Looking further afield

Tony Alexander.
Tony Alexander.
Auckland's overheated property market remained in the news yesterday, the Real Estate Institute reporting Auckland buyers were looking out of the region for properties, both as owner-occupiers and for investments.

Regions such as Northland and Waikato-Bay of Plenty had recorded significant drops in the volume of properties for sale over the past six months, Aucklanders increasingly being identified as a significant buying group in those regions, institute chief executive Colleen Milne said.

Further afield, there was increasing evidence Aucklanders were making up a larger proportion of total buyers.

At the weekend, Labour housing spokesman Phil Twyford said Chinese buyers were dominating Auckland's housing market, basing his claims on leaked data from one of Auckland's largest real estate companies.

According to the unverifiable data, 39.5% of about 4000 home sales the firm completed in Auckland between February and April were to people with last names that ''looked Chinese''.

Given 9% of Auckland's population identified as Chinese at the last census, the view was offshore Chinese buyers were scooping up Auckland properties.

BNZ chief economist Tony Alexander said the real estate agency data released had a huge flaw in that no-one was able to identify whether the person with the Chinese name was in fact located offshore and had no intention of living in New Zealand.

''Their family could have been in New Zealand since the Otago gold rush days of the 1860s.

''They might have migrated here in the wave from the late 1980s, when we changed our migration rules to specifically reduce emphasis on English heritage and open the door instead to people based on a measure of merit, regardless of where they are coming from.''

Also, New Zealand was enjoying record levels of net immigration, and the migrants might be the wealthiest group ever invited in.

Migrants liked to put down roots and buy a house as soon as they could, Mr Alexander said.

It was not surprising given nearly 35% of migrants came from Asia that there would be many Chinese names on the list of home buyers.

Chinese people had been spreading out of southern parts of China to the rest of the world for more than two centuries - Chinatowns existed everywhere - and it would be no surprise if people of Chinese descent were migrating to New Zealand from places such as the United States, he said.

There were several unknowns in the data released by Labour.

It was not known if the unnamed real estate agency with the unconfirmed data specialised in sales to Asian people and/or specialised in sales in the suburbs containing favoured schools.

Asian people placed a heavy emphasis on their children receiving a good or at least expensive education, Mr Alexander said.

''We remain in the dark about the extent to which Auckland's housing market is truly being driven by offshore buying.''

The fundamental cause of rising prices in Auckland was a shortage of supply and until that was addressed, prices would keep rising until late 2017, he said.

Whatever the true magnitude of Chinese buying in the past few months, it would only increase, he said.

Chinese families were growing wealthier and they would seek offshore assets.

Chinese people wished to transfer wealth from the mainland and last week's massive intervention in sharemarkets by the Beijing authorities illustrated why people had a high distrust of the environment on the mainland.

''And Chinese authorities have yet to relax hefty restrictions on people getting their funds offshore. When they do, well then you will see something entirely new hit the world's residential property markets.''

Mr Alexander recommended that New Zealand adopt as soon as possible Australia's rules restricting foreign buying of anything other than new housing unless they had been resident for 12 months.

But it had to be taken further.

Many Chinese who bought properties left them sitting empty.

That applied even to new apartments sold to Chinese buyers.

Chinese wanted an asset away from any control by the Chinese Communist Party, he said.

As Auckland slowly went vertical in areas like New Lynn, developers would find they could easily get offshore financing for their projects and hefty sales off the plan to Chinese investors.

Those investors might never occupy or even rent out their investment.

While on the face of it the Australian rule sounded a grand idea, it could leave the housing supply situation unchanged from a no-rule regime.

''Were we to adopt the Aussie regime, we would need to add in an extra clause along the lines of apartments having to be made available for rent, actually rented, or something like that,'' Mr Alexander said.

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