Overseas buyers: are they an issue?

Auckland property investor David Whitburn

Following the RBNZ’s announcement [of a 30% LVR for Auckland investors], a number of commentators were quick to suggest that the move would result in more foreign speculators entering the market.

Labour’s Finance spokesperson Grant Robertson said that overseas buyers have done extremely well out of LVRs already and now cashed up foreign speculators will face even less competition.

“This would be an unintended consequence of the RBNZ’s actions... The government must fix this looming loophole, and address the impact of foreign speculators who are simply taking profits where they can get them.”

However, contrary to a growing public perception, it is not known whether or not non-resident buyers are actually a problem.

NZPIF executive officer Andrew King said there simply isn't enough information on whether overseas property buyers are a problem or not.

“The little evidence we do have suggests that they aren't.”

In fact, it is that lack of solid evidence which is itself the problem.

In his policy presentation, Reserve Bank Governor Graeme Wheeler said there was currently no reliable data on how many non-resident buyers are active in the market.

He said existing data shows that about 20% of buyers are cash buyers, although that number would include New Zealander residents too.

Another set of data shows that the number of new buyers who are not first home buyers is in the 8-10% range.

“So non-resident buyers could be round 10% of the market. We don’t think the figure would be significantly greater than that. But it would be helpful if the information was collected.”

There is definitely a need for closer scrutiny and better understanding of overseas-based property buyers, Auckland Property Investors Association president Andrew Bruce said.

While anecdotal accounts about overseas buyers abound, there is no way of knowing whether they are true or exaggerated, or what the actual numbers are, he continued.

“It has to be a two-step process starting with a better understanding of exactly how many foreign buyers there are and to what extent they impact our housing market as well as the economy as whole.

“There can be no credibility to any level of debate on this matter until we fully understand what we are dealing with. Once we have that information, we can then look at ways to level the playing field. Or indeed if the playing field needs to be levelled at all.”

Bruce said there must be ways to collect the information – for example, some sort of question on the purchasing forms used by real estate agents.

Prominent Auckland property investor David Whitburn doesn’t believe overseas buyers are a massive issue. 

But he said they are a growing portion of buyers in Auckland because they view the city as being world class and, as smart business people, wish to participate in the growth and the continued long-term success of Auckland.

In his view, the introduction of restrictions for overseas buyers would not be the best way to deal with things. 

“A stamp duty of say 2-4% could be a better idea, with the proceeds directed into infrastructure for the region the property was purchased in.”

Whitburn also pointed to the Australian policy of only allowing overseas buyers to purchase new build stock. 

“This means old housing stock is left for permanent residents and citizens, with new builds and purchases off the plans able to be bought by foreign buyers. This could help address the supply crisis by re-directing capital into new stock.”