Policy plays to nationalist sentiment, but would punish exisiting home owners. UPDATED: Banks says Shearer trying to outflank Peters in bashing Auckland's Chinese community; English says policy is messing around at the margins.
If elected, Labour would restrict foreign ownership of existing houses, leader David Shearer told TVNZ's Q+A programme on Sunday.
Australian buyers wold be exempt from the policy, which would punish existing home buyers after the best price when they went to sell.
"The next Labour government will introduce restrictions so that non-residents will not be allowed to buy any existing house, flat or apartment," the Labour leader said.
The policy aims to reduce demand in the housing market from foreign speculators, Mr Shearer said.
"Non-residents will be able to build new homes."
English: messing around at the margins
"It’s a policy that addresses 3 or 4% of the market," Finance Minister Bill English said on Breakfast this morning.
Mr Shearer has quoted the number of foreign buyers of NZ homes at closer to 10%; Mr English says it's lower if you net out foreign sellers. With a dearth of concrete statistics, both men are relying on anecdotal commercial surveys (see the May BNZ-REINZ survey that came up with a 3.6% total here).
"Messing around with tiny groups of buyers won’t make any difference to the bubble … to the possible bubble. New houses on a significant scale will and that’s what we’re legislating for," the Finance Minister said.
Perception of foreign buyer numbers vs reality
Around 40% of Aucklanders are born overseas so the perception of foreign buyers is a lot higher than the reality, Mr English said.
Many buyers or open home browsers pegged as "foreign" by casual real estate industry observers are in fact NZ residents, outside the scope of Labour's proposed policy.
The core problem is that only around 4000 homes are being built a year in Auckland when the city needs around 12,000.
The government was addressing this with changes to the Resource Management Act, plus a stop-gap agreement with Auckland Council to help fast track the private development of 39,000 new homes by 2016, tripling the existing rate of building.
The PM also seems to be softening up the public for home loan-to-value (LVR) limits.
Mr Shearer said the restriction on foreign buyers is a follow up to Labour's early-announced policy to subsidise the building of 10,000 affordable homes a year for 10 years. The new homes would be mostly in Auckland and for an average price of $300,000 - a price point that critics say implies bedsits and one-bedroom flats.
Banks: Trying to outflank Peters in Chinese attacks
“Labour’s strategy is to outflank Winston Peters in his campaign against the Chinese community in Auckland," ACT leader John Banks said in reaction to Mr Shearer's comments.
“Blaming foreigners for housing unaffordability is simply not credible.
“The best evidence shows that the housing shortage in Auckland is caused by lack of land supply for residential development. It is not caused by foreigners buying homes,” Mr Banks said.
The ACT leader said for Mr Shearer to target foreigners purchasing homes as its solution to Auckland’s housing problem is anti-investment, anti-immigrant and anti-Chinese.
"His xenophobia is as disappointing as he has been."
This morning on Breakfast, Mr Shearer said China, Hong Kong and Singapore had restrictions or taxes on foreign home buyers.
"I bet none of them are worried about whether this will be [seen as] anti-European ... this is one of the factors that will bring down the price of houses," the Labour leader said.
Two-way street
Ealrier, Mr Shearer said the rule would not apply to Australian buyers because if New Zealand stopped Australians buying homes "we would risk the possibility they would shut us out as well". Many countries had policies restricting non-residents from buying houses.
"IRD records show that more than 11,000 overseas investors own properties here that they don't live in," he said.
"An estimated 2,600 homes were bought last year by offshore property speculators that had no intention of living here. That's a big chunk, given that just 4,700 new homes were built in Auckland last year."
Mr Shearer said the policy was modeled on a similar one in Australia.
Curiously, the Labour leader used Invercargill as an example of foreign sellers swooping in.
"When I look overseas, and you look at some of the websites that I’ve been looking at recently - there is in South Africa, for example, a website in South Africa, an NZ company advertising NZ homes here. One in Invercargill. ‘$170,000 home, four-bedroom home. Invest in NZ. Why? No capital gains tax, no stamp duty, no restrictions. Easy-peasy. Come over here and do it'."
Greens: 15% surcharge on foreign buyers
The Labour leader's comments today echo those of Greens co-leader Russel Norman during an Ask Me Anything session with NBR ONLINE readers.
When asked "On TV recently you mentioned how Hong Kong puts a 15% surcharge on non-residents who buy homes. Is that something you would like to see a Labour-Greens government introduce here?," Dr Norman replied:
It's one of the options. Australia uses a rule that foreigners can't buy existing housing but can build new housing. So there are a number of ways of reducing price pressure coming from offshore demand to help reduce house price inflation. We also need to use other demand side and supply side measures to constrain the house asset bubble.
ABOVE: Parker on The Nation. Watch Shearer's full Q+A interview here.
Parker - milder comments
Meanwhile, appearing on TV3's The Nation, Labour finance spokesman David Parker took a milder line, saying the party was considering restrictions on foreign ownership.
Labour might follow some overseas examples.
“We’re worried about these issues,” he said.
He said the party wasn’t ready to announce its precise policies.
“But the Greens have come up with one idea which is to introduce stamp duty on foreign purchasers to make it a bit harder for them to advantage in New Zealand.
“There are other options around but I'm not going to go into that further today.”
Auckland property to secure Chinese loans
Mr Parker made his comments in the wake of revelations on the progamme that Chinese buyers could source Chinese bank funding secured against Auckland properties at a lower rate of interest than they would pay in New Zealand.
Former Reserve Bank Governor Don Brash said that meant buyers could access money more cheaply than they could from a New Zealand finance company.
“If Chinese banks are making those loans they're presumably taking a currency risk on the New Zealand dollar, or perhaps the buyer is taking a currency risk on the New Zealand dollar” he said.
“It isn't I suspect a risk-less activity for either the bank or the home buyer.”
