Unreliable data won’t help foreign buyer issue

Claims about the level of Chinese investor activity in the Auckland market are not reliable - and nor are they the right way to deal with foreign buyers.

Monday, July 13th 2015, 12:00AM

by Miriam Bell

Fuzo Property director David Whitburn

People of Chinese descent were responsible for 39.5% of Auckland property transactions between February and April this year - according to controversial data released by the Labour Party over the weekend.

However, the data, which came from an unidentified real estate agency, relied heavily on Chinese sounding surnames and conjuncture about whether the buyers in questions were resident in New Zealand or not.

Property Institute chief executive Ashley Church said the claims were reprehensible and an exercise in unveiled racism.

He described the data as “shonky” and said it had “so many holes in it that it would be marked with an ‘f’ if it was submitted as a High School Economics project”.

Using “Asian sounding” surnames to identify which buyers are “Asian investors” provides no real evidence on whether the buyer is a New Zealand immigrant who lives here or an investor based in China, he said.

Claims that the Auckland property market is being skewed by non-resident investors might prove to be correct, Church said.

But any action taken should be based on hard data and facts, and the race of the buyer shouldn’t be a factor.

“We might be surprised to learn who the major investors really are. Work done by the Overseas Investment Office, in 2012, suggested that the biggest buyers were Americans, Brits, Canadians and Aussies – with the Chinese a long way behind.”

Church believes the government’s recent move to create a foreign buyer register by requiring investors to have a New Zealand tax number will provide good, accurate, information.

“It will help us to determine whether we need to be taking steps to ban foreign investment in Kiwi homes, or direct it into the construction of new houses, as is the case in Australia”.

Fuzo Property director David Whitburn also thought the data lacked credibility - due to the fact the real estate agency was unidentifed as well as the tenuous assumptions involved.

He said the data simply didn’t provide any information about which buyers were actually Chinese or not, let alone whether the buyers in questions were resident in New Zealand or not.

“Too much is being inferred from far to little information.”

Whitburn, who is himself a prominent Auckland investor, pointed out that the Reserve Bank, Treasury and most major economists have all said that Auckland’s housing market issues come down to supply and demand.

“There is extremely strong demand along with ongoing supply issues. It is this which is driving Auckland’s price rises and making things difficult for first home buyers.”

Like Church, he thinks the government’s moves to keep track of foreign buyers via New Zealand tax numbers and bank accounts are a good way to go.

“It will better reflect where foreign buyers are based and it will provide much better information about foreign buyers.”

Confining foreign buyers to the purchase of new builds, as is the practice in Australia, would also be a good idea, Whitburn continued.

“It would help to stimulate the creation of new housing stock - which Auckland desperately needs. And it wouldn’t have a negative impact on New Zealand’s export relationship with China.”

However, he said that, if such a policy was adopted, there should be a caveat that properties bought by foreign buyers should be made available for rent.

“This would prevent the problem of properties sitting empty and it would help alleviate the rental crisis which is emerging in parts of Auckland.”

Meanwhile, BNZ chief economist Tony Alexander said the vacuum of accurate information on foreign buyers meant that formulating policy to address rising concerns about them was extremely difficult.

In his view, it would be sensible to adopt Australia’s policy of restricting foreign buyers to the purchase of new housing stock as soon as possible.

However, he too said it would be necessary to add in an extra clause that any new housing bought would need to either made available for rent or actually rented.

Without doing so, it could leave the housing supply situation unchanged from the current no-rule regime.

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