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Speaking as an Australian, , where we already have nominally similar policies, and keeping in mind the metro house price phenomenon is repeating in several plac

Speaking as an Australian, , where we already have nominally similar policies, and keeping in mind the metro house price phenomenon is repeating in several places in the world in a similar fashion, there's just one small problem with these policies: There's limited evidence available that it's foreign buyers primarily responsible for our high house prices :/ The primary cause has always been local steady employment, low interest rates combined with liberal access to debt with households culturally disposed to pumping that into housing. It's very easy to blame this on Chinese money (which I'm sure is a common story in many parts of the world where house prices are taking off), but the far bigger cause had always been leveraging afforded by local households combined with a low interest rate environment.

elyobo 9y ago
Australia's policy is weak with regards to enforcement and penalties; NZ's may or may not end up being more effective. Agreed that foreign speculation is at most only part of the problem and that the drivers you mention are a large part of it, but you missed out the other significant factor in the "cultural" inclination to invest in property, which is that the favourable taxation policies (CGT discount, negative gearing, family home CGT exemption) and benefit policies (family home exemption from pension means tests) drive money into property. In NZ's case it's even worse as there's close to no capital gains tax on any property speculation (no requirement to actually live in a property to claim it as an owner/occupier style non-investment property).
- dzhiurgis 9y ago
  > no requirement to actually live in a property to claim But how do you enforce it?
  - elyobo 9y ago
    I wouldn't bother, because my preference is to tax capital gains on all property including family homes (and to apply this tax annually based on paper profits too). That said, occupancy requirements are reasonably common elsewhere (e.g. to claim first home buyer benefits in AU, to prove that it's your primary residence to avoid capital gains taxes in AU, to get owner/occupier interest rates in AU) so I assume that they have some means of enforcement, but haven't really looked.
    - seanmcdirmid 9y ago
      Property taxes already tax based on the paper value of the house (well, an assessed value, which may or may not be fair). Tying it to appreciation and paper profits could quickly drive someone out of their home (e.g. Seniors). Heck, this is why prop 13 was initiated in the first place, for all the damage it did.
      - mitchellberry 9y ago
        In Australia there is no taxes on the family home and it isn't counted as an asset for welfare purposes. So we end up with this bizarre situation where people in multimillion dollar houses can and do claim the aged pension.
      - elyobo 9y ago
        Different situation here in AU, but the idea would be that you put so many dampeners on capital growth that there isn't really any (and so nobody gets driven out of their home). See the other comment re: multi millionaires collecting the pension; my taxes paying for benefits with far more wealth than I'll ever have, it's a frustrating situation.
        seanmcdirmid 9y ago
        Pensions and SS aren't considered welfare in the states so it wouldn't matter how much wealth they had. The problem that the USA Californian seniors were having is that they had a fixed income (SS, pension) and couldn't keep up with rising property taxes (problem when your taxes go up but your income doesn't).
        elyobo 9y ago
        I don't know that they're generally considered "benefits" here, but that's what they are. There is a means test (i.e. if you have enough in the way of assets then you don't get the pension) but it totally omits the family home; someone with a million dollar house vs a million in cash have the same assets, but one will get a full pension and one will get none.
  - Spooky23 9y ago
    Tie tax discounts to residency and register those applications centrally.
    - elyobo 9y ago
      This is a different issue, establishing the difference between someone that buys a property to live in vs buys it as an investment.
      - Spooky23 9y ago
        It is, but tax policy can drive behavior. No residential exemption == higher carrying cost.
ACow_Adonis 9y ago
Just replying to myself now to add: the solution to high house prices is, like much transport policy, boring and well known but not implemented for political reasons. On the housing front: tax capital gains, limit leveraging ability, implement a land based tax and zone/invest appropriately to encourage new supply. This will bring housing far more in line with what people expect. This brings us to the other awkward point though: truthfully, I'm sure many New Zealanders, just like many Australians, neither want their housing prices/investments to drop in relative price or to return to closer relationships with local use. Which leads us to the policy/political pantomime game so often involved in these areas where people want to have their cake and eat it too: "I want afforable housing for my children that doesn't make my property prices drop!"
- gardnr 9y ago
  I would need numbers to be able to agree with you that foreign investment isn't a driving factor in housing costs.
  - ACow_Adonis 9y ago
    Wouldn't you also need numbers to arrive at the implication that foreign investment is? The numbers, at least historically, have always been hard to find, but the macro economic theory and indicators are generally quite boring and straight forward: employment stays high and household incomes improve, interest rates drop, lending and leveraging increases to household, supply is inelastic, house prices rise. Everything lines up pretty well, so why look to blame foreigners (who, even at the most generous estimates on what data does exist, are still a minority).
    - chris_wot 9y ago
      If the numbers are hard to get, then it’s difficult for you to say whether foreign investment is or isn’t part of the problem.
      - sushid 9y ago
xupybd 9y ago
I think you're correct on the large scale but anecdotally, the first 3 houses I put an offer on were purchased by the same Chinese couple at a price much higher than I'd have expected. I stopped putting offers on house when I saw them at the open homes. I have nothing against them they are acting in their own interests and good on them for having the money to buy property. I just can't compete with them and am glad that our government will manipulate the market in favour of people living in the country. I suspect that foreign ownership of land could have a negative impact on our economy as it only extracts money from our economy.
- maccard 9y ago
  For another anecdote, we were regularly outbid by young couples with large deposits offering way over valuation prices helped by parents gifting them large deposits.
- gardnr 9y ago
  This is the thing, why does one person need multiple houses when other folks can't afford one house. As someone that hasn't bought their first home, I'd be happy to see a tax on non-primary residences.
  - freedomben 9y ago
    This is how we get such a complex tax code that is abused by special interests. It's so easy to say, "go tax that person over there. He can afford it"
    - sitkack 9y ago
      It could be a tax, meaning it is still possible it just costs more. Or could be made outright illegal.
  - matwood 9y ago
    In the US this is already pretty common and often known as the homestead exemption. A primary residence gets a much reduced tax rate.
megy 9y ago
> There's limited evidence available that it's foreign buyers primarily responsible for our high house prices :/ It doesn't matter if it is the primary cause, it is one of the causes. And it is the one to change that causes the least problems to the people of the country you represent. In Australia, things are compounded by the incredibly greedy negative gearing rule, which also needs to be banned.
- gardnr 9y ago
  What's the negative gearing rule? Edit: from an American
  - jpollock 9y ago
    Negative gearing is when the house is run at a loss and the loss taken against regular employment income. That would be when the rent doesn't cover the mortgage interest + maintenance costs. The benefit is that the dominant form of income in the investment is the capital gains, which is under your control to take at a later date when you'll pay a lower tax rate. https://en.wikipedia.org/wiki/Negative_gearing https://en.wikipedia.org/wiki/Negative_gearing
  - deleted 9y ago
    [deleted]
  - ACow_Adonis 9y ago
    Quickly: income tax deductions on investment losses into property. The general strategy is to pump money into a property at a technical loss and make it up the difference on capital gains later.
    - sitkack 9y ago
      Wait, so you can get paid to renovate a place above what the market will pay in rent and deduct the difference from your taxes, but then eventually sell the palace later and make cap gains on that?
      - 9y ago
Smerity 9y ago
As another Australian, our housing prices is broken for multiple reasons but foreign investment is a _major_ contributor. Credit Suisse research indicates that "foreigners are acquiring 25 per cent of newly completed supply in NSW and 16 per cent in Melbourne, or 21 per cent if we combine the two states". The total value of new houses in both states was $39 billion over the relevant 12 months. After the Chinese government cracked down on monetary restrictions (i.e. Citizens of China can normally only convert US$50,000 a year in foreign currency and have long been barred from buying property overseas), Lend Lease reported 30 to 40% of foreign purchases now being cash settled. Transparency International consider Australia the worst money laundering property market in the world. Foreign investment, especially for countries which avoided the 2007 housing bubble such as Australia, is a major issue. A friend will be posting an article on the multiple bubbles he sees in the Australian economy, and property is potentially the most concerning of all given how exposed our banks are to housing loans. We may find Australia finally seeing their house bubble pop like the US in 2007. http://www.smh.com.au/business/property/australian-property-cheap-for-chinese-buyers-credit-suisse-20170323-gv5ets.html http://www.smh.com.au/business/property/australian-property-... https://www.transparency.org/whatwedo/publication/doors_wide_open_corruption_and_real_estate_in_four_key_markets https://www.transparency.org/whatwedo/publication/doors_wide... Updated to include direct link to Credit Suisse: https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&sourceid=csplusresearchcp&document_id=1072773781&serialid=vGaaRmOdA9BYZyKVi%2BOQvCfX%2BJZ8vpuaqcWf8o4NoF8%3D https://research-doc.credit-suisse.com/docView?language=ENG&...
- ACow_Adonis 9y ago
  Can hacker news link me to the credit suisse research? I only ask because I work a bit in this area, and I've gotten into the habit of ignoring all reporting in the press because they neither link to or critically engage with their sources. Incidentally, I'm not saying foreign investment plays no part in such markets, but that its relative contribution has always been overstated. Adittionally, the policy responses I suggest which address house prices work irrespective of foreign/local mixes for most markets.
  - sheepmullet 9y ago
seanmcdirmid 9y ago
There is lots of anecdata that Chinese real estate speculation that is obviously rampant in china is spilling out into international markets, like it did with Japan 30 years ago. When I was living in china, I knew people who were looking abroad for real estate investments. But anyways, vested interests in those target markets don't want it to go beyond anecdata, so they operate under a "don't ask, don't tell" policy. New Zealand is a classic case where housing prices have far exceeded normal incomes. When asked to consider NZ for a job, I ask is the pay better (no); is the cost of living cheaper (also no....). It definitely isn't tech salaries driving the housing bubble there!
- elyobo 9y ago
  Yeah, NZ national living in Melbourne, there's not much that could tempt me back to NZ. Property prices in Melbourne are more reasonable than Auckland, and salaries are far higher. Cost of living not much lower either.
  - HumanDrivenDev 9y ago
    Salaries didn't seem much higher when I was looking - I found a job in provincial NZ for the same salary inner city melbourn jobs seemed to be offering. How many years experience before you break 100k AUD in Melbourne? And where's the ceiling in terms of non management position?
    - elyobo 9y ago
      I have no idea about entry level rates, but I wouldn't think it would take many years to break 100k in IT. I know many non-management people making well over 100k/year. The cost of living calculator they put up[1] suggested that I'd be losing money as a single income earner for my wife and daughter in Auckland, while I can support them here and bank literally 1000s on top of my living costs and mortgage here. I don't know exactly what I'd get in Auckland though, I assume it's estimates are middle of the range, so it's not quite a fair comparison but the general picture fits; in general living costs in NZ are a bit lower (excluding Auckland housing, which is more expensive than anywhere in AU except for Sydney) and the median salary is _far_ lower. Also, preferences may differ, but I grew up in rural NZ and inner Melbourne is a much more interesting place to live as an adult; the country was pretty fun as a kid though. [1] https://www.newzealandnow.govt.nz/living-in-nz/money-tax/comparable-living-costs https://www.newzealandnow.govt.nz/living-in-nz/money-tax/com...
chris_wot 9y ago
That’s really not the case. The issue, however, is broader - there are so many people speculating on property in Any Arrakis we are heading for an absolutely enormous crash. Chinese investors are getting targeted because there have been quite a few of them in an already incredibly overheated market. That doesn’t mean that overseas speculators aren’t part of the cause this problem.
stirlo 9y ago
The issue is it's extremely easy to hide foreign ownership through trusts, companies and relatives who are Australian residents. Anyone with a the means to pay top dollar for an investment property can easily afford hiring the right people to get around this restriction. Which makes it even more shocking when you see statistics like 21% of supply is purchased by foreigners.
bogomipz 9y ago
>"There's limited evidence available that it's foreign buyers primarily responsible for our high house prices" There's actually lots of evidence that hot foreign money is driving the prices up. There's also been a trend by developers to develop properties to attract this type of buyer. See: https://www.nytimes.com/news-event/shell-company-towers-of-secrecy-real-estate https://www.nytimes.com/news-event/shell-company-towers-of-s... and https://www.theguardian.com/commentisfree/2015/jan/25/planners-must-take-back-control-of-london https://www.theguardian.com/commentisfree/2015/jan/25/planne... and http://www.miamiherald.com/news/business/real-estate-news/article69248462.html http://www.miamiherald.com/news/business/real-estate-news/ar...
refurb 9y ago
It's the same in Canada. Everyone blamed the Chinese for the increase in housing prices. When they actually got the data, non-resident purchases of residential real estate in metro Vancouver barely broke 10%. It's much lower than that in the suburbs of Vancouver and Toronto. It's the 90% of Canadians with access to cheap debt and fueled by "real estate never goes down! It's now or never" that pushed prices so high.
- hackits 9y ago
  Then why did your real-estate prices go down when they disallowed foreign investor's?
  - refurb 9y ago
    Coincidental. Vancouver was poised for a massive correction after prices increased 30% in the past 12 months. My understanding is that condo sales and prices are still strong. So I'd ask if foreign purchases were the cause, why are condo sales still going up?
  - gnopgnip 9y ago
    Toronto homes in certain neighborhoods lost nearly 25% compared their peak value in April. There were no restrictions on foreign investors.
    - kitcar 9y ago
      To clarify for those not versed in Canadian tax policy, April is when the foreign investor tax was announced in Toronto: https://www.theguardian.com/world/2017/apr/20/toronto-foreign-tax-homes-housing-market-canada https://www.theguardian.com/world/2017/apr/20/toronto-foreig...
  - myth_drannon 9y ago
    And after they were kicked out from Toronto they moved to Montreal. Prices/Sales in Mtl had increased by highest percentage on record (and that after 5 years being flat)
jseliger 9y ago
There's limited evidence available that it's foreign buyers primarily responsible for our high house prices :/ Correct. The primary cause has always been local steady employment, low interest rates combined with liberal access to debt with households culturally disposed to pumping that into housing. This part is incorrect; the primary cause in the last 40 years has been supply restrictions: https://jakeseliger.com/2015/09/24/do-millennials-have-a-future-in-seattle-do-millennials-have-a-future-in-any-superstar-cities https://jakeseliger.com/2015/09/24/do-millennials-have-a-fut... Tokyo is a notable exception: https://www.vox.com/2016/8/8/12390048/san-francisco-housing-costs-tokyo https://www.vox.com/2016/8/8/12390048/san-francisco-housing-...
- hackits 9y ago
  Partly correct.... If you access the ABS web-site and download the house price index for each state and capital and map out long term growth excluding the years after 2000. Then calculate the growth of housing that has been typically matching inflation or 3.3% per year (depending on state). Then you over-lay immigration, births, deaths, and interest rates. You will find that that most of them don't really correlate with the boom in house prices. Even accounting for the Negative gearing introduction it didn't have `that` much of a impact. The only correlation I have found that triggered the whole entire cluster f we have now. Is if you go back and look at the introduction of Capital Gains Tax Discount. After the introduction of CGT Discount that is when the vast majority of high to middle income earners turned to housing as a investment stream to avoid tax. Then on-top of this you had the Howard Government introducing the `User Pay` system where instead of the tax payer fitting the bill for new suburbs and infrastructure for housing, the developer and home owner now has to pay for housing infrastructure. I live in Darwin, and did recently purchase a house.
  - ACow_Adonis 9y ago
    Yes good :) that's the kind of data driven analysis we should build on. Additionally, we have to explain why house price rises correlated strongly across particular international areas at particular times (and that's one area where international investment should not be struck off the initially unfeasible list of options until our data/theory suggests otherwise). And additionally, if house prices are increasing, why these cities/areas and not others. If there is a reason money and investment is flowing to these places, do these policies address those fundamental reasons. If not, policies may just have to watch effects flow around policy like water flows around obstructions.
incompatible 9y ago
A house with an absent owner overseas is usually still occupied by somebody, so still contributes to housing supply. I don't really think the measure will have much if any affect. There may be some houses that are left vacant, the owner could be in NZ or somewhere else. Perhaps it would have been more useful to take measures against that instead.
- sitkack 9y ago
  This wasn't and isn't true in Vancouver.
  - incompatible 9y ago
    OK, so take measures against that instead.
mmerlin 9y ago
Acow_Adonis, I think you've failed to consider a few factors. A quarter of new NSW properties were sold to foreigners the past year and 89% of those foreigners are Chinese [1] 70% of Chinese are buying property with 100% cash [2] $3.8 TRILLION USD of "capital flight" escaped from China in the past decade [3] Australia's property prices doubled this past decade, from an already high base [4] Australia has no Anti Money Laundering laws for Realestate Agents, Lawyers and Accountants, despite a committee "considering" implementation every two years for over a decade. Transparency International ranks Australia as having the weakest anti-money laundering (AML) laws in the Anglosphere, failing all 10 priority areas [5] Prices for property are set at the margins (recent sales are used for valuation of upcoming sales) [6] Read more: [1] http://mobile.abc.net.au/news/2017-10-11/foreign-buyers-not-deterred-by-rising-stamp-duty/9038014 http://mobile.abc.net.au/news/2017-10-11/foreign-buyers-not-... [2] https://amp.afr.com/real-estate/residential/70pc-of-chinese-pay-cash-to-buy-australian-homes-sparking-moneylaundry-worry-20170403-gvc5vv https://amp.afr.com/real-estate/residential/70pc-of-chinese-... [3] https://www.forbes.com/sites/insideasia/2017/02/22/china-capital-flight-migration/ https://www.forbes.com/sites/insideasia/2017/02/22/china-cap... [4] https://about.homely.com.au/blog/2017/3/23/what-we-can-learn-from-australias-median-house-price-from-1970-2016 https://about.homely.com.au/blog/2017/3/23/what-we-can-learn... [5] https://www.macrobusiness.com.au/2017/03/report-australia-worlds-worst-money-laundering-property-market/ https://www.macrobusiness.com.au/2017/03/report-australia-wo... [6] https://www.macrobusiness.com.au/2017/04/foreign-buying-can-large-effects-property-prices/ https://www.macrobusiness.com.au/2017/04/foreign-buying-can-...
- ACow_Adonis 9y ago
  As per another comment in this thread, I really want/like links to original sources for figures, not second hand reporting. But let's accept some of those reports on face value. In Australia, you have to take into account both that we have laws that limit foreign purchasing of established properties, and that those figures are commonly for newly established properties. Firstly, that's exactly what the policies were supposed to cause. Secondly, new sales need to be measured relative to turnover and funding within the local established market. This gives you an idea as to the relative scales. Under the observation that many of these investments will be in high rise inner city apartments, again, it's not necessarily such an alarming figure, and arguably, might even be what policy was set out to achieve. The most feasible take away I think is your link no 6:pointing out that the price set in a market is a complex play of expectations and marginal prices. But, as with most of these articles and points, this all had to be taken in context of the behavior of locals and he size of their operations. I don't say that foreign investment plays no part. While no rain drop considers itself responsible for the flood, I think it's a curious analysis and interpretation that focuses on the 10% and blames them, when there is enough explanation to be found in the behavior of the local 90%, given that obviously market outcomes are in truth an interplay of both.
vidarh 9y ago
Same thing in London. Foreign buyers is the big bogeyman, but the reality is that prices are sky high even in areas where foreign buyers are not the slightest bit interested in putting their money. The reality is that most foreign buyers here rent out their properties - it's an investment after all - and it's only on the very, very high end of the market that people leave their properties empty for any amount of time, and that's a very tiny proportion of the total market. But it is convenient to be able to blame someone else and avoid making the hard policy decisions requires to boost construction. (while I agree leveraging makes it worse, though, the underlying problem is still competition for a too constrained supply of housing - I don't know about Australia, but in the UK house-building has trailed demand for decades at this point; to a large extent because of short-sighted policies which focuses infrastructure investments in already overheated areas and makes it even more attractive to move there, coupled with lack of willingness to open new areas for construction or relaxing restrictions on new developments in terms of height etc. outside of very small areas)
- norikki 9y ago
  >prices are sky high even in areas where foreign buyers are not the slightest bit interested in putting their money. If natives are out-bid in the areas attractive to foreign investors, then there will be greater demand from natives for housing in areas not attractive to foreign investors, and so the prices in those areas will increase as well. So that is not evidence that high prices can't be cause by foreign investment. > it's only on the very, very high end of the market that people leave their properties empty At least in Manhattan New York, the population of the island has fallen since the 1990's, despite the supply of housing increasing sharply since the mid 2000's, the size of the average apartment shrinking dramatically, and the rents increasing dramatically. Most new high-rises either have very low or unreported occupancy rates. However from the above statistics we can infer that a large fraction of the apartments are unoccupied investment for foreigners. As for foreign investors renting out property, that is total phony baloney. Do you know how bad it is to be an absentee landlord living in another country? Do you know how expensive it is to have someone else rent out your property for you? It is extremely rare for a reason, and even if they were to do that, why should the Chinese own the most prestigious real estate in your country? Shouldn't your own people own and occupy it? It's pretty outrageous that huge swaths of our cities are owned by foreigners, unoccupied or otherwise.
gonzo41 9y ago
Speaking as an Australian as well. I'd say 1 house per person and no negative gearing in addition to stopping overseas investment in residential property would be a better policy. I lament that lack of business in Australia because everyone is fighting over the scraps of our property market.
hnzix 9y ago
Anecdata: as a first time Oz home buyer relying on a bank loan, I was consistently excluded from house sales by foreign investors who could pay cash up front.
4thwaywastrel 9y ago
Forgive my ignorance, but if it's easy to build homes (as has been for a number of years) due to low-interest rates and steady employment wouldn't that lead in an increased supply hence dropping prices?
- hackits 9y ago
  You're correct, but missing one major factor. The price of land. If you have a look the countries with housing market bubbles have high regulation with zoning and release of land to build houses on. Take for example Australia. We have one of the most highly regulated land zoning regulations in the world. That and the high price of land where you can build a house on. If you track construction cost vs land prices you will find that land is one of the major contributing factor's to the price of houses. For example, the house I recently purchase I purchased for $330,000 AUD, but the land is worth valuation is $315,000.
zsoprano 9y ago
is not just chinese money btw.

elyobo 9y ago

Australia's policy is weak with regards to enforcement and penalties; NZ's may or may not end up being more effective. Agreed that foreign speculation is at most only part of the problem and that the drivers you mention are a large part of it, but you missed out the other significant factor in the "cultural" inclination to invest in property, which is that the favourable taxation policies (CGT discount, negative gearing, family home CGT exemption) and benefit policies (family home exemption from pension means tests) drive money into property. In NZ's case it's even worse as there's close to no capital gains tax on any property speculation (no requirement to actually live in a property to claim it as an owner/occupier style non-investment property).

dzhiurgis 9y ago
> no requirement to actually live in a property to claim But how do you enforce it?
- elyobo 9y ago
  I wouldn't bother, because my preference is to tax capital gains on all property including family homes (and to apply this tax annually based on paper profits too). That said, occupancy requirements are reasonably common elsewhere (e.g. to claim first home buyer benefits in AU, to prove that it's your primary residence to avoid capital gains taxes in AU, to get owner/occupier interest rates in AU) so I assume that they have some means of enforcement, but haven't really looked.
  - seanmcdirmid 9y ago
    Property taxes already tax based on the paper value of the house (well, an assessed value, which may or may not be fair). Tying it to appreciation and paper profits could quickly drive someone out of their home (e.g. Seniors). Heck, this is why prop 13 was initiated in the first place, for all the damage it did.
    - mitchellberry 9y ago
      In Australia there is no taxes on the family home and it isn't counted as an asset for welfare purposes. So we end up with this bizarre situation where people in multimillion dollar houses can and do claim the aged pension.
    - elyobo 9y ago
      Different situation here in AU, but the idea would be that you put so many dampeners on capital growth that there isn't really any (and so nobody gets driven out of their home). See the other comment re: multi millionaires collecting the pension; my taxes paying for benefits with far more wealth than I'll ever have, it's a frustrating situation.
      - seanmcdirmid 9y ago
        Pensions and SS aren't considered welfare in the states so it wouldn't matter how much wealth they had. The problem that the USA Californian seniors were having is that they had a fixed income (SS, pension) and couldn't keep up with rising property taxes (problem when your taxes go up but your income doesn't).
        elyobo 9y ago
        I don't know that they're generally considered "benefits" here, but that's what they are. There is a means test (i.e. if you have enough in the way of assets then you don't get the pension) but it totally omits the family home; someone with a million dollar house vs a million in cash have the same assets, but one will get a full pension and one will get none.
- Spooky23 9y ago
  Tie tax discounts to residency and register those applications centrally.
  - elyobo 9y ago
    This is a different issue, establishing the difference between someone that buys a property to live in vs buys it as an investment.
    - Spooky23 9y ago
      It is, but tax policy can drive behavior. No residential exemption == higher carrying cost.

ACow_Adonis 9y ago

Just replying to myself now to add: the solution to high house prices is, like much transport policy, boring and well known but not implemented for political reasons. On the housing front: tax capital gains, limit leveraging ability, implement a land based tax and zone/invest appropriately to encourage new supply. This will bring housing far more in line with what people expect. This brings us to the other awkward point though: truthfully, I'm sure many New Zealanders, just like many Australians, neither want their housing prices/investments to drop in relative price or to return to closer relationships with local use. Which leads us to the policy/political pantomime game so often involved in these areas where people want to have their cake and eat it too: "I want afforable housing for my children that doesn't make my property prices drop!"

gardnr 9y ago
I would need numbers to be able to agree with you that foreign investment isn't a driving factor in housing costs.
- ACow_Adonis 9y ago
  Wouldn't you also need numbers to arrive at the implication that foreign investment is? The numbers, at least historically, have always been hard to find, but the macro economic theory and indicators are generally quite boring and straight forward: employment stays high and household incomes improve, interest rates drop, lending and leveraging increases to household, supply is inelastic, house prices rise. Everything lines up pretty well, so why look to blame foreigners (who, even at the most generous estimates on what data does exist, are still a minority).
  - chris_wot 9y ago
    If the numbers are hard to get, then it’s difficult for you to say whether foreign investment is or isn’t part of the problem.
    - sushid 9y ago

xupybd 9y ago

I think you're correct on the large scale but anecdotally, the first 3 houses I put an offer on were purchased by the same Chinese couple at a price much higher than I'd have expected. I stopped putting offers on house when I saw them at the open homes. I have nothing against them they are acting in their own interests and good on them for having the money to buy property. I just can't compete with them and am glad that our government will manipulate the market in favour of people living in the country. I suspect that foreign ownership of land could have a negative impact on our economy as it only extracts money from our economy.

maccard 9y ago
For another anecdote, we were regularly outbid by young couples with large deposits offering way over valuation prices helped by parents gifting them large deposits.
gardnr 9y ago
This is the thing, why does one person need multiple houses when other folks can't afford one house. As someone that hasn't bought their first home, I'd be happy to see a tax on non-primary residences.
- freedomben 9y ago
  This is how we get such a complex tax code that is abused by special interests. It's so easy to say, "go tax that person over there. He can afford it"
  - sitkack 9y ago
    It could be a tax, meaning it is still possible it just costs more. Or could be made outright illegal.
- matwood 9y ago
  In the US this is already pretty common and often known as the homestead exemption. A primary residence gets a much reduced tax rate.

megy 9y ago

> There's limited evidence available that it's foreign buyers primarily responsible for our high house prices :/ It doesn't matter if it is the primary cause, it is one of the causes. And it is the one to change that causes the least problems to the people of the country you represent. In Australia, things are compounded by the incredibly greedy negative gearing rule, which also needs to be banned.

gardnr 9y ago
What's the negative gearing rule? Edit: from an American
- jpollock 9y ago
  Negative gearing is when the house is run at a loss and the loss taken against regular employment income. That would be when the rent doesn't cover the mortgage interest + maintenance costs. The benefit is that the dominant form of income in the investment is the capital gains, which is under your control to take at a later date when you'll pay a lower tax rate. https://en.wikipedia.org/wiki/Negative_gearing https://en.wikipedia.org/wiki/Negative_gearing
- deleted 9y ago
  [deleted]
- ACow_Adonis 9y ago
  Quickly: income tax deductions on investment losses into property. The general strategy is to pump money into a property at a technical loss and make it up the difference on capital gains later.
  - sitkack 9y ago
    Wait, so you can get paid to renovate a place above what the market will pay in rent and deduct the difference from your taxes, but then eventually sell the palace later and make cap gains on that?
    - 9y ago

Smerity 9y ago

As another Australian, our housing prices is broken for multiple reasons but foreign investment is a _major_ contributor. Credit Suisse research indicates that "foreigners are acquiring 25 per cent of newly completed supply in NSW and 16 per cent in Melbourne, or 21 per cent if we combine the two states". The total value of new houses in both states was $39 billion over the relevant 12 months. After the Chinese government cracked down on monetary restrictions (i.e. Citizens of China can normally only convert US$50,000 a year in foreign currency and have long been barred from buying property overseas), Lend Lease reported 30 to 40% of foreign purchases now being cash settled. Transparency International consider Australia the worst money laundering property market in the world. Foreign investment, especially for countries which avoided the 2007 housing bubble such as Australia, is a major issue. A friend will be posting an article on the multiple bubbles he sees in the Australian economy, and property is potentially the most concerning of all given how exposed our banks are to housing loans. We may find Australia finally seeing their house bubble pop like the US in 2007. http://www.smh.com.au/business/property/australian-property-cheap-for-chinese-buyers-credit-suisse-20170323-gv5ets.html http://www.smh.com.au/business/property/australian-property-... https://www.transparency.org/whatwedo/publication/doors_wide_open_corruption_and_real_estate_in_four_key_markets https://www.transparency.org/whatwedo/publication/doors_wide... Updated to include direct link to Credit Suisse: https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&sourceid=csplusresearchcp&document_id=1072773781&serialid=vGaaRmOdA9BYZyKVi%2BOQvCfX%2BJZ8vpuaqcWf8o4NoF8%3D https://research-doc.credit-suisse.com/docView?language=ENG&...

ACow_Adonis 9y ago
Can hacker news link me to the credit suisse research? I only ask because I work a bit in this area, and I've gotten into the habit of ignoring all reporting in the press because they neither link to or critically engage with their sources. Incidentally, I'm not saying foreign investment plays no part in such markets, but that its relative contribution has always been overstated. Adittionally, the policy responses I suggest which address house prices work irrespective of foreign/local mixes for most markets.
- sheepmullet 9y ago

seanmcdirmid 9y ago

There is lots of anecdata that Chinese real estate speculation that is obviously rampant in china is spilling out into international markets, like it did with Japan 30 years ago. When I was living in china, I knew people who were looking abroad for real estate investments. But anyways, vested interests in those target markets don't want it to go beyond anecdata, so they operate under a "don't ask, don't tell" policy. New Zealand is a classic case where housing prices have far exceeded normal incomes. When asked to consider NZ for a job, I ask is the pay better (no); is the cost of living cheaper (also no....). It definitely isn't tech salaries driving the housing bubble there!

elyobo 9y ago
Yeah, NZ national living in Melbourne, there's not much that could tempt me back to NZ. Property prices in Melbourne are more reasonable than Auckland, and salaries are far higher. Cost of living not much lower either.
- HumanDrivenDev 9y ago
  Salaries didn't seem much higher when I was looking - I found a job in provincial NZ for the same salary inner city melbourn jobs seemed to be offering. How many years experience before you break 100k AUD in Melbourne? And where's the ceiling in terms of non management position?
  - elyobo 9y ago
    I have no idea about entry level rates, but I wouldn't think it would take many years to break 100k in IT. I know many non-management people making well over 100k/year. The cost of living calculator they put up[1] suggested that I'd be losing money as a single income earner for my wife and daughter in Auckland, while I can support them here and bank literally 1000s on top of my living costs and mortgage here. I don't know exactly what I'd get in Auckland though, I assume it's estimates are middle of the range, so it's not quite a fair comparison but the general picture fits; in general living costs in NZ are a bit lower (excluding Auckland housing, which is more expensive than anywhere in AU except for Sydney) and the median salary is _far_ lower. Also, preferences may differ, but I grew up in rural NZ and inner Melbourne is a much more interesting place to live as an adult; the country was pretty fun as a kid though. [1] https://www.newzealandnow.govt.nz/living-in-nz/money-tax/comparable-living-costs https://www.newzealandnow.govt.nz/living-in-nz/money-tax/com...

chris_wot 9y ago

That’s really not the case. The issue, however, is broader - there are so many people speculating on property in Any Arrakis we are heading for an absolutely enormous crash. Chinese investors are getting targeted because there have been quite a few of them in an already incredibly overheated market. That doesn’t mean that overseas speculators aren’t part of the cause this problem.

stirlo 9y ago

The issue is it's extremely easy to hide foreign ownership through trusts, companies and relatives who are Australian residents. Anyone with a the means to pay top dollar for an investment property can easily afford hiring the right people to get around this restriction. Which makes it even more shocking when you see statistics like 21% of supply is purchased by foreigners.

bogomipz 9y ago

>"There's limited evidence available that it's foreign buyers primarily responsible for our high house prices" There's actually lots of evidence that hot foreign money is driving the prices up. There's also been a trend by developers to develop properties to attract this type of buyer. See: https://www.nytimes.com/news-event/shell-company-towers-of-secrecy-real-estate https://www.nytimes.com/news-event/shell-company-towers-of-s... and https://www.theguardian.com/commentisfree/2015/jan/25/planners-must-take-back-control-of-london https://www.theguardian.com/commentisfree/2015/jan/25/planne... and http://www.miamiherald.com/news/business/real-estate-news/article69248462.html http://www.miamiherald.com/news/business/real-estate-news/ar...

refurb 9y ago

It's the same in Canada. Everyone blamed the Chinese for the increase in housing prices. When they actually got the data, non-resident purchases of residential real estate in metro Vancouver barely broke 10%. It's much lower than that in the suburbs of Vancouver and Toronto. It's the 90% of Canadians with access to cheap debt and fueled by "real estate never goes down! It's now or never" that pushed prices so high.

hackits 9y ago
Then why did your real-estate prices go down when they disallowed foreign investor's?
- refurb 9y ago
  Coincidental. Vancouver was poised for a massive correction after prices increased 30% in the past 12 months. My understanding is that condo sales and prices are still strong. So I'd ask if foreign purchases were the cause, why are condo sales still going up?
- gnopgnip 9y ago
  Toronto homes in certain neighborhoods lost nearly 25% compared their peak value in April. There were no restrictions on foreign investors.
  - kitcar 9y ago
    To clarify for those not versed in Canadian tax policy, April is when the foreign investor tax was announced in Toronto: https://www.theguardian.com/world/2017/apr/20/toronto-foreign-tax-homes-housing-market-canada https://www.theguardian.com/world/2017/apr/20/toronto-foreig...
- myth_drannon 9y ago
  And after they were kicked out from Toronto they moved to Montreal. Prices/Sales in Mtl had increased by highest percentage on record (and that after 5 years being flat)

jseliger 9y ago

There's limited evidence available that it's foreign buyers primarily responsible for our high house prices :/ Correct. The primary cause has always been local steady employment, low interest rates combined with liberal access to debt with households culturally disposed to pumping that into housing. This part is incorrect; the primary cause in the last 40 years has been supply restrictions: https://jakeseliger.com/2015/09/24/do-millennials-have-a-future-in-seattle-do-millennials-have-a-future-in-any-superstar-cities https://jakeseliger.com/2015/09/24/do-millennials-have-a-fut... Tokyo is a notable exception: https://www.vox.com/2016/8/8/12390048/san-francisco-housing-costs-tokyo https://www.vox.com/2016/8/8/12390048/san-francisco-housing-...

hackits 9y ago
Partly correct.... If you access the ABS web-site and download the house price index for each state and capital and map out long term growth excluding the years after 2000. Then calculate the growth of housing that has been typically matching inflation or 3.3% per year (depending on state). Then you over-lay immigration, births, deaths, and interest rates. You will find that that most of them don't really correlate with the boom in house prices. Even accounting for the Negative gearing introduction it didn't have `that` much of a impact. The only correlation I have found that triggered the whole entire cluster f we have now. Is if you go back and look at the introduction of Capital Gains Tax Discount. After the introduction of CGT Discount that is when the vast majority of high to middle income earners turned to housing as a investment stream to avoid tax. Then on-top of this you had the Howard Government introducing the `User Pay` system where instead of the tax payer fitting the bill for new suburbs and infrastructure for housing, the developer and home owner now has to pay for housing infrastructure. I live in Darwin, and did recently purchase a house.
- ACow_Adonis 9y ago
  Yes good :) that's the kind of data driven analysis we should build on. Additionally, we have to explain why house price rises correlated strongly across particular international areas at particular times (and that's one area where international investment should not be struck off the initially unfeasible list of options until our data/theory suggests otherwise). And additionally, if house prices are increasing, why these cities/areas and not others. If there is a reason money and investment is flowing to these places, do these policies address those fundamental reasons. If not, policies may just have to watch effects flow around policy like water flows around obstructions.

incompatible 9y ago

A house with an absent owner overseas is usually still occupied by somebody, so still contributes to housing supply. I don't really think the measure will have much if any affect. There may be some houses that are left vacant, the owner could be in NZ or somewhere else. Perhaps it would have been more useful to take measures against that instead.

sitkack 9y ago
This wasn't and isn't true in Vancouver.
- incompatible 9y ago
  OK, so take measures against that instead.

mmerlin 9y ago

Acow_Adonis, I think you've failed to consider a few factors. A quarter of new NSW properties were sold to foreigners the past year and 89% of those foreigners are Chinese [1] 70% of Chinese are buying property with 100% cash [2] $3.8 TRILLION USD of "capital flight" escaped from China in the past decade [3] Australia's property prices doubled this past decade, from an already high base [4] Australia has no Anti Money Laundering laws for Realestate Agents, Lawyers and Accountants, despite a committee "considering" implementation every two years for over a decade. Transparency International ranks Australia as having the weakest anti-money laundering (AML) laws in the Anglosphere, failing all 10 priority areas [5] Prices for property are set at the margins (recent sales are used for valuation of upcoming sales) [6] Read more: [1] http://mobile.abc.net.au/news/2017-10-11/foreign-buyers-not-deterred-by-rising-stamp-duty/9038014 http://mobile.abc.net.au/news/2017-10-11/foreign-buyers-not-... [2] https://amp.afr.com/real-estate/residential/70pc-of-chinese-pay-cash-to-buy-australian-homes-sparking-moneylaundry-worry-20170403-gvc5vv https://amp.afr.com/real-estate/residential/70pc-of-chinese-... [3] https://www.forbes.com/sites/insideasia/2017/02/22/china-capital-flight-migration/ https://www.forbes.com/sites/insideasia/2017/02/22/china-cap... [4] https://about.homely.com.au/blog/2017/3/23/what-we-can-learn-from-australias-median-house-price-from-1970-2016 https://about.homely.com.au/blog/2017/3/23/what-we-can-learn... [5] https://www.macrobusiness.com.au/2017/03/report-australia-worlds-worst-money-laundering-property-market/ https://www.macrobusiness.com.au/2017/03/report-australia-wo... [6] https://www.macrobusiness.com.au/2017/04/foreign-buying-can-large-effects-property-prices/ https://www.macrobusiness.com.au/2017/04/foreign-buying-can-...

ACow_Adonis 9y ago
As per another comment in this thread, I really want/like links to original sources for figures, not second hand reporting. But let's accept some of those reports on face value. In Australia, you have to take into account both that we have laws that limit foreign purchasing of established properties, and that those figures are commonly for newly established properties. Firstly, that's exactly what the policies were supposed to cause. Secondly, new sales need to be measured relative to turnover and funding within the local established market. This gives you an idea as to the relative scales. Under the observation that many of these investments will be in high rise inner city apartments, again, it's not necessarily such an alarming figure, and arguably, might even be what policy was set out to achieve. The most feasible take away I think is your link no 6:pointing out that the price set in a market is a complex play of expectations and marginal prices. But, as with most of these articles and points, this all had to be taken in context of the behavior of locals and he size of their operations. I don't say that foreign investment plays no part. While no rain drop considers itself responsible for the flood, I think it's a curious analysis and interpretation that focuses on the 10% and blames them, when there is enough explanation to be found in the behavior of the local 90%, given that obviously market outcomes are in truth an interplay of both.

vidarh 9y ago

Same thing in London. Foreign buyers is the big bogeyman, but the reality is that prices are sky high even in areas where foreign buyers are not the slightest bit interested in putting their money. The reality is that most foreign buyers here rent out their properties - it's an investment after all - and it's only on the very, very high end of the market that people leave their properties empty for any amount of time, and that's a very tiny proportion of the total market. But it is convenient to be able to blame someone else and avoid making the hard policy decisions requires to boost construction. (while I agree leveraging makes it worse, though, the underlying problem is still competition for a too constrained supply of housing - I don't know about Australia, but in the UK house-building has trailed demand for decades at this point; to a large extent because of short-sighted policies which focuses infrastructure investments in already overheated areas and makes it even more attractive to move there, coupled with lack of willingness to open new areas for construction or relaxing restrictions on new developments in terms of height etc. outside of very small areas)

norikki 9y ago
>prices are sky high even in areas where foreign buyers are not the slightest bit interested in putting their money. If natives are out-bid in the areas attractive to foreign investors, then there will be greater demand from natives for housing in areas not attractive to foreign investors, and so the prices in those areas will increase as well. So that is not evidence that high prices can't be cause by foreign investment. > it's only on the very, very high end of the market that people leave their properties empty At least in Manhattan New York, the population of the island has fallen since the 1990's, despite the supply of housing increasing sharply since the mid 2000's, the size of the average apartment shrinking dramatically, and the rents increasing dramatically. Most new high-rises either have very low or unreported occupancy rates. However from the above statistics we can infer that a large fraction of the apartments are unoccupied investment for foreigners. As for foreign investors renting out property, that is total phony baloney. Do you know how bad it is to be an absentee landlord living in another country? Do you know how expensive it is to have someone else rent out your property for you? It is extremely rare for a reason, and even if they were to do that, why should the Chinese own the most prestigious real estate in your country? Shouldn't your own people own and occupy it? It's pretty outrageous that huge swaths of our cities are owned by foreigners, unoccupied or otherwise.

gonzo41 9y ago

Speaking as an Australian as well. I'd say 1 house per person and no negative gearing in addition to stopping overseas investment in residential property would be a better policy. I lament that lack of business in Australia because everyone is fighting over the scraps of our property market.

hnzix 9y ago

Anecdata: as a first time Oz home buyer relying on a bank loan, I was consistently excluded from house sales by foreign investors who could pay cash up front.

4thwaywastrel 9y ago

Forgive my ignorance, but if it's easy to build homes (as has been for a number of years) due to low-interest rates and steady employment wouldn't that lead in an increased supply hence dropping prices?

hackits 9y ago
You're correct, but missing one major factor. The price of land. If you have a look the countries with housing market bubbles have high regulation with zoning and release of land to build houses on. Take for example Australia. We have one of the most highly regulated land zoning regulations in the world. That and the high price of land where you can build a house on. If you track construction cost vs land prices you will find that land is one of the major contributing factor's to the price of houses. For example, the house I recently purchase I purchased for $330,000 AUD, but the land is worth valuation is $315,000.

zsoprano 9y ago

is not just chinese money btw.