signalled the Government may tighten rules on foreigners buying houses if a new register shows a scale the public is unhappy with.

In his first day back at work since Labour released data showing a large proportion of house sales in Auckland in early 2015 were to buyers with Chinese sounding names, Key conceded that the public wanted to know the scale of foreign buying. …

“We’ve been a pretty pragmatic government. If we think we need to take steps to address an issue which we see coming of great concern, we’re prepared to look at it.”

Under proposed legislation the Government will begin to collect the residential tax status of buyers as a proxy for how many houses are being sold to foreigners.

So rather than judge off people’s surnames, the Government will collect much more reliable data. And this decision was announced months ago – so Labour’s stunt was an unnecessary own goal.

Key said information on buyers from markets from Britain and Australia would be “a bit polluted by New Zealanders who live over there”, whereas the “vast bulk” of buyers from mainland China were unlikely to be New Zealanders.

So this data won’t be perfect, but it will be reasonably robust.

Key said that he believed the scale of the issue would not be on the level which Labour appeared to suggest, but if it were he would consider it “a problem”, he told reporters.

“If you’re asking me if 30 per cent of all sales of residential property in New Zealand was to foreigners, would I think that’s much bigger than I expected and be a problem, I’d say ‘yes’.

“Because around New Zealand I’d be amazed if that was the case. Even in Auckland I’d be absolutely staggered if that was the case, but let’s wait and see the data.”

I’m looking forward to seeing the data.

He was dismissive of Labour’s research, based on personal examples.

“My next door neighbour’s Mark Ching. I look more Chinese than he does, but according to Labour, he’s a problem,” Key said.

“My son’s Max Tim Key, and he’s born in Singapore. If you saw that name on a piece of paper and I wasn’t prime minister, you’d assume he was Asian.”

I wonder what Labour’s Bayesian analysis says about whether someone named Key is Chinese?

Tags: ,

So will Labour apologise if it is revealed most ‘Chinese’ buyers are not foreigners?

July 16th, 2015 at 7:10 am by David Farrar

The Herald reports:

Principal agent James Law said Labour’s leaked figures that showed 40 per cent of homes sold at auction in Auckland over a three-month period went to people with Asian surnames was “about right”.

Mr Law said four out of 10 of the 350 who bought real estate through the company last year were of Chinese ethnicity.

“But what we found from our sales record was less than 10 per cent of them are actually overseas-based investors,” he said. “Most of them are citizens or residents who have lived here for years.”

Mr Law said it was “tradition” for Chinese people to buy real estate, and many made it their “first priority”.

Many regarded real estate as a safe investment and one that they could either make a profit on or hand down to their children.

“This explains the high number of Chinese buyers and investors, because many find their security in owning houses,” Mr Law said.

“In the same way, data on dairy business sales will show a high number of ethnic Indian buyers.”

I made this point yesterday on social media. I’d say over half of dairies are owned by people with Indian surnames, yet only 3.9% of NZers are Indian. So does that mean that our dairies are being purchased by people from Mumbai? No – it means different ethnicities have different purchasing priorities.

Now let us assume that 40% of buyers do have Chinese surnames. Of course a proportion of those will be foreign buyers. But it is 1% or 10% or 80%? There is a huge difference.

If the data is just 10%, will Labour then apologise for slurring the 90% who are Kiwis, just Kiwis with a Chinese sounding surnname?

Tags: , ,

Labour’s policy would breach the FTA Labour signed

July 15th, 2015 at 10:00 am by David Farrar

Richard Harman at Politik reports:

Labour would exempt Australians from any restrictions it might put on foreign buyers of New Zealand real estate.

In a move that raises questions about the reasons for appearing to single out Chinese residents, Housing spokesman, Phil Twyford says the Australian exemption is because of the Closer Economic Relationship with Australia. …

But back in the Labour Party Mr Twyford has been continuing to assert that Labour would ban all foreign buyers.

He repeated this claim in a piece he wrote for the Herald. 

But he told POLITIK that “sometimes simplicity is the enemy of nuance.”

“Our policy is to ban all foreign buyers with the following exceptions —“If you intend to come here and settle.”

“If you build new.

“Australians – in the spirit of CER, given that they exempt Kiwis from their restrictions on offshore speculators.”

This tells us two things. The first is you can’t trust an article written by Phil Twyford. Sure in a live interview you may need to go for simplicity, but in a written op-ed for a newspaper, it is disgraceful to lie about your own policy.

But assuming he has told the truth to Harman, he has killedhis own policy. Stephen Franks explained why in 2013:

But wait – another Article (the most favoured nation clause) commits New Zealand not to pass law that discriminates against Chinese investors in comparison with other overseas investors (such as Australians).

Article 139 requires that investors of [China] be treated no less favourably than investors of any third country [Australia] “with respect to admission, expansion, management, conduct, operation, maintenance, use, enjoyment and disposal” of investments.

So Chinese would-be  investors do not get direct rights to insist on investor equality but they can’t be treated worse than Australians.

Labour has said Australians would still be allowed to buy residential property under their policy. This would breach Article 139.

So Labour’s policy is a soundbite, not an actual policy that could be implemented.

Tags: , , ,

Rob Hosking on Labour’s surnames research

July 14th, 2015 at 10:00 am by David Farrar

Rob Hosking writes at NBR:

This is where Mr Twyford’s effort is a cheap and nasty political shot. By basing his claims on data about whether investors have what Labour considers foreign-sounding names, he has opened up a seam of racism.

It appears he and Labour Party researcher Rob Salmond have simply gone down a list of property buyers and singled out anyone who has a name that sounds vaguely Chinese.

This has been wrapped in a patina of bogus statistical chatter in a bid to make it sound less odious: for example, Mr Salmond says someone with the surname of Lee has a 40% chance of being Chinese.

Message: if you have a Chinese-sounding name, you’re probably foreign. What’s more, Labour researcher Rob Salmond has an algorithm that calculates just how foreign you might be.

And over 30,000 have visited the parody site – and a fair number it seems think it is a legitimate Labour site. Labour should reflect on what that means that such an obvious parody is not seen as too far from what they have been doing.

This is really nasty stuff. Anyone with a passing acquaintance with some of the more bloody racial conflicts of the 20th Century will feel a chill that the Labour Party is doing this.

Really though, the matter of offshore investment in Auckland’s property market distorting that market is primarily an economic issue, not one of race.

By emphasising the racial aspect of the matter, Labour has deliberately embarked on a move calculated to raise racial tensions.

Why?

A good question.

Some of this is to do with Mr Twyford’s ambitions for the deputy leadership. This is also tied up with those well-known west Auckland voters who deserted Labour for National in recent elections.

Not sure this will help him. I understand a fair few Labour MPs are very upset with him.

There is no doubt people with Chinese names whose families have been here for years are justifiably enraged by Mr Twyford’s rather glib, shallow and irresponsible ploy.

But even for more recent arrivals: the assumption that anyone with a Chinese sounding name is foreign is nasty and poisonous.

Yep.

Tags: , , , ,

Rutherford on Labour’s surname policy

July 13th, 2015 at 10:00 am by David Farrar

Hamish Rutherford writes at Stuff:

What do Labour’s figures about the number of Chinese names appearing on property transactions in Auckland prove?

Nothing concrete about the state of foreign ownership in New Zealand’s largest city. In terms of evidence, it is seductive, yet shaky at best.

There is every chance that a Wang appearing on a property record can claim a century of proud Kiwi ancestry, while the Smith who bought the house next door is the foreign investor. …

So what the release has done is made everyone with a Chinese sounding surname seem second class.

The research has concerning limitations. Labour will not say who gave it the data, beyond saying it is from one of Auckland’s largest real estate companies. If the figures were not nakedly political – if they had been presented by an economist – they would almost certainly be dismissed completely for the lack of rigour.

I really wonder what Labour were thinking with this. They’ve alienated a lot of their own supporters, and opened themselves up to a lot of ridicule.

Eventually new rules will force the disclosure of where buyers are based for tax purposes, a better measure of foreign investors than Labour’s name game.

This should come close to settling the argument about the extent of offshore investment in New Zealand real estate. There is every chance it will prove Twyford correct, that thousands of investors are seeking a way to get their money out of China and into a stable investment.

Alternatively it may mark Twyford as the man, and Labour as the party, who squarely pointed the finger of blame a substantial portion of New Zealand for no other reason than that they sound like they might be Chinese.

On that note Melissa Hu (a Young Nat) writes:

I’m not sure if you saw Andrew Little, Phil Twyford and the New Zealand Labour Party hit a disappointing and desperate new low yesterday.

They blamed the challenge of housing affordability on whether your name sounds Chinese or not. 

I was born here, I study here, I work here and I’m a New Zealand citizen but because my last name sounds Chinese I’m apparently a big part of the housing affordability problem – (I’m actually of Mongolian descent but would Labour care about that?)

Melissa continues:

I’ve lived here all my life, and I’m proud to call myself Kiwi. Young New Zealanders like me are ambitious, excited and open about New Zealand’s future. I don’t think my last name, or yours, has anything to do with trying to buy a house.

We need to be encouraging all Kiwis – young, old, European, Maori, Chinese, whatever – to aim high, work hard, create wealth and continue to raise our living standards. We also need the Government to keep taking common sense steps with councils to make more land available for housing. That’s why I support National- they know there’s a problem and they have a real plan to fix it.

We don’t need to start a “pick on the Chinese” attitude which could create more problems than it solves. Auckland’s housing problem is a supply issue – not a Chinese issue. We’re a multicultural, ambitious and prosperous country – I hope we stay that way.

Well said.

The Herald reports:

Labour leader Andrew Little has stood by the decision to release figures showing a high proportion of Auckland house sales to people with Chinese names, saying it is time to blow the whistle on what is happening in the city.

The use of the data has been criticised by many as racist and “shonky” and Mr Little admitted there had been some backlash.

I understand a number of Labour MPs are very unhappy about this and see it as a test of of Little’s leadership, if he keeps defending this. They’re not so unhappy with the data as Phil Twyford’s comments which implied Chinese NZers are now hard working Kiwis. John Key demoted Lockwood Smith for his comments on Asians. Will Little continue to defend Twyford?

Imagine if for example a Don Brash led National Party had come out with a shonky analysis like this, and used the language Twyford did? Every Labour and Green MP in Parliament would have been calling Brash racist. Instead, we have silence.

Finally, if you want to work for yourself if you’re Kiwi enough to buy a house under Labour, try out this new Kiwi-O-Meter. Well done to the Young Nats for this humourous response to Labour’s dog whistles.

Tags: , , , ,

Stats Chat on Labour’s surname story

July 12th, 2015 at 12:00 pm by David Farrar

Thomas Lumley (A Professor of Stats) writes at Stats Chat:

So, there is fairly good evidence that people of Chinese ethnicity are buying houses in Auckland at a higher rate than their proportion of the population.

The Labour claim extends this by saying that many of the buyers must be foreign. The data say nothing one way or the other about this, and it’s not obvious that it’s true. More precisely, since the existence of foreign investors is not really in doubt, it’s not obvious how far it’s true. The simple numbers don’t imply much, because relatively few people are housing buyers: for example, house buyers named “Wang” in the data set are less than 4% of Auckland residents named “Wang.” There are at least three other competing explanations, and probably more.

First, recent migrants are more likely to buy houses. I bought a house three years ago. I hadn’t previously bought one in Auckland. I bought it because I had moved to Auckland and I wanted somewhere to live. Consistent with this explanation, people with Korean and Indian names, while not over-represented to the same extent are also more likely to be buying than selling houses, by about the same ratio as Chinese.

Second, it could be that (some subset of) Chinese New Zealanders prefer real estate as an investment to, say, stocks (to an even greater extent than Aucklanders in general).  Third, it could easily be that (some subset of) Chinese New Zealanders have a higher savings rate than other New Zealanders, and so have more money to invest in houses.

Personally, I’d guess that all these explanations are true: that Chinese New Zealanders (on average) buy both homes and investment properties more than other New Zealanders,and that there are foreign property investors of Chinese ethnicity. But that’s a guess: these data don’t tell us — as the Herald explicitly points out.

One of the repeated points I  make on StatsChat is that you need to distinguish between what you measured and what you wanted to measure.  Using ‘Chinese’ as a surrogate for ‘foreign’ will capture many New Zealanders and miss out on many foreigners.

The misclassifications aren’t just unavoidable bad luck, either. If you have a measure of ‘foreign real estate ownership’ that includes my next-door neighbours and excludes James Cameron, you’re doing it wrong, and in a way that has a long and reprehensible political history.

Lumley also points out:

But on top of that, if there is substantial foreign investment and if it is driving up prices, that’s only because of the artificial restrictions on the supply of Auckland houses. If Auckland could get its consent and zoning right, so that more money meant more homes, foreign investment wouldn’t be a problem for people trying to find somewhere to live. That’s a real problem, and it’s one that lies within the power of governments to solve.

Making it easier for supply to meet demand is a better solution than trying to reduce the demand.

Tags: , ,

Median house price doubled under Labour

May 20th, 2015 at 1:00 pm by David Farrar

The Herald reports:

The Prime Minister has been accused of lying about housing price increases under Labour – but figures support his often-repeated claim.

John Key was called a liar after an exchange with Labour leader Andrew Little in Question Time Tuesday.

Mr Little asked what effect the Government’s new rules on taxing capital gain on residential properties would have on the Auckland housing market.

In response, Mr Key repeated a claim he has made in recent weeks – that house prices doubled under the previous Labour Government.

That prompted Labour’s housing spokesman Phil Twyford to tweet that the Prime Minister was repeating the lie that house prices went up more under Labour than under his own Government.

So what is the truth?

Mr Twyford referred to statistics from the Real Estate Institute of NZ (REINZ) that showed its Auckland housing price index rose by 77 per cent during the Helen Clark Labour Government, and 87 per cent under the current National Government.

But another data set also released by REINZ – median national sale prices – does support the Prime Minister’s statement.

Under Labour, the national median price rose from $172,000 in November 1999 to $337,500 in November 2008, a 96 per cent increase.

The national median price has since gone up another 35 per cent under National to $455,000.

So median price for NZ doubled under Labour, compared to 35% under National.

Twyford tries to wriggle out of his claim by saying:

Mr Twyford told the Herald that he stood by his criticism.

The Prime Minister was being deliberately misleading by referring to nationwide prices in responding to questions about Auckland prices, without saying he was using nationwide figures, Mr Twyford said.

Twyford is wrong – again. Let’s look at Hansard:

Interestingly enough, if you look at the information by the Real Estate Institute, figures across New Zealand actually show that although Auckland house prices are up, the rest of the country is very mixed; some are actually down. And, interestingly enough, if you look at the equivalent period of time under the last Labour Government, house prices doubled. Under National they have gone up nationally by 35 percent.

Twyford should apologise. And to remove doubt, Key in a previous question used a different figure in reference to Auckland prices:

I know that Labour members do not like it, but house prices doubled under their watch. Actually, Auckland house prices went up by 79 percent under the previous Labour Government.

So John Key clearly linked to doubling of house prices to being nation-wide and used the 79% figure correctly for Auckland house prices under Labour.

Twyford will of course refuse to apologise.

Tags: , ,

New bright line test for capital gains on housing

May 18th, 2015 at 7:00 am by David Farrar

John Key announced:

“People calling for a new capital gains tax often overlook the fact that under existing rules, anyone buying property with the intention of selling for a gain is liable for tax on that gain,” Mr Key told the National Party’s Lower North Island regional conference in Lower Hutt today.

Mr Key confirmed the Budget this week will contain several measures to bolster tax rules on property transactions and to help Inland Revenue enforce them.

Introducing a new “bright line” test to tax gains from residential property sold within two years of purchase, unless it’s the seller’s main home, inherited or transferred in a relationship property settlement.

This isn’t a major change, but a useful one. Intentions are very hard to prove, so a bright line test will make enforcement easier. It is hard to think of many times that you’d sell a secondary home within two years of buying it, unless it is to make a capital gain.

Requiring non-residents and New Zealanders buying and selling any property other than their main home to provide a New Zealand IRD number.

This may also give us some better data on what proportion of houses are foreign owned, plus of course allow any gains by non-residents to be taxed,

Tags: ,

Reserve Bank tightens bank credit for Auckland property investors

May 13th, 2015 at 2:00 pm by David Farrar

The Reserve Bank has announced three changes to its LVR restrictions:

In response to the growing housing market risk in Auckland, the Reserve Bank is today announcing proposed changes to the loan-to-value ratio (LVR) policy. The policy changes, proposed to take effect from 1 October, will:

  • Require residential property investors in the Auckland Council area using bank loans to have a deposit of at least 30 percent.
  • Increase the existing speed limit for high LVR borrowing outside of Auckland from 10 to 15 percent, to reflect the more subdued housing market conditions outside of Auckland.
  • Retain the existing 10 percent speed limit for loans to owner-occupiers in Auckland at LVRs of greater than 80 percent.

So the new rules will be:

  • 100% of property investors in Auckland will need at least a 30% deposit to buy property
  • 85% (was 90%) of home buyers outside Auckland will need at least a 20% deposit to buy a property
  • 90% of non investor home buyers in Auckland will need at least a 20% deposit to buy a property

I think the changes are sensible and better targeted. Those outside Auckland will find it easier to get a mortgage. Non-investors in Auckland will have no change (or may find it slightly easier as investors will find it harder), and property investors in Auckland will not be able to get financing unless they can cover 30% from their own reserves.

The Reserve Bank is consulting on its proposal, and if they proceed, will implement them on 1 October.

Politik notes:

Mr Wheeler said the Bank thought that the moves would reduce the number of property transactions in Auckland by 8 – 10% and possibly reduce house price inflation by 2 – 4% “MAYBE EVEN MORE THAN THAT”.

Conversely the moves would give a slight boost to the property market outside Auckland and Mr Wheeler estimated that sales there could pick up by about 4% and “maybe house price inflation by about one per cent.”

The RB move won’t solve the fundamental issue of not enough land in Auckland has been made available for housing, but it will help.

Tags: , ,

International expert says land supply is the reason for house inflation

August 27th, 2014 at 9:00 am by David Farrar

David Killick at The Press reports:

Former World Bank principal planner Alain Bertaud, who visited Christchurch this month, has more than 30 years’ experience in urban planning. Now based in New York City, he has worked in places as diverse as France, the United States, Central America, Yemen, and Thailand. …

Providing affordable accommodation, according to Bertaud, is not that hard.

“The solution is to increase the supply of land. I would not bother so much on the construction of the housing itself, I think that can be taken care of fairly easily by the private sector.”

The opposite of what Labour is proposing. Labour has been against increasing the urban boundary in Auckland to allow more land to be used for housing.

Let’s figure it out. Look at your latest property valuation, or that of someone you know. Compare land value and “improvements” (the house). I bet land value accounts for over 30 per cent of your total property value. In some desirable areas, like coastal areas, land value may be over 50 per cent.

That is crazy. Bertaud says the rule of thumb is that land should be no more than 30 per cent.

In Houston, Texas, it would be only 15 per cent. “It’s strange because normally when the land prices are very high it’s a very dense country like Japan or Holland. This is not a dense country.”

Exactly. Unless we expect farms to take over the whole countryside, New Zealand has plenty of space for houses. “It’s a self-inflicted problem, frankly.”

It is, primarily by local government. From the point of view of local government, they like to restrict land, as it makes life easier for their planning departments. So land supply restrictions work well for the entity which decides them, but punish those seeking to buy a home.

Restricting land supply and imposing too many controls also stifles business growth, especially in the central city, Bertaud warns.

“I think it’s so inconsistent to put restrictions on height and say at the same time we want a compact city, we don’t want sprawl. If you put a restriction on height, it means you want people to use more land but you don’t provide this land.”

You need to allow growth to be both vertical and horizontal.

Tags:

Australian house prices

July 12th, 2014 at 3:00 pm by David Farrar

Stuff reports:

An Australian report that lays the blame for rising house prices on a lack of land for development, rather than a “price bubble”, could have reached the same conclusions here, a free-market think tank says.

The report, by the Sydney-based Centre for Independent Studies, said Australian house prices had risen at an annual rate 3 per cent higher than inflation since the 1970s.

Author Stephen Kirchner said foreign and domestic property investors had been made a scapegoat when the real problem was zoning and planning rules. They restricted the availability of building land and prevented the more intensive development of existing residential areas.

The supply squeeze in Australia was compounded by taxes such as stamp duty and capital gains tax, he said.

Australian house prices have risen at much the same level as New Zealand. What is useful to note is Australia has had a Capital Gains Tax since the 1980s.

So when Labour goes on about how a CGT will magically mean house prices decrease, ask them why has that not worked in Australia?

The solution in both countries is the same. Make more land available. It is about as basic economics as you can get. Artificially restrict the supply of land, and of course the price of land increase.

Tags:

The trade offs of urban form

June 17th, 2014 at 10:30 am by David Farrar

The NZ Initiative has published a major research report which examines the trade offs of urban form.

A report summary states:

  • zoning restrictions, such as urban limits, have been quantifiably shown to increase land supply shortages and dramatically reduce housing affordability. According to Demographia, the three least affordable cities in the world are the compact cities: Hong Kong, Vancouver and San Francisco
  • New Zealand’s main cities are characterised by severely unaffordable housing markets, with Auckland particularly unaffordable due to urban growth constraints and inner-city height limits. 
  • high land costs in ‘superstar cities’ have been shown to create a property inflation cycle where prices exceed wage growth, only affordable for wealthy residents, forcing lower income residents from the inner city. 
  • all urban residents share the cost of land prices in rent and mortgage costs, not just property owners, as businesses have to pass on higher operating expenses through prices. 
  • far less restrictive planning regimes in the United States and Europe have consistently nurtured affordable housing markets for decades.

The conclusions are no surprise. The Productivity Commission has also concluded that the artificial scarcity of land for housing is the largest factor in house prices. There is a wealth of evidence that this is the biggest single factor.

They also look at the claims that compact cities have less congestion:

  • US cities that have chosen to pursue compact development strategies tend to be more congested than dispersed urban environments (urban areas in North America most resemble New Zealand cities). 
  • research by the Reason Foundation, which quantitatively analysed 74 US metros over a 26-year period, found investments in public transit systems had little impact on overall traffic congestion. 
  • public transit, such as buses and trains, cannot replace the utility of cars for groups in society who have needs that extend beyond public transport routes, such as young families, working mothers and those who don’t work in the CBD (87 per cent of Auckland’s working age population are not 
  • employed in the inner city).

They also look at the claimed health benefits of compact cities:

  • there is a weak relationship between high population densities and low obesity rates. 
  • some of the world’s most dense and compact cities in Asia are struggling with obesity epidemics similar to that of their Western counterparts, despite high levels of walking, cycling and public transit 
  • landscape and climate have a bigger influence over walking and cycling activity levels than urban form. 
  • quantitative research in Vancouver, a compact city, shows urban areas with high walkability are exposed to significantly higher primary pollutants than suburban areas. 
  • green spaces and vegetation within cities, proven to provide health benefits, are likely to decline as population densities increase, particularly gardens, parks and playgrounds.

Central planners tend to have a holy zeal to try and regulate a city so it is compact. That makes the job of the local authority easier. But it doesn’t make it better for residents.

My belief is that cities such as Auckland need to be able to build both up and out. You need both. Building up is great for younger people without kids who like inner city living. But many families don’t want to live in an apartment block, and are quite happy to live some way from the CBD. As the Initiative points out, only 13% work in the CBD.

Many will attack this report simply because they don’t like the conclusions. But will they be able to back up their beliefs with actual data that refutes these findings?

The full report is only 48 pages, well references and documented, and a good read.

Tags: ,

The Labour curse strikes again

June 5th, 2014 at 12:27 pm by David Farrar

We’ve seen with manufacturing and immigration the Labour curse in action. After a few months of them declaring something is a crisis, it improves massively. In fact immigration has improved so much they’re now claiming it is a reverse crisis with not enough people leaving which has turned Auckland house prices into a crisis.

Well the curse has struck again. The Herald reports:

Auckland house sales, prices fall in May

I’m going to write to Labour and ask them to declare my love life a national crisis. That should result in a hugely improved winter for me :-)

Tags: ,

Labour ramps up the rhetoric on migrants

May 27th, 2014 at 9:00 am by David Farrar

Yesterday the UKIP wins the UK European elections, and maybe it is no coincidence that David Cunliffe is on TV that night saying that migrants are responsible for our increasing house prices.

3 News reports:

Labour leader David Cunliffe has taken his hardest line yet against immigrants, blaming them for rising house prices.

It follows a 3 News-Reid Research poll which shows almost two-thirds of voters say immigration should be restricted.

“It would take 80 percent of our housing supply just to accommodate this year’s migrants – and National is doing nothing,” says Mr Cunliffe.

This is the politics of blame and xenophobia. The facts do not back up what Cunliffe is trying to get people to accept.

I blogged the data for the last 10 years here. I repeat the key point:

So net migration is 24,000 higher than five years ago. But look at what makes up that 24,000. 15,300 are fewer people leaving. 5,700 are Kiwis returning or Aussies migrating. Only 3,400 are other migrants.

Migration does have an impact on house prices. But the level of migrants coming here has not changed greatly in recent years. In fact residency visas are down on 2008.

Will Labour just dog whistle on this one, or will they come out with a specific policy they propose? Do they propose to scrap work visas for that has been the area of most growth. For if they do, well then it means houses in Christchurch will not get built as quickly – because hey it is those damn migrant workers helping build them.

And now mistruths in this Radio NZ report:

Mr Cunliffe told Morning Report the party has always backed the skills and diversity migrants bring with them, but it must be sustainable.

He said a gross inward flow of about 70,000 migrants is forecast over the coming year, while a figure of about 15,000 has been a rule of thumb in the past.

That’s totally wrong. The current figure (PLT arrivals of non NZ citizens) for the year to April 2014 is 71,070. Here’s what it was when Labour was in.

  • 2008 – 64,320
  • 2007 – 59,670
  • 2006 – 58,640
  • 2005 – 54,710
  • 2004 – 54,670
  • 2003 – 64,310
  • 2002 – 71,040
  • 2001 – 58,170

15,000 has never been close to the rule of thumb. David Cunliffe was Immigration Minister for two of those years.

UPDATE: Radio NZ has altered their story so it now reads:

Mr Cunliffe cites predictions of net immigration of 40,000 people over the coming year, whereas he says a figure of 15,000 has been the rough rule of thumb in the past.

Why has the story changed. Did David Cunliffe say what the original story quotes him as saying, or did Radio NZ get it wrong. If the latter, then once again we have media altering stories with no transparency. If the former, then why did the web story change?

UPDATE2: Have now listened to Morning Report and the error is Radio NZ, but also Cunliffe tried to fudge figures.

Cunliffe did say gross migration was around 72,000. He said it should be lower and Espiner challenged him to name a figure he thought was acceptable. Cunliffe in response said that 15,000 is the normal level of net migration. So Cunliffe did not say gross migration is normally 15,000.  But he was being tricky by talking about gross migration in slating the Government, and then talking net migration for the level under Labour.

I can understand how a Radio NZ reporter got confused and conflated them. Doesn’t change the fact though that their original story was wrong and they should note at the bottom of a story when they have changed it from a previous story.

Tags: , ,

If 90% fail, it’s a silly test

May 16th, 2014 at 11:00 am by David Farrar

Stuff reports:

More than 90 per cent of rental properties in a nationwide survey have failed a ”warrant of fitness” (WOF) check.

About 140 rentals across Christchurch, Auckland, Tauranga, Wellington and Dunedin were given the once-over by home assessment experts earlier this year.

The rental housing WOF trial involved councils, the Accident Compensation Corporation (ACC), the New Zealand Green Building Council and the University of Otago.

It aimed to test whether draft WOF checklists and methodologies were practical for landlords, assessors and tenants.

About 94 per cent of the 144 houses inspected did not pass at least one of the 31 checklist items, but the majority failed on only a handful.

This should ring major warning bells that the proposed WOF checklist would push up costs and eventually rents for pretty much every tenant and landlord in New Zealand.

There might be some merit in some sort of WOF test which highlights the very worst properties as being sub-standard. But a test which sees 94% of properties fail is just some sort of unworldly wishlist. It’s fine as a voluntary branding test (you advertise you have passed it) but any notion of Councils making it compulsory should and must be rejected if it means 94% of properties are failing it.

Having the Government say that only 6% of NZ rental properties are good enough to allow people to live in them, would push housing prices and rentals up massively.

Tags: ,

Pellett blaming the Chinese

March 20th, 2014 at 9:00 am by David Farrar

Selwyn Pellett tweeted yesterday:

 

Pellett is a donation to both Labour and David Cunliffe and meant to be involved in their economic policy development. As you can see he has concluded the problem is Chinese expat house owners.

Note his robust source of data – a mate who texted him. And somehow this mate not only went around 25 houses, but went out of his way at every house to ask about the ethnicity of the owner, and whether or not they are expat. His data sounds about as reliable as a typical caller into talkback radio.

 

Bill Ralston congratulates him on behalf of Winston. Ralston also supplies a fact, as opposed to a text from a mate:

 

So Pellett asked for some facts, and got them.

 

But amazingly even after Ralston supplies the source, Pellett seems to suggest that the data may be made up or manufactured. This from the economic genius who cited a text from a mate as his source.

 

I then helpfully stepped in and provided a media report citing the BNZ data. So we have Pellett arguing 92% of homes sought by his buyer mate were owned by Chinese expats vs the BNZ data from reat estate agent sales that found it was 1.2%. You’d think he’s give up, but no.

 

Now he is claiming that the Auditor-General or someone has to audit the BNZ data before he will accept it. This would be more hilarious than tragic if it were not for the fact he started the discussion by citing a tweet from a mate claiming that 92% of homes he had looked at were owned by Chinese. He certainly does know shit data when he sees it, but because it allowed him to bash the Chinese, he used it.

 

Then finally he claims it is not about race, but foreign ownership. However he is the one who tweeted explicitly citing Chinese expat owners. Bit too late at the end to try and say it isn’t about race. The reality is he tried to scaremonger over Chinese buyers based on an anecdotal text from a mate. And then when called out on it, he rubbished any data that contradicted his mate’s text.

And this is who is helping Labour write their economic policy. That’s the really scary thing.

UPDATE: A reader has pointed out to me that Pellett wasn’t so opposed to foreign investment when he got hundreds of thousands of dollars from Jim Anderton in grants for his company, and then sold it off to a foreign buyer. Also it has been suggested that he ask family members how they would feel about his mate racially profiling them on the basis of assumed ethnicity if they were home owners.

Tags: , ,

LVRs from 1 October

August 21st, 2013 at 12:00 pm by David Farrar

The Herald reports:

Reserve Bank Governor Graeme Wheeler said banks will be subject to restrictions on high loan-to-value ratio (LVR) housing mortgage loans from October 1.

He said banks would be required to restrict new residential mortgage lending at LVRs of over 80 per cent to no more than 10 percent of the dollar value of their new housing lending flows.

He said the LVR restrictions were designed to help slow the rate of housing-related credit growth and house price inflation, thereby reducing the risk of a substantial downward correction in house prices that would damage the financial sector and the broader economy.

In a speech today at Otago University, Wheeler said housing played a critical role in the economy but was also a major source of “value and risk” to the household sector and the banking system.

“The Reserve Bank is concerned about the rate at which house prices are increasing and the potential risks this poses to the financial system and the broader economy,” he said.

“Rapidly increasing house prices increase the likelihood and the potential impact of a significant fall in house prices at some point in the future,” he said.

So this move is not about lowering house prices, more about reducing the risk of a boom and bust cycle.

ASB’s chief economist Nick Tuffley said the Reserve Bank was continuing to highlight the need for fundamental issues such as the shortage of land and housing to be addressed in the long-term.

Freeing up land will do more for house prices than any other action. Almost every piece of independent research has confirmed the artificial scarcity of land for housing is the largest factor.

I’m not a huge fan of LVRs. They may be a necessary evil, but I think making it harder for people to get a mortgage is not the best way to take the heat out of the housing market.

Tags: ,

Brash on land prices

May 28th, 2013 at 6:56 am by David Farrar

Don Brash writes in the NZ Herald:

Of course Dr Hosking is right if the supply of land is fixed, as indeed it has been by council decision. But it doesn’t have to be fixed. At the moment, less than 1 per cent of New Zealand’s area is urbanised. We are one of the least densely populated countries in the world. The council has quite deliberately chosen to make land expensive.

The price of land in Auckland is not an accident. It is, as Don says, deliberate.

And the consequences of that decision are disastrous, socially and economically.

It’s disastrous socially because for most low and middle-income families, buying a house in Auckland is now not even remotely possible, and for those families who do make the attempt, it almost inevitably means both parents working outside the home. Most low and middle-income families can’t even make the attempt, and often live in over-crowded, poor quality rental accommodation.

Don asks:

Why is it possible to buy 500sq m sections on the outskirts of Houston for $40,000, whereas 400sq m sections on the outskirts of Auckland cost $400,000? The answer lies simply in the fact that in Houston there are relatively relaxed attitudes towards using land on the outskirts of the city, whereas in Auckland that has been prohibited.

Town planners turn their nose up at Houston, and claim it is an awful place to live. However families from all over the US are heading there – because they can buy a reasonably sized home at a decent price there.

The very first report of the New Zealand Productivity Commission was on the cost of housing. The commission concluded that there were various reasons why housing is so expensive in New Zealand – but overwhelmingly the biggest single factor is the price of land, and that in turn has been a quite deliberate policy choice.

There are multiple factors, but ignoring land supply is ignoring the elephant in the room.

Dr Hosking mentioned that four of the five cities in the Mercer quality of living survey are “intensified”. And the fifth is Auckland. What he didn’t note was that Auckland is already more intensified than one of the other five, namely Vancouver. In fact, according to the Demographia survey of many hundreds of urban areas around the world, no city in the United States, Canada or Australia has more people per square kilometre than Auckland has now.

Again, a deliberate choice by the Council. And the fact Auckland is one of the most expensive cities in the world to buy a home is deliberately linked to that. And politicians from the left near universally are opposed to doing anything meaningful about it.

Tags: , ,

Not the fault of Chinese buyers

March 15th, 2013 at 7:00 am by David Farrar

Stuff reports:

The latest BNZ and Real Estate Institute residential market survey found 9 per cent of house sales were to people offshore. 

Of those offshore buyers, 18 per cent were from Britain, 15 per cent from China and 14 per cent from Australia.

Will we hear the parties of the left going on about banning Brits from buying property in New Zealand?

BNZ’s chief economist Tony Alexander said real estate agents reported that at least 69 per cent of British buyers planned to move to New Zealand, while 37 per cent of Chinese buyers and 51 per cent of Australian buyers intended to. 

“Taken all up that means at most 5.6 per cent (but perhaps as low as 4 per cent) of all dwelling sales are to people offshore not planning to shift to New Zealand.”

So between 94% and 96% of sales are to people residing in NZ or intending to reside here. How disgraceful that some politicians have tried to blame house prices on the 4%.

“The sprawling anecdotes regarding Auckland properties being snapped up by Chinese buyers are not supported by the evidence,” Alexander said.

While most overseas buyers in Auckland came from China (19 per cent – compared with 18 per cent from Britain), sales of property in our biggest city to Chinese buyers comprised just 2.1 per cent of total sales there.

And just 1.2 per cent of house sales in Auckland were to Chinese buyers not intending to move here.

1.2%. Remember that number the next time the xenophobes try to blame them.

 

Tags: , , ,

Labour’s housing policy falling apart

November 27th, 2012 at 3:00 pm by David Farrar

The media are starting to realise that Labour’s policy to build 100,000 houses for under $300,000 is out of touch with reality. It simply can not be done. Labour have in fact been proving this themselves with their photo ops.

First Shearer visited some affordable housing in Newtown as an example of what they will provide. But the houses there were not $300,000 but $495,000.

However, at the Newtown development Mr Shearer saw first-hand how expensive even entry level housing can be. The four four-bedroom homes he visited were each valued at $495,000.

So he tried again.

Opposition leader David Shearer got a closer look at what houses built under the Kiwibuild scheme could be like today. …

Shearer spent the morning touring New Zealand Housing Foundation properties across Auckland to promote the policy by illustrating innovative projects already underway.

The foundation is a charitable trust that helps low to middle income people into houses through a range of shared equity programmes.

His second stop was in Mt Roskill where he saw larger homes worth $400,000-$500,000.

”A lot of people are asking what can you build in Auckland for that money. We’re saying if you can build these here so close to central Auckland, we should be able to build much bigger homes if we’re doing it en masse.” 

Yeah the Govt will wave a wand and homes will both be bigger and cost less, under $300,000.

The foundations properties are an excellent example of what could be built under Kiwibuild, MP Phil Goff said.

”These are at the higher end for middle income families, but there are still about $100,000 cheaper than most houses in Auckland.

Yes the foundation properties are cheaper. In fact they even do have some homes for $300,000. But do you know why?

They are already being subsidised by the taxpayer. From May 2012:

The majority of the new projects are in Auckland, with the New Zealand Housing Foundation receiving the largest share of funding with $8.86 million to build 68 homes in West Auckland, Takanini, Mt Albert and New Lynn, and a further two in Kaikohe in Northland.

That is an average of $130,000 subsidy per home. Now Labour are saving they can do houses for under $300,000 with a mere $15,000 capital per home. Their numbers are so out of kilter with reality that I don’t think it is too harsh to call them a lie. There is just no way they can make it happen unless they can reduce the cost of land to $50,000 a section. Ironically they oppose almost every initiative to reduce the cost of land and consenting building on land.

Shearer’s credibility on this was savaged on 3 News last night:

Labour leader David Shearer hit the streets today, on a mission to prove his affordable home policy will actually work.

But one of Auckland’s top property experts has offered Mr Shearer some advice: start buying caravans, because it’s not going to happen.

Publicity stunts don’t always go to plan, and Mr Shearer found that out today as he showed off a low-cost subdivision.

Just over a week ago Labour announced, if elected, it would build 100,000 homes – many in Auckland – selling for just $300,000 each.

Construction costs would make up $220,000-250,000 of that, leaving just $50,000-$80,000 for the section.

When asked if he knew the average section price in Auckland, Mr Shearer says, “it depends where the section’s going to be”.

The average section price in Auckland is actually $300,000.

It is simple – we need to reduce the price of land. The supply of land is artificially constrained. Labour are against increasing the urban land limit in Auckland, so section prices are not going to decrease – and only on Planet Labour will you get land for $50,000 – not just one or two pieces of land – but 100,000 sections!

 

Tags: , ,

House prices and GVs

November 25th, 2012 at 10:00 am by David Farrar

Kirsty Wynn at HoS reports:

It’s almost as good as claiming Lotto’s first-division prize – the winners in Auckland’s frantic housing market are selling their properties for hundreds of thousands of dollars above their official valuations.

Ummm, no it’s not.

One could sell a house for hundreds of thousands above GV and lose money on the sale.

Official valuations are often massively different from market values. What makes a seller a “winner” is how much profit they made selling a house compared to what they paid for it, plus improvements made.

Statistics show that in the past six months there have been at least nine properties that sold for $500,000 or more above their CV, and one went for a whopping $1.2 million above valuation.

A meaningless statistic.

Another stand-out property was 18 Rangitoto Ave in Remuera, which sold for $2,895,000 in August – $1,175,000 over its recent CV of $1,720,000.

Bayleys Remuera agent David Rainbow, who marketed and sold the property, said buyer competition was fierce.

“Two hundred parties registered from open-home viewings and at auction. Five parties were competitively bidding against each other, which ensured the top price was achieved,” Rainbow said.

He said the CV could be a ballpark figure but a lack of stock and high demand meant the price was pushed up by bidders who all desperately wanted the home.

The house had undergone significant internal renovations and remodelling work that were not factored into the $1,720,000 council valuation.

“A council valuation is a broad snapshot of a suburb, and fails to take into account added-value work that owners have invested in,” Rainbow said.

Exactly. An apartment near where I live recently sold for around $100,000 thousand over GV. However the previous owner had spent $300,000 on improvements – so in fact she lost considerable money on the sale – yet this article’s criteria would declare her a winner.

This is not to say that some people are not making a good profit on selling their houses. I am sure they are. But the comparison should be to purchase and improvement price.

Tags:

Transtasman on house price logic

November 2nd, 2012 at 2:00 pm by David Farrar

Transtasman report:

OK, so the Govt wants us to smoke more, which is why it has hiked the tax on tobacco, right? And the whole Kyoto, putting a price on emissions thing: it’s to encourage people to put out more greenhouse gases, isn’t it?

No?

Well consider the position of Labour and the Greens and – as of this week – whoever writes NZ Herald editorials. Apparently, according to this logic, the way to get more houses is to tax them more.

Thanks TT for pointing out the stupidity of their arguments. They want to tax houses more, so they cost less. Yeah, right.

At the moment the issue is supply of houses. There isn’t enough of them, in Auckland or – for obviously different reasons – Christchurch.

In Auckland the question is simply because it’s the only part of the country with net inward migration and a growing population. In short, both Auckland and Christchurch need more houses.

You don’t – unless your grasp of economic incentives is really skew-whiff – increase the tax on something you want more of.

Labour and Greens are against freeing up more land, and want to tax houses more – imagine house prices then!

Tags: ,

Auckland land prices

July 31st, 2012 at 7:00 am by David Farrar

NZ Herald reports:

An environmentalist has accused Fletcher Building of being greedy and rebuffed its recipe for solving housing affordability problems.

Gary Taylor, the chairman of the Environmental Defence Society, criticised Fletcher for demanding the Government and Auckland Council expand urban limits to create more housing.

“Fletcher, with its market dominance, stands to make a fortune out of building more houses. But that won’t make housing more affordable. It will, however, contribute to Fletcher’s excessive profit-taking, which is a big part of the problem,” Taylor said.

In a column for the Herald’s Mood of the Boardroom publication last Thursday, Jonathan Ling, Fletcher’s chief executive, said central and local government must free up more land, particularly in Auckland, if the city is to grow and prosper.

But Taylor said it was an urban myth that more land brought cheaper houses.

“It won’t make any real dent on cost because raw land value – a greenfield site before it’s subdivided and developed – is only around 10 to 15 per cent of the total value of a new house and land package,” Taylor said, advocating instead the creation of a more competitive building supplies market, improving labour inputs, reducing development levies and consenting costs and tightening up on infrastructure spending.

I don’t think Taylor’s figures are supported by the facts. In Auckland the land is on average 60% of the house price, while elsewhere it is 40%. Land just inside the urban limit costs eight times as much as land just outside it.

Philip King, Fletcher’s investor relations manager, cited his company’s submission to the Productivity Commission and said land prices made up almost half the cost of new houses so it made sense to make more land available.

“Land price rises have outstripped other building costs by a factor of more than two to one over the past two decades. Construction materials have increased by around 70 per cent whereas section prices have gone up fourfold in nominal terms or threefold in CPI adjusted terms,” King said.

The Real Estate Institute and Statistics NZ found the biggest driver in the increase in house prices has been land value appreciation, King said.

You know I think I’ll go with Stats NZ!

Tags:

Auckland Housing

May 17th, 2012 at 11:00 am by David Farrar

I get mad when I read this:

A report by the Housing Shareholders Advisory Group in 2010 found there was a 70,000 house shortfall across the country.

The Greens say yesterday’s announcement is ”just a drop in the ocean”.

Co-leader Metiria Turei said the housing crisis was ”a ticking time bomb”.

”We urgently need to increase the supply of housing to cover the 70,000 house deficit we have in New Zealand. At this pace it will take decades.”

Families were struggling with high-cost, low-quality, overcrowded housing while some families didn’t even have housing, she said.

And why do we have high-cost low-quality housing in Auckland especially? Because the Greens and others steadfastly campaign against the one thing which could massively lower the cost of land, and hence housing. That is to increase the urban limit.

The Greens are against this because that means people living further out will drive those evil cars more. Now that is a reasonable point of view to have – that getting rid of cars is more important than affordable housing.

But hell when you then come out all upset over the cost of housing, well go bloody look in the mirror.

Personally I regard making housing in Auckland more affordable as far more important than trying to force people out of their cars. The Greens do not however. Their solution is to keep land prices high.

Tags: ,