It's reasonable for cities to ask that people show that they have some skin in the game, that they're living, working, paying taxes and contributing to and enhancing the community.
First, stats show that foreign buyers own ~3% of homes. Everything else is kiwi-owned.
Second, there is another thing going on here -- KiwiBuild. Basically, government funds and builds 'affordable houses'. Prices (in NZD) are $500-650k, but now they want to have even more affordable houses - $300k. For comparison, actual average house price in Auckland is above $1kk.
My wife and I work really hard, NZ is not our country, English is not our language, the culture is different, we have nothing to inherit here. Why should we pay (with our taxes) for poor kiwis who can't afford a house? Shouldn't they work harder instead? Get education, get better job.
We wish we could buy a $1kk+ house in Auckland too, but we can't. If you can't afford a house, then buy an apartment because they are much cheaper. Yes, it is not that fancy, but at least you'll have a place to live in.
I mean, yeah, Labour party is in power in NZ at the moment, hence such policies like 'Let's increase salaries to poor workers, let's give them houses, let's increase maternity leave etc.'. The problem is that somebody has to pay for that.
UPD: another problem in my opinion is that Kiwi culture is very different. NZ is isolated from the rest of the world. It is very quiet here, people are very relaxed, everything goes slow. People are not used to work hard (in my opinion). It is common here to spend a year or two doing nothing, just traveling around the world after graduation. Many people don't want to build a career, they want to 'try many different jobs, find themselves, enjoy life'. Many people live with their parents, start thinking about career at the age of 30-35. At work, if it is 4pm (sometimes 5pm) -- people just leave and go home. "We have an urgent task" here means that it must be done within a week. In schools they teach children that everyone is a winner -- even if you have poor marks. Also, if there are any competitive games/sports, then sometimes they make it that the winner is not the one who actually won, but the one whose turn today is. And so on. Hence many people here, when they grow up, are not used to fight for survival. Just enjoy their quiet life in a beautiful country. But then they are 35, have no money, no career, but want a fancy house...
Sorry if I'm being too harsh, don't mean to offend. But this is my take on Kiwi culture, the way I see it as a non-native.
Nevertheless at some point I started thinking: Maybe these guys are right and I'm wrong? Maybe there's more to life than this "fight for survival" and I shouldn't value my ability to do so so highly?
There's a level of, for lack of a better word, satisfaction I see on people's faces daily in Italy that I know I won't achieve, because I was born in a poor country in a rather poor family and had to claw myself out of poverty.
I think it's precious. I wish my (future) children lived in a world where they can have, like my SO likes to put it, "two youths" - one spent on doing personally meaningful, fulfilling things, and the other doing what's necessary to live an independent life.
And I respect people if they choose to live this way, not fight for survival, enjoy their lives. But I don't think it is fair if later they start complaining about lack of money, lack of career and expensive houses they can't afford and start asking the government (read 'other people') to pay for it.
There are apartments in Auckland for $300-400k, which is even cheaper than affordable KiwiBuild houses ($500-650k).
I do agree that NZers have this strange desire for bungalows in the suburbs, commuting and mowing lawns. I'm in an apartment downtown and love it.
Also have you look at the minutes from BC meetings? Going through just a handful will turn you off purchasing an apartment in no time.
Why pay taxes at all for a country you're not citizen of? /s
Seriously now, it's because you live there. Their government makes the rules, you decided to live there and, by extension, decided to follow their rules.
> I mean, yeah, Labour party is in power in NZ at the moment, hence such policies like 'Let's increase salaries to poor workers, let's give them houses, let's increase maternity leave etc.'. The problem is that somebody has to pay for that
And, given which democratically elected government is in power, it's their right to choose how to spend their money.
That is just my view on such policies. As you might have guessed, I'm not a labourist.
New Zealand is a very wealth country by most metrics. It can definitely afford these things.
When I say "it" I mean: the people of New Zealand can afford to redistribute some of their wealth so the country can avoid the worst types of poverty, and probably a whole lot more.
https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe...
Logic has gone out the window regarding sensible planning, it's all politicised and no longer serves the greater good.
House prices could be slashed overnight with the stroke of a pen in many cities on earth.
At first we were looking for an apartment, but then realised that it was just hopeless to find affordable apartments which a of reasonable quality.
EDIT: Downvoters, what gives? Just asking a question...
An investor doesn't buy groceries at the local store, doesn't go to local music venues etc.
They help out the construction industry and the FIRE (finance, insurance, real estate) industry, but local neighbourhoods weakly benefit.
Again, I'm not advocating for foreign investors; just trying to understand the problem.
Even if these properties are being rented out, persons with foreign capital buying power that exceeds that of locals have a distortionary and, from the point of view of a local, a negative impact on the real estate market, as they are able to out compete locals and bid up the price of housing. A person which may have normally been able to buy a home can no longer buy, and now has to devote more of their income to renting from a foreigner. Why would any local support this state of affairs?
At a high level "skin in the game" means involvement and having some commitment. That can mean monetary involvement or otherwise and I'd use the broader definition. An absentee foreign buyer has tenuous involvement in a city beyond the impact of their foreign capital. Sure they've risked their capital on an investment, but from a locals point of view they have no real personal stake in the community.
Foreign owners are likely to move at least a portion of this money overseas, which takes it out of the local economy, reduces the ability of residents to innovate by taking financial risks etc etc.
As far as not allowing housing as a speculative financial investment, there are some significant unintended consequences there.
Here's an article about the struggles of retailers in Vancouver's Coal Harbour neighbourhood, which has estimates of around 20-25% empty housing.
https://www.theglobeandmail.com/real-estate/at-vancouvers-co...
Just ask the people in London who live among all the empty properties that have been bought by various Russian oligarchs or other people who want to exfiltrate their wealth from the countries where they "acquired" it.
In NZ, ROI on property is targeted to be around 8% [3]. The owner will take that ROI either in capital increase or in rent. [2]
If the property is appreciating, the rents will be allowed to slow down. If the property stops appreciating, then the rents increase to maintain the ROI. The entire market is targeted at 8%, particularly the property management companies.
Changing the property tax rules changes this equation, with a shift to higher rents.
New Zealand is trying everything to remove demand from the housing market. They first brought in new deposit rules (20% min for owner occupier[4], higher for investment properties 35%+[5]), now they've brought in foreign ownership legislation. It might affect the rate of capital increase, but that will only shift the ROI equation towards rental increases.
The government is looking at building more housing (FINALLY), but they are finding that all the regulations (houses with heating and insulation cost more!) means they can't do it for less that 600-650k [1].
[1] https://www.interest.co.nz/property/95345/housing-minister-s...
[2] https://www.interest.co.nz/saving/rental-yield-indicator
[3] https://www.yourinvestmentpropertymag.com.au/expert-advice/l...
[4] https://sorted.org.nz/guides/home-buying/buying-a-first-home...
[5] https://www.rbnz.govt.nz/education/at-a-glance-series/lvr-re...
The ROI is the +appreciation + rent - expenses.
If the property depreciates you have least return on investment. There is nothing you can do about it. You can't increase rent to compensate, people can't pay more rent. Your reasoning is absurd, if you could increase rent you should be doing that right now already.
Looking it up, I see USA is somewhere around 30% of income [1] as housing cost, while NZ is about 17% [2]. Seems to indicate there is room to grow under tight supply conditions.
[1] https://www.businessinsider.com/how-to-save-more-money-2017-...
[2] https://www.stats.govt.nz/information-releases/household-inc...
What I'm trying to say is walking into a house here in winter still doesn't feel like a place in say, Northern Europe. I don't think it's that onerous.
Sources: Partners brother in law is a builder, parents just had heat pumps installed, our landlord just installed underfloor insulation and it's currently 12 degrees C in the house.
Not yet, but soon. They did tighten up the rules around businesses that _never_ make a profit a while ago (I seem to remember).
CONSULT YOUR ACCOUNTANT.
You just can’t make a career out of construction with the current boom and bust way the cycle is going.
The challenge is health. It's a very demanding line of work where you have to carry weight, wake up in the early morning and work in the cold. People don't want to work like that. It's very hard on the body and you're broken when you reach your 50's.
When you are in your 20's. You fall from a ladder, break some bones, you heal and get back on your feet one year later. When you are in your 50's, you are more fragile and less resilient, same thing happens, you might never be able to work again. It's brutal.
There are huge markups in the local market on building materials due to a duopoly. It is cheaper to fly to Australia buy NZ made siding there and ship it to NZ than to buy it locally.
If an external rentier enters the market and realizes yield, other rentiers will follow. This increases demand for housing assets, not necessarily housing utility. this is the problem they are trying to solve.
So it's not like the foreign investors are beneficial in any way, besides maybe paying their bit of water/electricity/police costs (and if they only pay their share, then why bother accomodating all the volatility to house prices they bring?)
Also property taxes here are not tied directly to house valuations - there's a fixed component, plus a component that's calculated from your valuation divided by the sum of the valuations of ALL the properties in the city. That means that if everyone's valuations are doubled your taxes don't change, if your house value goes up faster than the average you do pay more, if it goes up more slowly your taxes go down.
Do you want to ban vacant or mostly vacant housing stock for its constriction of housing supplies? Why only foreign owned? Don't vacant holiday or investment homes of residents have the same impact?
Do you also want to ban renter occupied homes where a landlord is profiting excessively? How do you define excessive? Why only foreign landlords? Don't domestic landlords have the same impact? Don't investment trusts have the same impact, regardless of who owns the shares? Or is there a problem with your tax system, so the foreign-consumed profits are not taxed at the source?
If you dislike speculative investment, shouldn't you really dislike renter occupied homes where the landlord isn't profiting? They might accept a tenant at a partial loss, as long as it costs less than holding the property vacant, but this behavior depends on their speculative expectation that the future value is worth the holding costs. It is not sustainable for rent to be lower than the total holding costs (taxes, maintenance, depreciation, risk).
It is interesting to imagine a strict owner-occupation requirement. Nobody can own a home they don't live in as primary residence. Obviously, that means nobody can own a second home unless you zone some special vacation-home areas. And nobody can become a landlord, owning and operating rental properties. No person and no corporation nor trust. Ignoring the obvious disaster of how to get there from here, how would such an economy work? Does everybody at every income level get access to financing to buy their own home? It's hard to define a similar rule for commercial properties, since corporations can fractionally live in many places and it will be hard to define a minimum occupation density to distinguish real use of a commercial property from token use of a speculative holding. The same problem applies to wealthy home owners---what's the difference between a huge estate/mansion and an apartment building other than resident density?
At the other extreme, what about a strict public-owner requirement? What if every property had to be owned by a trust available on open markets? Everyone could buy into shares of every trust, and everyone would pay rent to some trust owning their residence. Everyone could benefit from real estate investment whether they have enough assets to own 1/100, 1, or 100 homes. Independently, they would decide what kind of housing and cost are best for them. What would happen to rents and property values...?
This happened in BC, Canada. It’s a popular spot for vacation homes for Canadians, this they get slammed with a tax as well.
Govt backed down and created exemptions for large swaths of BC.
Edit: oops, Canada does have a property tax, and New Zealand has something like it. So it’s just Australia (on first residences) and the UK that don’t. Well, China also. I’ll take my downvotes gracefully.
https://vancouver.ca/home-property-development/property-tax....
You can look up what they are for a property and get an idea of the property value on local government websites.
https://www.aucklandcouncil.govt.nz/property-rates-valuation...
When calculating the affordability of a home, the total monthly cash flow requirements (housing costs as a percentage of income) are critical. I live in an area where the rates are 10x that of Auckland. A $600k home valuation requires a ~$250 weekly rate commitment vs only about $27 in Auckland - a significant difference. It's still an expensive home by any metric, but considerably more affordable.
From a speculation perspective, an investor in Auckland can sit on a very expensive property with almost no cash flow burden, reducing the need to even rent.