Banning foreigners from buying property was the norm until the late '80s or so. Then they opened the floodgates around the world, and the wealthy foreigners piled in.
I was in New Zealand and Australia in 1990, and this was very much on peoples' minds then, as property prices spiked and normal people had a more difficult time finding a place to live.
Halelujah and praise the Lord. I'll support anything that makes housing more of a place to live and less of a financial instrument. As they say Down Under, "Good on ya, New Zealand".
The great consolidation is on. The wealthy are buying up everything that normal people need to live. So when a home morphs from a place to live into a financial instrument, it is an integral part of this process. Financial instruments are easier to manipulate than places to live, and allowing foreigners to buy housing stock is an integral part of this manipulation.
For now, we focus on income inequality, but there is something more insidious going on. The real issue is not how much money the wealthy have, but how they use it to gain control of the lives of others. Controlling their access to housing is one of the cornerstones of that control.
3
I used to work in the construction sector in Aukland, and the truth is that there were so many people working at any moment doing not much, you can see it also anytime they are building or repairing a street hole, 10 people watching a guy doing it, the efficiency is super low, so we were wondering if this was planned to inflate the price of the house justifying it with high wage cost, the higher the cost of the new home, the more people you can see doing nothing, at one point we were 20 guys literally just sweeping the floor for 10 hours a day, doing nothing but getting paid, that's why I quit.
So yes, foreign investors might increase the prices but also the internal admin is doing it so, and as other comment says, for each one crying out the high prices is another one so happy to sell his home valued at 2x-3x the price.
1
@Gil: The cost of construction adds to the price of housing, but not nearly as much as the cost of speculation.
1
@mlbex: @Gil. Rereading your post I see that you get it. You believe that the inefficiency in building was just an excuse for the speculative increase. I'm not so sure, but I do take your point.
Having lived in NZ for the last 11+ years and witnessing the housing prices skyrocket. There, from my perspective, several factors that impact housing prices:
o Foreign investors. The 3% figure is misleading as this is a nationwide figure and only represents the data between Apr 2018 and June 2018. The largest growth over the last decade has been in Auckland where that number is 7% with some communities reaching 18% of sales going to foreign buyers. NZ only started to track Foreign ownership in the last year or so. We will never know how many homes were purchased by foreign investors during the high growth period.
o Competition: There is no MLS equivalent in NZ. The majority of homes are represented by a single realtor or sometimes 2. This stifles competition and leads to speculation.
o Until recently, the majority of homes were sold thru the "Tender" process. Essentially, blind bidding on what price the seller is looking for. You receive some "guidance" from the seller's agent, but this is vague at best and fuels speculative bidding.
o There is no capital gains tax on home sales. Many kiwis view property investment as their ticket to wealth.
o Migration. NZ has a high net migration rate for its size. This, coupled with a lack of infrastructure investment to accommodate this growth, adds to the cost of housing.
o The average kiwi living in a major city can't afford to own a home. The median wage to house price ratio in cities like Wellington, is over 10x. `
4
I wrote this same article for a Boise, Idaho weekly -- in 1993. There prices had doubled at the low end in four years, and I'm sure that is now a 500-600% increase. Before then the same had happened in Santa Fe, where adobe huts went up by 10x, driving locals out just due to property tax increases.
But possibly the next real estate crash has already started
http://thegreatrecession.info/blog/housing-market-crash-2-0/
3
Good for them. Stopping the penetration of imperialism wherever a nation can is a priority in today’s concentration of wealth in the hands of individuals.
11
Bravo to New Zealand! The super-rich from around the world have used real estate as tax dodges and, in the case of the Russian oligarchs, as a money laundering scam.
This has driven real estate prices far beyond the middle class in most big cities in America. Even small towns and villages with the most comely landscapes and Main Streets, and within a fairly easy drive from the big ciites, have seen local real estate leap into unaffordable prices, driving local buyers out of the market, because of wealthy buyers bringing saddlebags full of cash.
Hence, the New Zealand government has decided that this is unacceptable as a very negative effect for their economy and their citizens.
This is my kind of place. Now, if only I could buy a home there.
17
@David Ohman: Along with their tax dodges, they make it harder for everyone else to get housing. That's collateral damage that hurts normal people even more.
Meanwhile, a wealthy person I know has gobs of money in some kind of real estate trusts that are bringing him great returns. He's cagey about the details, but someone is spending the money that he and his cohorts enjoy.
1
I look around the streets of Manhattan and Brooklyn and see the proliferation of mega high-rise luxury buildings that even my acquaintances who are of the doctor, lawyer and marketing executive ilk scoff at the extreme prices of. After reading the NYTimes investigation a few years back regarding the shell companies and foreign investors buying up top property in NYC and pushing up prices, I can only ask, why doesn't our xenophobic president put his mouth where his money is and look to campaign on implementing similar rules as New Zealand? Let's build a legislative wall to keep out the global top .1% and allow the working and middle class to continue to exist in our cities...
11
@jon
Our xenophobic president will never support anything like ths because most of the financing he obtains for his development projects comes from Russian oligarchs and Saudis. He’s been laundering that dirty money since the 2008 financial crisis. This is something the Mueller investigation will most likely expose.
16
@jon The Federal Government does not control who can buy property in the US. It's up to localities who establish free market (not subsidized) housing rules. That's the way it has always been. NYC sets the rules in NYC as do other cities.
1
@Greg
Music to my ears, Greg...
1
As anyone having taken an introductory course in Economics will tell you the solution to heated up demand is more supply. That people want to move to and invest in New Zealand is a good thing. Plus this is real estate, which means foreigners cannot take it away from New Zealand. The fact is xenophobia and racism play a part when white countries and cities propose laws against "foreign" buyers, mostly aiming at Chinese investors. (And in the past, against Japanese.) Many were surprised when they found out the majority of investment has come from other white countries, not China. There's also hypocrisy involved: for every New Zealander who cries foul, there's another New Zealander happily selling his/her house to a foreigner for a hefty profit. Foreigners just make easy whipping boys for politicians who then can avoid solving the real problems.
5
Well... I am not aware of any foreign buyers that are welcome to purchase real estate or land in China!! Good luck with that...
4
Yes! Have been saying this since the 90s when foreign land purchases by LLCs or individuals started to sky rocket. China now owns almost as much land as the UK, and may own more. But New Zealanders and Aussies also have increased their ownership under group purchases since 2008. Many around the globe have invested as corporations and now rent to US citizens; one reason for the lack of affordable housing.
We need to outlaw foreign investment in land. Period. It would help NYC tremendously, but parts of many states would find new houses. The global economy has not been too good for the US, and it sounds like the same is true for at least some other nations.
Anyone that does own property should also pay full property taxes. Perhaps the worst example in the US is Florida, where thousands that live in NY and NJ pretend they live in FL.
4
Apartments and houses are bought by Chinese land speculators expatriating their money to the safety of this country. They then evict the tenants and sit on empty property waiting for the 7 year penalty to term and the scarcity they drive to increase the value, then sell the cleansed properties to further speculators from China enjoying the free visa granted for $500K "investment" in the country. San Francisco is ground zero for this enduring scam in concert with the real estate industry. Interestingly, this article solely quotes the real estate industry to establish banning foreign speculators doesn't affect housing and rental prices... look to Vancouver. It does, absolutely.
16
Same is true in Boston, where wealthy Chinese vacuum up all the properties surrounding the city (lousy 3-story tenements going for a million dollars in working class neighborhoods).
Time to stop this kind of foreign carnage in America. Decent people in large U.S. cities can't even find a decent place to live.
17
Overseas buyers with access to cheap money find our prices cheap and can offer over the odds and this artificially raises the values and makes it harder for NZers to buy. Foreigners can build a new home but can't buy existing
What a surprise. When governments (all parties) allow unchecked immigration and sell their country out to the highest bidder
4
Bit late, should have done this 10 years ago...
6
@BDubs: 10, 20, or 30 years ago I used to talk about this stuff and people shined me on and called me a communist. Now that it's mainstream, I can relax and talk about something else.
Urban gentrification causes tremendous social inequalities. I don't like that at all. Billionarisation... i definitely hate it.
2
New Zealand has been a popular easy-entry point for East Asians seeking residency in Australia - as last I looked NZ citizens were automatically allowed to stay in Oz
as for getting welfare or committing crimes - not so much ...
The main foreign buyers of American real estate are Chinese..and Russians.
4
@johnw
When I lived in Orange County, CA, the influx of wealthy Chinese helped to drive up real estate very quickly. They also became a large percentage of student population at UC Irvine. A campus annual report, as far back as 2000, reported that Asians represented more than 60 percent of enrollment. And the UC regents promoted this because of the massive amount of out-of-country tuition rates. And this made it harder for high-achieving American students already residing in California to be accepted for admission, despite 4.0+ qualifications.
So when NZ seeks to put a stop to an unnecessary acceleration in the rise of housing and the cost of living index, good for them. Money laundering and tax evasion through real estate purchases by the world's super-rich must come to an end, regardless of national identity.
16
Sounds like an excellent idea.
Tired of “Communists” (they hate landlords, right?) wrecking American cities for people who are stuck living here.
2
New York has become a housing disaster because of foreign investments. Talk to anyone trying to buy a middle class home.
First the prices for “middle class” are $600,000 - over $1,000,000 easily.
More so, talk to anyone who has tried to buy a place even in Astoria for $750,000. It’s not that they get outbid, it’s that Chinese buyers come in and pay cash. I have friends who have put in literally 10 offers only to be rebuffed.
Stop allowing foreigners and secret LLC’s to purchase homes and not live in them.
8
@Manish -- Yes - secret owners. The little people are seen while the rich oligarchs (with lawyers) get to hide. ALL PROPERTY OWNERS should be on a property record. PERIOD. No special rules for the super rich.
2
Good on kiwis. Countries that still have decent living for most of their citizens need to protect themselves from the rapace rich. Land, air, water are human basics and governments should take care of them.
7
@Jo Ann
Vancouver BC, Canada has a housing crisis because wealthy foreigners, mostlt Chinese, have been biying up property as investments. In many cases the owners leave the property vacant. In some cases they will purchase mini-mansions and have their college children occupy them.
I think Vancouver is cracking down on this practice because housing cost have risen exponentially.
8
''....fundamentally, the policy can be worked around.''
"so far it hasn't had an effect."
For those with great wealth and fortunes, nothing ever does.
5
If NYC wants to curb foreign money from buying up real estate, end anonymity of LLC buyers. Require all the LLC participants to be named and to update the publication of those LLC stake holders every year.
If you want to keep using NYC real estate to stash foreign money and launder ill-gotten gains, keep LLC purchases as anonymous they are now. Anonymity of landowners and home owners is not a right.
3
The purpose of the legal changes referred to in this article in British Columbia, Canada's west coast Province, is not to restrict ownership of residential real estate by foreigners. The goal is to discourage residential property being left vacant for extended periods of time for investment, money laundering or like purposes.
These legal changes impose added annual ad valorem property taxes on such properties in high-density regions of the Province if these properties are not occupied for 7 months during the preceding year by the owners who file Canadian income tax returns or renters.
4
Hawaiians have been dealing with gentrification for decades, if not generations. Nothing wrong with that I guess.
1
@Chase Long: They've been dealing with it since the haoles arrived.
Elephant in the room for NZ: Chinese money launderers by the boatloads. That AND their buying off politicians, pro China CCP "think tanks", media along with the bullying and threatening of academics and anyone critical of the CCP.
3
Good for them. At least there is one country in the world run by people with common sense.
7
@Fred
'Couldn't agree more. Money laundering and tax evasion tactics by the super-rich is not a right; it is a crime.
5
Let’s use basic economics to answer the article's main question: “how much, if at all, the new law will succeed in bringing prices down and homeownership up.” The article says: “There are also several ways for foreign investors to get around the ban… [a]nd the law doesn’t apply to new homes.”
If the law permits foreigners to continue purchasing new homes, then it will concentrate foreigners’ demand on New Zealand’s limited supply of new homes, causing new home prices to rise. How does that help New Zealanders who want to buy new homes?
This law may well reduce the overall demand for New Zealand’s existing homes thereby reducing their prices. But will that help young New Zealanders buy homes? Fewer owners of existing homes will have an incentive to sell, reducing the quantity for sale.
Politicians who seek to alter market forces should realize that the laws of supply and demand can work in ways they do not anticipate. A direct subsidy to first-time home buyers funded by a tax on foreign buyers is a better way to go.
4
@Andrew
Baloney - New Zealand can build new housing on its own. It doesn't need foreign "investment."
4
Overseas buyers are speculators sheltering money. They don’t care if they pay top price because their portfolio doesn’t rely on investment grade return. Thus, locals are priced out, houses stand empty, and money is drained from the economy. The top of the market determines price growth so everyone is affected. Except parasites like Peter Thiel, of course. (Yes, his citizenship was fast tracked, unlike for thousands of others who work, pay taxes and contribute to the community for five years before they are eligible then have to jump through bureaucratic hoops.) A lot of Americans who are reading this can’t imagine an $800,000 mortgage on a normal salary but believe me, it’s common.
Using housing the way overseas buyers are is immoral. The government is right to step in.
10
Hope so. Why let foreign money lauderers and parkers take over the real estate of a small country where actual people live?
5
Why the Chinese are moving:
China’s Entrepreneurs Are Wary of Its Future
“Only one-third of China’s rich people say they are very confident in the country’s economic prospects, according to a recent survey of 465 wealthy individuals by Hurun, a Shanghai-based research firm. Two years ago, nearly two-thirds said they were very confident. Those who have no confidence at all rose to 14 percent, more than double the level of 2018. Nearly half said they were considering migrating to a foreign country or had already started the process.”
https://www.nytimes.com/2019/02/23/business/china-entrepreneurs-confidence.html?action=click&module=News&pgtype=Homepage
Putting your own citizens’ needs first - what a great concept.
A politician in America who ran on that platform - especially when it comes to controlling illegal aliens - might win.
2
@James
Nice try, Jimmy. This article is about big money buying up real estate (laundering, etc...) and pricing regular folks out of the market. Not about a whole different subject - controlling immigration.
2
If you want to see what has happened to an area where foreigners are purchasing a lot of property, come to the Bay Area in California. What used to be a great place to live has turned into an unaffordable mess.
8
"Will it work? "
Well, the "alternative" -- sky-high priced beyond the reach of non-investment bankers and non-Gogglers -- is clearly NOT working, in terms of providing decent housing to working people and preventing rampant speculation by profiteers.
Not to mention the huge aspect of racketeering oligarchs money-laundering and hiding assets off-shore "dark window" luxury apartments in NYC (which the Times has documented).
5
This is happening all over the world. Take it from a Bay Area resident.
4
This seems like fairly selective use of the data on foreign buyers; after all, it should be remembered that the marginal buyer sets the price...
Central Auckland houses in particular were significantly overinflated by foreign money - particularly Chinese, who as in other markets (Vancouver? Sydney?) appeared to be aiming to diversify their money out of Yuan and into tangible property assets outside China before their own more restrictive overseas investment policies got enacted - and plenty of 'local' investors/speculators that rushed in to follow the growth in residential real estate prices... compounded by a significant influx of new immigrants (and returning kiwis) over a period when we had one of the highest population growth rates in the OECD...
So there has been a genuine supply-side (and cost) issue, and solving it is certainly not going to be as simple as banning foreign buyers from purchasing existing houses, and slapping a (potential) capital gains tax on investment properties, but as a starting point it certainly won't hurt...!
These measures would probably have gone a long way toward cooling the market (for the better) if they had been implemented years ago before things really got overheated. Instead we got the National government of the day's laissez-faire cozying up to any foreign investment on offer, and using high levels of immigration as a crutch to keep the gas pedal down on economic growth...
2
I lived Auckland for 17 years before departing in 2017. In their rush to find the parts of the article that confirm their pre-conceived notion that overseas (CHINESE) money is the single, major driver of house price inflation in their neck of the woods, many commenters have either missed or have chosen to ignore the expert comments of Shamubeel Eaqub about the actual effect of the foreigner buyer ban on the Auckland market. He notes “in terms of whether it actually has an effect, it doesn’t look like it.” As is implied in the article, housing inflation in Auckland is driven by other factors too. This article mentions population growth (demand) and limited housing supply. This is how the argument is normally framed in New Zealand. It is not too surprising that this article does not touch upon another major driver of house price inflation in Auckland, one that is a direct consequence of the particulars of the New Zealand tax structure. That unnamed driver is domestic investors, who up to now pay no capital gains taxes, who can write off depreciation against their earned income elsewhere as their properties actually increase in value, who can write off their mortgage payments as business expenses (mortgage paid on a personal home is not tax deductible) and who up until a couple of years ago, could qualify for a mortgage with a lower down payment than what was required for a personal home mortgage. The prospect of the dreaded Capital Gains Tax was just raised. Stay tuned.
3
It seems like something is not right in global housing markets. How can the price of a home change so significantly compared to average income?
Can NY Times do an article to help us understand why housing all over the world has become so much more expensive relative to average income over the last couple of decades? Is it all due to foreign investment? Was there little to no foreign real estate investment before 20 years ago? What other factors play a role?
10
I live in Metro Vancouver where have seen a 100% increase in prices over the last five years, various taxes have been implemented to slow and reverse this at last. In as much as foreign investment has superheated the market, money laundering from the proceeds of drugs and crime from around the world played a major role as the sector was effectively unregulated. Homes used to be family investments, the real estate market once thought of a secure conservative investment is now considered high risk and regulations have not kept pace. There is a small percentage of people in this world who have so much money that they need to hide it or are just so greedy that they have no regard to consequences, time to go after them.
15
It might be relevant that Mr. Theil is viewed by some as a sort of high functioning paranoid billionaire who subscribes to doomsday environmental survivalism that stokes New Zealand's deepest xenophobic notions.
There is also the simple dynamic that billionaires and 'mere multi-millionaires' pursuing their lust for high end assets have distorted the development patterns in real estate by encouraging the creation of über luxury real estate for the "Sotheby International Set" with a highly adverse impact on the creation for housing that real people actually live in.
The reason of this boils down to the brute force exerted by capital, land acquisition and development costs versus risk and profit. Plus less fiscal competence is required the larger the profit margins become to shield developers from all the padding and hype. The backlash is quite understandable seen against that stark reality.
Add to this the 'exceptions' clauses fueled by the Australian backdoor, and the exemption for "new homes" - or 'ground up' - and the difficulties are guaranteed to continue until halted by a worldwide economic capital contraction.
6
The basic question is whether cities belong to those who live there or to the international community of investors looking for a safe place to park some of their money. If the answer to this question is the investors, then present policy is what we need. But if the answer is that cities belong to the people who live there, present policies will have to be modified in ways that make investors furious. If they are not furious, then they do not think the policies will work except to a minor extent.
13
Skyrocketing house prices, collapse of home ownership among the young, increase mortgage stress are very real cities such as Sydney and Auckland. The governments have responsibility first and foremost to the citizens and electorate that voted them in. It is matter of fact that red hot demand from overseas speculators, particularly China, has added to the problem of housing affordability. I see no problem restricting home ownership to citizens and permanent residents.
12
I'm an American with a home on the south island. I SUPPORT the restriction on foreign ownership- even though it means I can never purchase another home in New Zealand.
I think what will happen is that a future federal government will relax the restriction, so that foreigners will be able to buy... and sell...with multi year (ie 5-7 year) duration requirements to stem the "flipping" of homes which Chinese "investors" are notorious for having done in Auckland and Queenstown.
10
Ms. Prime Minister is just playing politics. As an American living in a town outside of Auckland, I have seen the ability of 'locals' to purchase a house here decrease year on year, and foreign purchasing is a minute reason why. In such a small country, wages have not gone up much but costs certainly have. I am constantly amazed at how Kiwis manage day to day. Forget about foreigners, Jacinda, and deal with the real wage & industry issues you have here now.
6
@JC I understand that Chinese investment- prior to the law change in 2018- accounted for 20% of the Auckland market ownership; Queenstown 10%. This alone "capped" the best homes and upward mobility of middle class people...based on foreign capital- not domestic economics. The net result was that Auckland's surrounding towns themselves became overpriced and expensive to rent.
Most New Zealanders are one generation "off the farm"...in a nation with the size and population of Colorado. The federal government is preserving monopoly status in many industries (with govt ownership of shares) and wages are about 1/3 what young people can earn in Australia.
Thus, capping real estate speculation is, in itself, not an "answer" for long term health of the housing and property markets in the nation. But it's a statement of priority that should resonate strongly; and be upheld by Labor and New Zealand First parties. The Nationals will modify the current housing market restrictions, but I think the spirit of the law will be maintained.
5
High house prices are multifactorial. I suspect foreign buyers are a small factor. Bigger are the very high costs of new construction. Plus government inaction in the form of a capital gains tax to reign in the property speculators of the past two decades.
4
San Francisco has some 30,000 unoccupied residential units, most owned by domestic and foreign speculators ranging from wealthy individuals to corporate real estate investment trusts. If most of these vacant units became available, our notorious housing shortage might be somewhat eased. But flippers, whether they're mom and pops or corporate entities, who convert housing into units of speculation, work against affordable housing because, ultimately, renters are required to subsidize their debt, and would-be buyers, including people vital to our community, are forced to find housing far from where they work. Nothing good comes from treating homes as investment vehicles for absentee speculators.
37
@Mark Hugh Miller
Better idea: How about a law demanding that foreign owners allow undocumented foreigners to live in these units, rent free, as caretakers? We offer a capital sanctuary to the owners, and housing sanctuary to the undocumented. Smile and skip 48 anthills.
You have the wrong idea. Quantitative Easing caused financial institutions to be flushed with money. Money needs assets for investing. One of the asset classes is real estate. All asset classes went up in price as the huge QE2 money hit the banks including real estate. It is easier to fund a high net worth person in your country rathar than an unknown person from a country not known for respect for private property.
It is not the imaginary alien. It is your own banks funding your own high net worth groups.
11
I am all for New York City following the example of Ontario or British Columbia but with a twist: I suggest that, instead of a sales tax surcharge, we add a significant real estate tax surcharge on all residential real estate that is not the primary residence of the occupants, be they owners or renters. Residency can be easily claimed and verified using tax ID or other government-issued documents, including the NYC ID. In other words, people who want a New York City pied a terre, but who also avoid paying their fair share of New York State and City income taxes by claiming residence elsewhere would now pony up for the privilege of having precious living space sit empty for most of the year. Such a non-resident occupant tax would be non-discriminatory, applying to all owners and renters not residing in New York City, regardless of nationality or status. Best of all, it wouldn't just benefit prospective home buyers who actually live here, but also those of us who are renting and residing in this City.
47
Auckland is still cheap compared to most cities in California. Prices will continue to rise no matter what the government does as long at the NZD is at 70 cents.
3
When you plug one hole the leak will spring somewhere else. The fundamental problem is the Anglo-American legal system that steadfastly defends individual liberty safeguards property rights. These systems are so much better than any other that wealthy refuge seekers are inevitable.
Locals in Bozeman, I hear, feel the same way about refugees from California, but banishment laws are not allowed.
8
A good idea, but a bigger issue that should be addressed is that investors are the primary reason housing prices are out of reach for many.
23
Good on the New Zealand government!! While there are many factors which drive the property market, foreign buyers have definitely driven up prices in certain areas of Melbourne (especially near certain schools) and made them unaffordable. These days you really can’t buy much here for under $1 million and if you want a nice family home you’re looking at around $1.5 - $2 million or more in the nicer suburbs. I have been told by real estate agents who specialise in Chinese buyers that I could get at least and extra half a million dollars for my house if I sold to one of their clients as opposed to a local buyer. Now tell me that foreigner buyers don’t inflate prices. Of course, even if I got a good price, when everything’s expensive I probably wouldn’t be able to buy the equivalent or better than what we have. I worry for our children. Government regulation has softened the market, but prices are still sky high and there plenty of ways to work around the restrictions. The idea that Australians are all rich is incorrect. Some people are. Some foreigners are just ‘parking’ their money here. Most of us are in high debt. If property prices fell too far, all the vendors would be in trouble. And I suppose if all those young people stopped buying smashed avocado for breakfast, they’d be able to buy a house. Ha, ha!!
49
Fundamentally, this is just another manifestation of the problems with global income inequality. Attempts to do an end run around that issue end up treating the symptom and not the cause. The cause is that a tiny fraction of the world’s population controls a huge amount of its wealth, and parks it all over the world in real estate because they can. If we could establish policies that would reduce this huge gulf in income, the 0.1% would not be pushing up prices in cities all over the world as they buy a second, third, fourth, fifth, sixth, seventh, eighth, ninth, and 10th home.
As a start, high-end wealth taxes such as some of the US presidential candidates are proposing; shutting of offshore tax havens; labor market reforms so that labor unions are once again empowered to demand better benefits and wages; increase in estate and capital gains taxes; taxes on high-speed trading and other forms of stock market manipulation that add little to no real value to the economy.
Until those few people at the top of the income ladder have less incentive to just park money all over the world in high-end real estate, this problem is not going to be solved.
50
@dr.reba Right on point! The growing inequality of wealth That arises out of the global economy is a fundamental problem that must be addressed. Soon this obscene inequality of wealth will raise its ugly head in many facets of our lives.It must be addressed now!
It is a form of protectionism, but every country has the right to establish laws such as this, however, most economists disfavor this economic approach because, unfortunately, it usually harms the people who it is trying to help.
4
@Isle you may be right...but from a national and international standpoint...I dont think Chinese Communist, Russians, North Koreans, and others of thier ilk should be allowed to own property until they become democracies AND property can be purchased on thier homeland as well.
2
In general this is a defense of the U.S. style real estate business. Since a home is a necessity I applaud the N.Z. move to keep residential home costs down by eliminating absentee owners. Buying or renting from an owner in your own country at least keeps the money there. Hopefully large N.Z. real estate companies are well regulated toward the same goal.
26
Can we please have a law like this in New York?
58
@Help! The problem of absentee ownership and high housing costs due to foreigners is on full display in Forest Hills, New York. I walk my dog several times a day and when darkness falls (oops, that's a movie title) there are so many dark apartments that it boggles the mind. Who is causing it? Which ethnic minority? Well, there are 800 languages spoken in the Borough of Queens, the most diverse county on the entire planet. Who should we ban? I would say that it would be a good idea to require that the actual equitable owners be revealed in any property transfer. Good luck getting that past the Real Estate Mafia in New York City.
2
Look at Vancouver, British Columbia and tell me about investments from China and elsewhere and how those can and cannot improve the local market.
24
Journalists should stop quoting that misleading statistic, "Only x% of buyers are foreigners." It comes up in every discussion of foreign buyers taxes, and I can't figure out where the number comes from. What matters is not the owner of record, but the beneficial owner--who is hard to find in the case of LLCs or trusts or even Uncle Ed supplying the money. In Canada, the government has no idea who the beneficial owner is.
Secondly, the average buyer is not the issue. The issue is who is the marginal buyer, the one setting the price. If it's a foreign buyer, that's a huge problem and you need only a relatively small number of these to set up a dysfunctional market. Vancouver cannot house every corrupt oligarch who wants to launder their ill-gotten gains.
Finally, there is an unfortunate element of racism of many supporting foreign buyers taxes. That makes me doubt my support of them. The problem is not the country the money is coming from, but the empty homes that result.
58
The empty houses - and there are a lot of them - are indeed one of the problems because they take properties off the market that people could be living in.
22
Maybe the best laws to curb the problem should target vacancies instead of sales? Say, if a house is vacant for more than a year the government can confiscate it?
15
@Vanyali Governments love vacant homes on which taxes are paid. If nobody lives there, very few public services are used. Governments love money for nothing.
1
The housing solution needs inexpensive govt. secured credit to fuel necessary construction.
The private sector only builds for high profit.
NZ like many places needs modest family apartments for young couples and singles — long mortgages at low interest. The private sector isn't interested in that unless the risk is zero, then somebody will step in to build.
Unfortunately these programs are ripe for corrupt politicians (face it there are a lot of dishonest politicians everywhere all the time, it's a field that attracts sociopaths) It will be necessary to have a truly independent oversight entity reviewing who gets the cheap govt. credit and how much. Community boars will have to be fully aware of what's going up where — there will be alarm bells and disagreement.
Yet basically it's all doable once you stop worshipping "market forces" as animistic gods, and recognize that they are nothing more than temporary circumstances created by human actions which can be successfully modified.
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@Arthur New Zealanders do not want to live in apartments, as they are an anathema to the Kiwi way of life in so many respects. That mindset may change over time when the immutability of the economic reality is finally accepted. For the time being, though, apartment living is not an acceptable solution for very many people.
Prague has the same problem.
Global investors have been pushing real estate prices beyond reach of Czechs even when mortgage rates are lower than in the West.
Adding to the problem is AirBnB as the Prague City Hall have been so far slow to regulate (tax) this lucrative source of income of both the locals + foreign investors using numerous properties for short term, off the books rentals.
But it looks like that - as far as AirBnB "shared economy", off the books scheme is concerned - the city at lasts becoming proactive in enforcement ... and tax and fee collection from these operations.
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"Restrictions like these have led to slower growth in many of the areas that have adopted them. After years of big gains, some investors have seen profit margins shrink."
Good! Less profit for absentee "investors" likely means slightly better chances for locals to buy their own homes. And it is the residents that "make" a city, not the real estate speculators and foreign investors looking for a place to launder their ill-gotten gains.
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I look forward to a follow-up article evaluating the active proposal for a Capital Gains Tax on secondary residential properties. NZ is currently unique among it peers in lacking a CGT. Surely this, together with the formerly lax rules regarding offsets for negative equity, has played a much larger role in fueling house price rises - as well as rewarding capital at the expense of individual effort to the detriment of the economy - and widening deeply resented inter-generational income and wealth differentials that penalize the young.
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While the problems in some US cities are similar, in places like NZ and Australia, they have small populations and only a few major metropolitan cities. Being locked out of home ownership for even the middle class in these places has happened quickly. And where else are they supposed to go?
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Foreigners can't buy property in Switzerland. Only Swiss citizens can, but I'm sure there are exceptions for the wealthy enough.
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@john michel, Indeed. There are 'always' exceptions for the 'wealthy enough'.
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@john michel
It I is likely that there may be exceptions for the wealthy. But it is not true that foreigners can't buy real estate in Switzerland. People who are residents can - and about 25% of Swiss residents are not citizens. EU and EFTA members can buy real estate with a B or C permit, this means basically as soon as they are legal residents. Other nationals can buy with a C permit, which they obtain after 5 or 10 years of residence, depending on their country of origin. People who don't fulfill these criteria have to apply for a permit, for example for a second home in tourist areas. These are rate limited.
https://www.bj.admin.ch/bj/en/home/wirtschaft/grundstueckerwerb.html
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@John michel
I don't think Roman Polanski is a Swiss citizen, and according to news reports he owns a chalet in Gstaad. There always seems to be a way around the laws for the rich and famous.
If a foreigner is looking for a great place for a home in a:
1. Financially Safe Place
2. Physically Safe & Secure Place
3. Stress less & Tranquil Place
Then US News and Wold Report has crunched the numbers and the winner is:
1. The USA
2. The state of Florida
3. The city of Winter Haven
4. The gated and safe HOA neighborhood of Mandolin II on Round Lake.
5. Any lakefront home on Mandolin Ct.
6. The closer to the Mandolin Tango & Casino Clubhouse ... the better!
Leave a message if you need more details.
New Zealand is ole history ... take the above advice and get out of China now.
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@Gustav
You must be a real estate agent.
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@Gustav As a full time resident of FL, I am here to tell you that FL is not financially or physically sound. Our primary industry is tourism - low wage, low paying jobs, high insurance (car, property, flood), non existent mass public transportation on the west coast of FL. We have an incompetent state government, lax regulations when it comes to consumer protection and we are seeing flooding in inland areas, not just the coast. When we evacuated during Hurricane Irma, the state was woefully unprepared - highways became parking lots and we were spared only because we got lucky. Unless you're involved in some kind of scam, FL is not the paradise you think it is.
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@Gustav
Real estate in Florida will soon be uninsurable.
The people who reside there keep electing climate deniers in a state that is, on average, about six inches above sea level.
In the not too distant future I expect that actuaries will convince insurance companies to pull up stakes and stop doing business in the state.
That, or set policy premiums so high as to be prohibitive. When that happens, banks will stop lending money on Florida real estate purchases.
3
foreign owners have jacked up prices in many desirable cities- NYC, London, Paris, Vancouver etc. often times they're bought purely to "buy and hold and aren't even lived in regularly."
as for NZ, I've a family member who wants to retire there (she does there every year for several weeks) and who has a legit claim for citizenship (parent) has been caught in red tape for years. I feel terrible for her she is someone who wants to be a part of the community, not just have a vacation home there.
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After Trump and company took over the US I desperately wanted to move out of the country but since I am retired and not a tech billionaire it became clear that no one wanted us. I wanted to move to a democratic country where English is the main language.
At first New Zealand wanted 1 million for "investment" but before plans could be made it went to 5 million and forget Canada ,I'm not rich enough, the same with UK in fact no English speaking country would take retired Americans without considerable wealth..
I did not want to spend my remaining years watching the destruction of everything I care about especially when there is nothing to be done.
There is no peaceful retirement for us. My neighbor a tech wizard did get a Job and quickly moved to New Zealand because she wanted her children to be safe at school.
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@Chelsea I'm sorry, but I think your outlook is entirely too pessimistic. Don't underestimate the stresses involved with an international move, and don't overestimate the "tranquility" you'll find when you get there.
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@Chelsea Probably for the best. If Trump gets re-elected, he may cut for Social Security to people who expatriate.
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@Chelsea
I also looked into emigrating to an English speaking country and found the same roadblocks. And I started with New Zealand because I was there for 4 months in the early 80s. It was the most beautiful and tranquil place I've ever seen. I barely told anyone because I didn't want to contribute to ruining New Zealand for the Kiwis. It seems the word got out anyway, as it was bound to. I'm glad they are taking steps to protect the way of life in their very special, very beautiful, and very tranquil island. Bar the door, Katy!
20
We should do the same in New York, especially with the predatory Chinese oligarchs who destroy everything in their path and turn it into a profit machine for their own national mafia. So help us God.
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@Marie Condo The Canadians did it for Vancouver a while back. Like NZ it was a bit late to waking up to the Chinese money influx.
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@FDRT Actually, in Vancouver they did some kind of feeble version of this, not an outright ban.
US is also having the same issue. The main foreign buyers of American real estate are Chinese. That's one the major reasons for sky high property value in many cities in the US.
Many of them use "Investment visa" or EB5 visa. It's high time to repeal that EB5 visa, which is highly misused by many corrupt American real estate promoters, including Trump and Kushner. That EB5 visa almost exclusively attract rich and corrupt criminals from various countries, mainly those developing countries like China, Russia, India etc., with very damaging long term impact on American society.
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@bonku
RE: That EB5 visa almost exclusively attract rich and corrupt criminals from various countries, mainly those developing countries like China, Russia, India etc.,
And the source for this claim?
there are only 50K investment visas available per year, it's a drop in a bucket compared to the number of immigrants coming into USA yearly, don't let sensationalism get you. And if a country needs immigrants, we rather have people with means and education, who will have less children and contribute more.
@D
Your point is well taken, but we could do a better job of vetting those people who actually are criminals or corrupt oligarchs laundering money into the U.S. by the EB5 visa process. There are likely a few, who knows how many, including some who have bought million dollar condos in the Trump and Kushner properties in New York.
1
Would be interesting if de Blasio limited residential real estate purchases to native New Yorkers.
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@Rick
I thought he just did that with Bezos.
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@Connecticut Yankee: Bezos owns a home in NYC, which is why he chose it to begin with.
1
That will never happen. I may sound paranoiac and conspiracy theory minded. But there is no more powerful group in NYC than the real estate bloc and all the people who own property and would be happy to sell at high prices to wealthy and absent foreign investors.
But if you want to curb the practice, make it harder to use apartment buying to launder money. Ban anonymous LLCs from buying real estate in NYC. Allow LLCs to buy but insist that all the owners be identified.
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The run up of housing prices is world wide in major cities. It's not unique to Auckland.
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@Douglas Comegy
Minor cities as well. My southern Oregon mill/fishery town (population ~6500) has a housing shortage due to the influx of retirees cashing out their homes in others states and buying here where taxes are relatively low and the physical climate is relatively benign.
The flip side of the coin is that wage increases have not nearly matched housing cost increases and local workers are being priced out of the local housing market.
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@Douglas Comegys
Mid-sized too.
My home near downtown had doubled in value over the last 8.5 years
14
@Still Waiting for a NBA Title You should see what's happening to Boise, ID. Let me type that again... Boise.
1