6 ms·

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 re

• 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
        That's literally what your parent commenter is getting at...
      • ACow_Adonis 9y ago
        Well, one can use ockhams razor and plug the aggregate finance stats and household numbers in for each country: foreign investment will likely be related to the residual. That is, whatever amount is left over after domestic statistics and aggregate lending are taken into account. We don't have an accurate primary source for foreign investment, but we can reason. The rba website would be my first stop in aus for aggregate finance stats available publicly. The Abs has some construction/hiding investment data, but there are some issues with definitions you'd need to take into account. And our neighbors across the pond, although I'm not a kiwi, I imagine will have very similar structures and data. Additionally, such a simple model explains house prices quite well since the 1990s, across various markets with various levels of foreign investment, so we would need very good reasons to insert a "foreign investor" cause in there.
  • msie 9y ago
    People in Canada blame foreigners too for house prices in Vancouver and Toronto but recent surveys show that foreigners only make up about 10% of purchasers. We've had low interest rates too and a vibrant economy. The federal government raised interest rates, changed mortgage terms and increased fitness requirements to stop people acquiring mortgages they can't afford.
    • soperj 9y ago
      yeah but 10% is huge when you consider that's all inflow, not people selling one house to purchase another, not to mention historically low vacancy rates in both cities.
      • dzhiurgis 9y ago
        You might be right. Parent OP doesn't specify if it's 10% per year. Compound growth would be huge over several years. Also, Auckland has had probably more immigration than Australia, at least for the last few years. That said, dropping prices by 10-20% would mean absolutely nothing for an average labourer.
        • soperj 9y ago
          It's per year. Before the foreign buyer tax in Vancouver, there were parts of the city where 20% of purchases were made by foreigners (Burnaby and Richmond).
    • Spooky23 9y ago
      10% is a lot for driving market prices.
      • vidarh 9y ago
        10% is a lot for driving market prices only if they live in those houses or leave them empty or massively overpay. But most foreign buyers in these markets are buying to profit, and rent out the properties, and so only really contribute to balancing rental and sale prices.
• glangdale 9y ago
  There are a lot of weird arguments about this that seem to work of the idea that because there aren't really that many foreign buyers, ergo they don't have much effect on the market. Agreed that capital gains and leverage have a lot more do to with it, but I don't think Australians are necessarily ready for "zone/invest appropriately" (and fair enough - so we have to watch our cities transformed to megacities?)
• elyobo 9y ago
  Nailed it.
• afinno 9y ago
  I would hate to be agreeable on the internet but I think you've covered this from an Australian perspective fairly accurately. Simply removing the capital gains tax discount would help to prevent speculative investments. There has been much talk of negative gearing being the issue but those with a short memory don't realise it has been around since the 80s and operating with out much fuss. It was the CGT discount combined with negative gearing that really got the property snowball rolling. Further, I believe a land tax would help to cool the market in perhaps a more controlled manner.
  • ioquatix 9y ago
    I talked to my accountant and he suggested CGT + lower personal income tax. So, someone who owns O(1) house, pays CGT, but that's compensated by O(1) less income tax. Someone who is flipping houses is paying CGT but in the end, it's not offset by less income tax if they are flipping lots of houses. They pay tax O(N) on it just like everyone else, and they gain O(1) less income tax. Would something like this work? (Forgive my bastardisation of the O-notation :)
    • elyobo 9y ago
      Why allow the compensation at all?
      • ioquatix 9y ago
        Currently when you sell a house, you are not taxed on the profit that you make. It's one of the few forms of income which is not taxed. Everyone else pays income tax. I think the point of introducing CGT is to tax people who are buying and selling houses as their sole form of income. Given two people, if one person earns 100k through hard work, and another earns 100k through flicking property, the first person would be at a major tax disadvantage, currently. However, introducing CGT would essentially mean less money in everyone's pocket. It's possible by reducing income tax, that in the above scenario, hard work is encouraged over being a property middle-man while still maintaining some semblance of balance. I guess you could leave income tax where it is at, but that would make it even harder for people to climb up the property ladder after CGT was introduced, IMHO.
• gnat 9y ago
  Aucklander here: you're right. One of the effective political tactics against the Labour Party was to suggest they'd threaten house prices: most of Auckland home owners need high real estate prices, either to keep rents (investment cashflow) up, to continue to leverage their retirement real estate Ponzi scheme, or for the simple reason that nobody wants to have to move for work and lose money when they sell their house. These all make it hard for a government to be effective at lowering house prices without the needed-but-deeply-unpopular introduction of a Capital Gains Tax. The "no sales to foreigners, let's curb immigration" is a sop to affronted New Zealanders of European and Māori descent, who are increasingly finding themselves outbid by recent (last 20-years) Chinese migrants who not only want a house for themselves but also want to participate in the only economically thriving part of the NZ economy that doesn't require a dairy farm: real estate.
  • dba7dba 9y ago
    I don't see any issue with NZ putting up that block to keep out Chinese 'investors', considering the roadblocks foreigners have to face to do business in China. Seems fair to me.
    • busterarm 9y ago
      There's not going to be any change in money coming in to buy property from foreign buyers. What you're actually going to see is a cottage industry of lawyers setting up citizen-owned shell corporations to funnel this money through -- minus their fees of course.
      • dba7dba 9y ago
        Welp, then, a law will be erected that forces lawyers to report info of shell companies if they are involved in real estate deal. Just a few months ago, US govt started a program where if a foreigner buys real estate of a certain value ($4 million?) in certain hot markets like Los Angeles, NYC, they have to report it to Treasure or IRS. As of now, that value is too high to be effective imo, but there are ways.
• justinmk 9y ago
  > the solution to high house prices is ... tax capital gains, limit leveraging ability, implement a land based tax Your solution to high real estate prices is to make the investment less attractive by increasing taxes? What does this gain for the new buyer?
  • glibgil 9y ago
    > What does this gain for the new buyer? Less competition from landlords
  • ACow_Adonis 9y ago
    You left out my other measures :p Obviously, it's very hard for me to be specific to each market, so those are high level principals. It gains for the new buyer an average falling of house prices, under the assumption that we are talking about a later period market that has seen asset prices rise due to leveraged investment by primarily high net worth holding entities looking primarily for capital gains of of asset price movements in an illiquid and inelastic-supply market, rather than fundamental connections to longer term investment/income flows and local income opportunities. The logic is that this disproportionately targets the leveraged investors regressively compared to the local home buyers. Now there's also an argument to be made that if you encounter a market that is not in such a state, it could be individually rational for a new buyer to buy into said market, then lobby for policies which increase demand while removing said policies/barriers for themselves, thus trying to turn such a market into our common current situation now they have become a property holder, but in short, we have to try for policies that allow openness for sensible new investment while still tying values to local incomes, services and infrastructure funding, and long run returns.
  • elyobo 9y ago
    Well yeah, obviously. Anything that reduces the profitability reduces the appeal to investors, which decreases price pressure, which leads to price falls, which ideally falls into a virtuous cycle of falling prices and falling investor demand until you have sane prices again. You'd have to hit it pretty hard to actually get that going though; this policy won't do it alone. For new home buyers lower prices is great. For the economy lower prices is great (the initial massive losses will be rough, but going forward it means far less overhead on all Kiwis with that interest money going elsewhere in the economy, and in general the money going into non productive real estate speculation will go to more productive areas of the economy).
• MarkMc 9y ago
  > "I want afforable housing for my children that doesn't make my property prices drop!" There is actually a very simple solution to this problem: build up.
• curun1r 9y ago
  There's reasons for these sorts of policies that go beyond housing prices. For instance, too many vacation/investment properties makes it harder for cities to provide services. How do you forecast demand for electricity, gas, water, trash removal and schools when non-resident owners are using those services sporadically or not at all? These kinds of services all benefit from higher population density and ownership by absentees makes it harder for city governments. It would be nice if these laws were written in a less xenophobic fashion (i.e. allow ownership for citizens and permanent residents who've lived a certain number of years in country), but these kinds of policies have their purpose, even if they don't solve the housing affordability problem. It's in the interests of a city/country to have the people who own property in it be people who are committed to living there and caring about the community.