Leaked data shows Chinese offshore buyers fuelling 'rampant' Auckland property speculation, Twyford says

Data released by Labour suggests impact of Chinese buyers on Auckland property market much bigger than expected, the party's housing spokeman says.
 
While ethnic Chinese make up 9% of Auckland's population, 39.5% of Auckland houses sold from February to April this year were to buyers with Chinese surnames, according to figures from one large real estate firm that represent a significant minority of all Auckland sales, Phil Twyford says.
 
Mr Twyford says his data (vigorously disputed by data journalist Keith Kg), shows:

• Buyers with Chinese surnames paid on average $140,000 more than next ethnic group (Korean surnames) and $153,000 more than those with European surnames
• Most popular suburbs amongst buyers with Chinese surnames (100 sales or more) were Albany, Epsom and Milford.

"Property speculation is rampant, and I believe on the strength of these numbers that offshore Chinese investors are a very significant part of what’s going on," Mr Twyford says.

“I believe it strongly suggests that offshore Chinese investors have a major presence, possibly as high as 30% of the houses sold by this real estate firm over a three-month period, then that is very significant.”

Mr Twyford says government has its “heads in the sand” over the issue and needs to implement a public foreign buyers register. 

Up until this point, no government agency has tracked sales to foreign buyers, beyond sales (typically in the $5 million+ bracket) that require Overseas Investment Office approval. Budget 2015 introduced two measures to track offshore buyers: the requirements to register with IRD and establish an NZ bank account. Both measures come into force in October.

Mr Twyford says Labour is committed to banning all foreign non-resident buyers from purchasing property and to introducing its KiwiBuild policy.

He points to measures that have been introduced in Australia.

However, as NBR columnist Michael Coote points out, Australia's housing market is much like ours despite its capital gains tax and restrictions on foreign buyers. Mr Coote's column follows an AFR investigation that found offshore Chinese buyers were able to easily skirt restrictions on buying existing housing stock in Sydney.

Mr Twyford says the Chinese QDII2 (Qualified Individual Investor programme to allow individual Chinese citizens to invest offshore), will turn the Auckland property market from "overheated" to a "blast furnace" as billions in new Chinese investment washes in.

Housing minister Nick Smith says he will have more accurate data after the new tracking measures kick in later this year, but indications from government agencies including the Productivity Commission are that foreign investors play a small role in the housing market.

RAW DATA: The Nation Transcript: Lisa Owen interviews Labour housing spokesman Phil Twyford

Lisa Owen: Are you personally comfortable sitting here today, being the front person for this strategy, launching an attack on a specific ethnic group – are you comfortable with that?
Phil Twyford: I’m standing up for young Kiwi first-home buyers who currently are denied the dream of affordable homeownership.


Lisa Owen: New information leaked this weekend suggests that Asian buyers, specifically ethnic Chinese buyers, are snapping up many more houses in Auckland than previously estimated. We only have estimates, because New Zealand still has no foreign buyers register. The sales data covers February to April this year and shows that while Chinese make 9% of the Auckland population, 39.5% of the houses sold in Auckland were to people with Chinese surnames. Now, Phil Twyford is with me here in the studio. Good morning.
Phil Twyford: Good morning.
Tell us this new data. Tell us exactly what it shows.
So this data is the comprehensive sales record from a major Auckland real estate firm. It includes about 4000 individual records. It’s every house sold in the Auckland region over that three-month period. What it shows, I think, is striking. Nearly 40% of the houses sold in that period went to people of Chinese descent, and as your introduction pointed out, the Chinese New Zealander population in Auckland, according to the most recent census data, is about 9%. Now, that is a remarkable discrepancy, and, in my view, it’s simply not plausible to suggest, as many have done in the last couple of years, that the Chinese— ethnic Chinese people who are buying houses in Auckland are all Chinese New Zealanders. It points, I think, to only one possible conclusion, and that is that offshore Chinese investors have a very significant presence in the Auckland real estate market when you consider that Auckland house prices are spiralling out of control at the moment. They went up on average by about $74,000 in the last three months.
Okay—
Property speculation is rampant, and I believe on the strength of these numbers that offshore Chinese investors are a very significant part of what’s going on.
But here’s the problem, isn’t it, this analysis, your conclusions are based on surnames, aren’t they?
Yes, they are, and the statistical modelling that we did with this data basically attributes probability against each surname, as the surname predicts ethnic origin. And if you look at these names, take, for example, the name Wang – W-A-N-G. Under the modelling we did, that has something like a 95% probability that that person is of Chinese descent. Take the name Lee – L-E-E. That has about a 40% probability that the person is Chinese. So that’s how it’s done. We believe that it’s about 95% accurate, and it certainly points to a very strong conclusion.
All right, well, let’s take a look. We’ve got a list here which is the names of the top 20 buyers in Auckland. We’re scrolling through them there now. What does that list tell us?
Well, I think it tells Aucklanders that what they have thought and felt for the last few years— you know, anyone who’s bought or sold a house in Auckland in the last few years, who’s been to the open homes, been to the auction rooms, knows that there is a major presence of people of people of Chinese descent in the Auckland real estate market, but the Government has been in complete denial about this. They have pooh-poohed the idea that offshore Chinese investors are a significant factor. Nick Smith, the Housing Minister—
But why does it matter? So we have a list and it’s got 20 names that appear to be Chinese names; what does it matter? What does it matter if Chinese people, people with Chinese names, because that’s all it is – people with Chinese names – are buying houses in Auckland?
This is an issue about foreign investment, and it doesn’t matter in one sense what the surnames of the buyers are, but if this data shows, and I believe it strongly suggests, that offshore Chinese investors have a major presence, possibly as high as 30% of the houses sold by this real estate firm over a three-month period, then that is very significant.
How do you even know that these people aren't Chinese New Zealanders? How do you know that?
So we didn't go and doorknock these people and ask them whether they were offshore speculators, but when you look at the data and you look at the names and you apply the analysis that we did — that has been checked by three different data experts, including an independent statistician — we believe the data stacks up. It points in one direction, and that is that offshore Chinese buyers have a major impact in the Auckland market. Now, Aucklanders, I think, have known that for years. The government has been in denial. The reason that we're having this conversation, Lisa, about leaked real-estate figures is that the government has refused to collect the data or share it with New Zealanders.
You talk about data, so let me present you with some other data that another expert has put up, which is 39.5%, is about 1600 homes, which is what you're saying is the number of homes purchased. 9%, which is the number you say is of Chinese buyers, is about 125,000 Chinese Aucklanders. 9% is what they make up of the Auckland population. Couldn't 125,000 local Chinese people conceivably buy 1600 homes? It's not out of the realm.
Well, theoretically, that's true, but is it plausible? Is it credible that 9% of Auckland's population went on such a house-buying bender between February and April that they accounted for nearly 40% of all houses sold in that period? I just don't think that is credible.
Well, actually, we do know that 40% of the homes sold in the Auckland area go to speculators or investors. So, yes, people buy multiple houses.
Yes, they do, and one of the possible explanations for the picture that this data presents is that even if it's much lower, say, than 30%, what we know is that speculators do buy multiple houses, and even if it's smaller than 30%, who knows? No one really knows how big the figure is, but even—
Isn't that your problem, though? We don't know. You can't definitively say, and even the data that you've got, you can't look me in the eye now and say that you are 100% certain that these people are foreign buyers.
I've been calling for the last three years for the government to collect the facts on this issue. They've been in denial about it. Nick Smith, the housing minister, is on record saying he thinks that offshore buyers are probably responsible for 1.2% of the houses being purchased. They've got their heads in the sand. They refuse to even collect the data. If they had collected the data, we wouldn't be sitting here, having this conversation about leaked data from a real-estate agency.
 Well, that leaked data that you've got, when you compare the top 20 names of buyers in Auckland to the top 20 most common names for residents in Auckland, nine Chinese names feature on both lists, and there are two Indian ones in there. So that shows that they're more than likely residents, isn't it?
No, I don't believe it does. I mean, when you look at the list of the top 20 names of the purchases of those properties, all but one are of Chinese origin, Chinese descent. All that tells us is that there's an overwhelming Chinese presence in the buying of houses by this real-estate firm. But it's not plausible to suggest that 9% of Chinese Aucklanders couldn't be responsible for that.
Mr Twyford, people listening to this will think to themselves, 'There's only one thing certain here, which is that Labour is prepared to play the race card.'
I’m speaking out on this issue because, like most New Zealanders, I believe that the Kiwi dream of homeownership is worth fighting for. Rampant property speculation in Auckland is driving house prices higher and higher and out of the reach of young, hard-working first-home buyers. Offshore speculators are a major part of this picture. That’s what this data suggests. I think it’s as plain as day, and I think that so many Aucklanders will wake up this morning, they’ll look at these numbers, and they’ll say, ‘I told you so.’
Okay, if it is such a big issue, what would Labour do about it?
We would ban foreign buyers from buying New Zealand houses, end of story. That’s what the Australians have done. Look, there’s a reason—
So long-term residents can buy, and if you buy, what, a new build, you can buy? But otherwise no?
If you’re not a citizen or a resident, you’re sitting on the other side of the world, and you want to buy a house, come and live here. That’s the way to do it. Or, if you want— as the Australians allow, if you want to build a new house and add to the supply, we don’t see any problem with that. But, look, there’s a reason that so many countries around the world – Singapore, Hong Kong, Australia, and a dozen others – have enacted laws and restrictions that put limits on the ability of foreign speculators to trade local housing. Juwai.com, the preeminent Chinese website that specialises in marketing international real estate to Chinese investors in China, they reported recently that the Chinese government’s plans to free up capital controls, so that their citizens can move money in and out of the country more easily—
Yes, a loosening up.
They predicted that’s going to lead to USD 6 trillion being invested outside of China, 2 trillion of that into real estate, and they specifically noted that New Zealand would receive $16 billion—
So what are you saying, Mr Twyford? Are you afraid the Chinese are coming? Because that’s what it sounds like, what you’re saying.
What I’m saying is that there is a tsunami of Chinese investment headed towards international real estate markets, including New Zealand. These numbers are coming from Juwai.com, the preeminent Chinese website that markets real estate, including New Zealand real estate. There’s a whole industry marketing our houses to Chinese investors.
If that is the case, then why not put sanctions on Chinese buyers and Chinese buyers alone, and forget people from Ireland, and forget people from the US? If Chinese are the problem, as you are saying, why not just deal with that problem?
I want to ban foreign buyers no matter where they come from. I want us to save the Kiwi dream of affordable homeownership for all New Zealanders. One of the things we should do, and it’s by no means the only problem we need to solve; it’s by no means the only policy we need to adopt; but actually banning foreign buyers will actually make a difference, and reduce the spiralling house prices that are making homeownership unaffordable.
What other policies do you have that would make a difference? Because the thing is, Labour ditched capital gains tax, which arguably would have made a difference, because it wasn’t popular with voters, but you’re happy to give the old foreigners a kick, because that doesn’t lose you votes?
We’re going to crack down on speculators generally, and we have a policy review underway. There are a myriad of different tax and policy approaches that we can do to level the playing field away from the current incentives for property speculation in our economy. So we’re going to do that. We’re going ban foreign buyers.
OK.
Lisa, you asked me, so I’m going to answer it.
Quick – we’re running out of time.
We’re going to build thousands of affordable homes for first-home buyers in New Zealand. We’re going to change the planning rules so that the industry can build more and better housing in places where people want to live.
Okay, before we go, I do want to ask this – are you personally comfortable sitting here today, being the front person for this strategy, launching an attack on a specific ethnic group – are you comfortable with that?
I’m standing up for young Kiwi first-home buyers who currently are denied the dream of affordable homeownership. This is a matter of vital public interest. The Government is in denial. They have refused to give New Zealanders the information about foreign buyers—
You’re seriously fine with this strategy? You’re fine with it?
I’m speaking for young New Zealanders who want affordable homeownership. If we solve this problem, if we ban foreign buyers, that will make a big difference.
Thanks for joining me this morning, Phil Twyford.