Offshore Buying of NZ Property is Only Going to Grow and a National Debate on Rules Regarding Foreign Purchases

Posted on Saturday, March 30th, 2013 at 12:59 am in

HOUSING MARKET UPDATE: Offshore buying of NZ property is only going to grow and a national debate on rules regarding foreign purchases would seem useful.

I have received a good number of emails from people who have either read my survey of real estate agents or saw it reported in the newspaper. Almost all expressed incredulity at the low proportion of sales reported as going to Chinese people. One person advised looking at property registers to see all the Asian names owning houses in certain streets. One suspects they are unaware that New Zealand has an Asian population of near half a million people and that some people with Asian names have had their families here for generations.

Mainly people gave the same anecdotes about Chinese buying at auctions. But again they gave no indication that they had ability to detect whether that person already lived here, intended living here, or was buying with no intention of occupying the house. Mainly however, I don’t think many of the people emailing me had knowledge of areas outside prime school zones and traditional destinations for migrants such as the North Shore.

In that regard some greater granularity in another survey would be useful. But I don’t plan repeating it every month – maybe every three months is all that is necessary.

Those interested in the foreign buying topic may be interested in this. http://www.realtor.org/sites/default/files/2012-profile-international-home-buying-activity-2012-06-highlights.pdf

This url will take you to a pdf copy of the annual report issued by the National Association of Realtors in the United States called “Profile of International Home Buying Activity 2012″ It covers the year to March 2012. The NAR survey found that 8.9% of US house sales were to people offshore or only recently migrated to the United States, measured by dollar value. Some 4.4% of sales were to foreigners not planning to shift to the United States.

My survey with the RE1NZ found that 9% of NZ dwelling sales are to people offshore, and some 42% plan coming back. Adding in half the 44% who responded ‘Don’t Know” we get 64% of people offshore buying NZ houses planning to move here – or 36% planning to stay away. Then if we take 36% of 9% we end up with about 3.2% of NZ dwelling sales being to people offshore not planning to shift to New Zealand. This is lower than the US figure of 4.4%. But the US data is by value whereas the responses from NZ real estate agents are likely to have been on the basis of property numbers. Given that the average purchase by a foreigner in the United States is for $400,000 compared with $212,000 for US-based buyers, it looks like our proportion of sales to people staying offshore is in the vicinity of the US proportion.

If we look at where the NAR survey shows that foreign buyers are coming from we get this – remembering that our survey found that 18% of sales offshore were to people in the UK (foreigners and expats), 15% to people in China, and 14% to people in Australia. In the United States 24% come from Canada, 11% from China, and 8% from Mexico. Therefore courtesy substantially of buying by their northern neighbours, the proportion of property sales to Chinese in the United States is lower than in New Zealand. But the key point to note is that our 15% is not vastly different from their 11% of sales to Chinese.

Note that there are just over 1 million realtors in the United States so the NAR survey response of 1,745 is a response rate of about 0.17%. Our response of 355 out of just over 10.000 is a response rate of about 3.5%.

If I Were A Borrower What Would I Do?

Stay floating but look to fix half of my debt at a rate of three years or beyond if someone offers a very discounted rate. Same comment as for the past few months. Plus, for your guide I struggle as yet to see a serious chance of fixed rates suddenly shooting up though this is likely to happen at some stage. A heavy influence will be US monetary policy including money printing operations.

OFFSHORE

In Europe the news is all about the 0.5% of the Euro-Zone GDP accounted for by Cyprus rocking financial markets with fears of bank runs and capital flight from heavily indebted countries because of the proposed but now ditched levy on Cyprus bank deposits. In Italy there is no government in place. In Spain there is a political scandal. In Greece there is continuing failure to implement reforms agreed as part of previous bailouts.

Basically, much as there was excitement about some strong import data for Germany last week along with good German employment data, the story for Europe remains one of the debt crisis rumbling on for many years. This means a weak macro-environment facing NZ businesses (but it pays to remember it is the niches which matter there and everywhere else).

In the United States continue to come out in reasonable shape, though the Fed. Have just cut their growth forecasts slightly? Their money printing operations show no sign of being curtailed this year.

Source: Tony Alexander, BNZ Chief Economist

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