
New Zealand Passes Law to Crack Down on Foreign Home Buyers - uptown
https://www.bloomberg.com/news/articles/2018-08-14/new-zealand-poised-to-impose-crackdown-on-foreign-home-buyers
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Tiktaalik
Seems reasonable to me. Housing should be for housing people, not a
speculative financial investment.

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.

~~~
briandear
If they own a house, they are paying taxes, so they do have significant skin
in the game. They pay property taxes despite not using the local schools or
most other city services.

As far as not allowing housing as a speculative financial investment, there
are some significant unintended consequences there.

~~~
Tiktaalik
The problem with absenteeism is that while taxes are still being paid to
maintain city services, the city doesn't function correctly, because there's
weak street life.

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...](https://www.theglobeandmail.com/real-estate/at-vancouvers-cold-harbour-
a-neighbourhood-hollows-out/article11713598/)

~~~
toby
Vancouver has a vacancy tax, which strikes me as a really good idea to avoid
these problems. Does anyone know why these aren't more popular?

~~~
ggcdn
I agree with you that it seems like a good idea. However, the vacancy tax is
still in its infancy, so we've yet to fully understand its effectiveness or
side-effects. A big issue around the housing discussion in Vancouver is the
lack of data and amount of misinformation being injected into the discussion.

~~~
peterburkimsher
The Netherlands has a system where vacant properties may be occupied by
squatters after they've been empty for a year. There's an active squatting
scene in Amsterdam, particularly OT301 (an abandoned cinema, now an arts
centre).

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kartan
1\. It is banning non-residents. You can be a national from any other country
and still buy a house if you live there.

2\. Watered down by interest groups: [https://www.reuters.com/article/us-
newzealand-economy-housin...](https://www.reuters.com/article/us-newzealand-
economy-housing/new-zealand-softens-ban-on-foreigners-home-ownership-in-
amended-bill-idUSKBN1JF01F)

~~~
Max_aaa
Have they removed the "Trust" loophole?

This is where you setup a local trust, and purchase the property through that
trust (and not a non-resident).

People can also still purchase properties through local proxies.

~~~
vorg
Proxy purchases would be common via the informal financing system in places
like Wenzhou. It's hard to imagine how the NZ government could possibly
enforce such proxy purchases, especially since Australians and Singaporeans
are exempt from the foreign buyer restrictions. Australia, New Zealand, and
Singapore all have high immigration from China, and such immigrants can easily
act as the proxies of anyone with an informal business relationship with a
lender in Zhejiang.

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breitling
Hope the Canadian government learns from this. We desperately need it. (ya, I
know I know there will be trickle down impact of so much foreign money pulling
out, but average home price of $1.36MM is unbelievable for the local salaries)

~~~
twothamendment
If they do, maybe the USA will learn from Canada. In my area the Canadians are
the ones buying stuff up. Other than property taxes, their contribution is to
all show up on the same weekend and empty the grocery store shelves - and
driving up prices.

~~~
craftyguy
> maybe the USA will learn from Canada

Has the US ever learned anything from Canada?

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wepple
To add some context: NZ regularly rates in the top 10 least affordable cities
to buy a house. The last stat I saw was that median house prices were 9.7x
median salary.

That’s absurd for a relatively small city of 1.4m people.

It has further negative effects: everyone gets into property as their only
real path to financial freedom, with 95% of new loans using family financial
assistance. It’s stifling innovation and business that could be providing
employment and international business.

~~~
sjg007
NZ is a country.. not a city.

~~~
wepple
If you dig deep, you may be able to uncover the intention of that sentence. NZ
has some of the least affordable property in the world. A tiny nation of 4m
with minimal job prospects should never be able to achieve that title.

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lawnchair_larry
Good move. More cities need to adopt this. There is a flood of foreign capital
into major western cities that is hurting those economies. And a lot of denial
that this is happening.

~~~
isostatic
Local owns house they bought 20 years ago for $50k

Local sells to foreign buyer for $500k

Local has lots of money

~~~
sametmax
Local kids can't buy house and is renting forever at unreasonable price. The
world is not just about giving everyone the opportunity to become rich. Just
making a decent living for most is a nice objective.

~~~
isostatic
Why would they pay an unreasonable price? It's clearly reasonable for the
person paying the rent.

~~~
shady-lady
> It's clearly reasonable for the person paying the rent

How so? They may not have an option to not pay it(as we're seeing happen in
cities all over the world)

Definition of reasonable[[https://www.merriam-
webster.com/dictionary/reasonable](https://www.merriam-
webster.com/dictionary/reasonable)]

1 a : being in accordance with reason - a reasonable theory

b : not extreme or excessive - reasonable requests

c : moderate, fair - a reasonable chance a reasonable price

d : inexpensive

~~~
isostatic
Unless you live in a tiny country like singapore, you have a choice where to
live.

Economic theory says that if the price is unreasonable, people won't pay it.

~~~
spronkey
You have to live _somewhere_ though, and in NZ cities rents are high enough
that they prevent many renters from saving any money at all.

So, no, supply and demand theory kinda doesn't stack up when it comes to
housing.

~~~
isostatic
2 bed house, $310 a week, that's under half the minimum wage. That doesn't
seem too extreme to me. That's for a two bed remember, so if you are a couple
on median wage, you'll be earning $1800 a week pre tax, about $1500/week take
home.

[https://www.trademe.co.nz/property/residential-property-
to-r...](https://www.trademe.co.nz/property/residential-property-to-
rent/auction-1737239163.htm)

Should be able to save $450 a week out of that. After 3 years that's $70k, a
20% deposit on
[https://www.realestate.co.nz/3341361](https://www.realestate.co.nz/3341361),
with a mortgage then costing about $330 a week.

The problem people who complain about house prices seem to have is that they
want to live in very specific and desirable locations (Certain parts of
Auckland for instance). There is a high demand for these locations, therefore
price is high. But clearly the price is reasonable as people can afford to
live there, otherwise they wouldn't pay the rent/mortgage.

When people stop paying high prices for rent in aukland, and instead live
elsewhere, then companies in Aukland will have to either

1) Relocate to cheaper locations to attract staff

2) Pay staff more so staff can live in the area

It's the same the world over. You can buy a house in the UK half an hour out
of two major cities for £125k. That's a £7k deposit (£44/week or £190/month
for 3 years) and £550 a month after that.

If you can afford £600 a month for housing costs (£400 rent plus £200
deposit), you can rent for 3 years, then buy, within 35 minutes of Leeds and
Manchester. Minimum wage is about £1200 a month after tax.

------
bovermyer
Housing was already expensive in 2000, well before the current "foreign
invasion."

Perhaps they should try reducing the red tape required to build new homes.

~~~
mc32
They are not placing all blame on foreign soeculative real estate investors,
but are assigning some blame, which i think is fair.

Many countries require some form of either citizenship or residence in order
to qualify as a real estate buyer.

~~~
bovermyer
I didn't mean to suggest that foreign speculation was without blame.

I just wanted to make it clear that that isn't the only, or even biggest,
culprit in the current housing crisis.

~~~
thatjsguy
How would you prevent new housing stock from being similarly bought up?

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ebikelaw
Western cities have only themselves to blame for turning housing into an
appreciating asset. Housing is not supposed to appreciate and if it does not
then nobody would speculate in it. In cities where they just build housing,
like Vienna (typical rent ~1000 Euros/mo), they don’t have a need of these
kinds of laws.

~~~
munificent
I don't think it's fair to blame cities for what is a nationwide problem. The
entire economy is shifting from farming and production to a service economy.
The former provided incentives for people to be widely distributed across a
number of small cities and town. The latter does not, so there is a mass
migration to cities. It's happening faster than the infrastructure, zoning,
and physical layout of the cities can adapt to accommodate.

This is a hard problem, and isn't made easier by moralizing, which seems to
happen heavily on both sides.

Personally, in the US, I think we'd be better off trying to make our mid-sized
cities more desirable than turning our handful of large cities into giant
skyscraper-filled concrete grids. We have _plenty_ of space for everyone in
the US. The problem is people all want to live in an increasingly small
fraction of it. Increasing the density of that tiny fraction while the rest of
the country empties out doesn't seem great to me.

~~~
stale2002
I mean, what's wrong with SOME cities being giant skyscraper filled grids?

Personally I would love to live in that kind of city. And apparently this is
also true for a lot of other people.

The low density people have 99% of the world to live in. Why can't us high
density people get the 1% that WE want?

Let's just let everyone live how they want. There is more than space for both
skyscrapers and suburbs.

~~~
munificent
_> I mean, what's wrong with SOME cities being giant skyscraper filled grids?_

Nothing at all, and I get that some people dig that.

 _> Why can't us high density people get the 1% that WE want?_

You can. What I disagree with is the moralizing tone that people take when
others don't want their existing city _turned into_ that.

 _> There is more than space for both skyscrapers and suburbs._

I agree, but this discussion usually takes place when people argue that the
existing single-family homes should be torn down and replaced with greater
density.

I'm probably overly sensitive because I live in Seattle in a single-family
home. But it gets really tiring always being made to feel like a bad person
for liking the way I currently live.

~~~
ebikelaw
> people argue that the existing single-family homes should be torn down and
> replaced with greater density.

Literally nobody argues this. Pure strawman. What people argue is that
property owners should be _permitted_ to build _slightly_ larger buildings on
_their_ property. The law today for most land in most American cities says
that property owners are forbidden from building anything but detached single-
family dwellings. To remove this prohibition and to allow property owners to
develop their own land, if they want that, is not the same as bulldozing the
existing neighborhood.

------
John_KZ
Good. Every country needs such laws. From NZ to London to Spain to Iceland.

If you live in a place and earn your income there you should be able to buy or
rent residential property. Otherwise you have no business exploiting the
inflexibility of the market to adjust the available housing. Rent is becoming
an indirect tax to the rich in many major metropolitan areas around the world.
And it's massive, often up to 50% of the median wage.

------
newshorts
I wish my government cared about its citizens this much...

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RestlessMind
I hope SFBA does the same - not against foreigners per se, but against non-
residents. Maybe a few ballot initiatives would help?

~~~
jonahhorowitz
Corporations are people. It would probably be trivial to get around in the US.

~~~
woolvalley
Corporations are also owned by people. You get around this by making the law
look at the entire ownership graph and seeing the total percentages from that.

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onetimemanytime
Logical. I wonder if it's possible to designate certain parts as investment
property...leasehold for 99 years and sell to the rich and tax them more. You
want it? Fine, it will cost more both in price and maintenance. Buying homes
also is good for the econ...from the builder to the security company later.

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mabbo
Sounds like a good time to start a NZ real estate company that takes
investments from foreign buyers, buys the houses they tell me to buy, and then
rents it out to them when they visit at very low prices.

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antisthenes
Sounds like pulling up the ladder after all the people who bought the houses
already climbed it.

What about all the people who have already purchased and are just holding onto
an empty house for speculative reasons?

~~~
pc86
Are you suggesting the government steal their property?

~~~
goodJobWalrus
No, but it could implement hefty property tax on properties owned by non-
residents.

~~~
dpiers
And then those hefty taxes will be passed on in the form of rent. The non-
resident never ends up on the hook.

~~~
indemnity
I don’t understand when people believe this - as an owner of an investment
property in Auckland, NZ, I almost never can just pass on increases to my
tenants, unless I want long stretches of no tenants, even with the shortage as
it stands.

The market dictates what I can charge.

And if I have good tenants I’d rather keep them than immediately try to
recover costs.

~~~
saltcured
You might buffer changes in costs and provide some stability to the tenants
just as they can provide some to you by extending a lease rather than
vacating. But, you do need to adjust and pass on the costs, or fail as an
investor. In a significant way, the service in a healthy landlord-tenant
transaction is for the landlord to accept the liquidity hit and risk of
property ownership and redistribute it along with other costs in the form of
rent.

Where people may get confused is in ignoring the land appreciation assumptions
built into a speculative investment. They don't always recognize that a
capital-rich investor might be perfectly happy to buy a property and sit on it
for decades without thinking of it as a revenue source. They can only imagine
a more leveraged landlord where the property is purchased with a minimal down
payment, the rents have to cover all mortgage, tax, and other operating bills,
and the landlord may only have a limited amount of emergency capital.

~~~
pc86
The second point here is the most important. I know a handful of real estate
investors and one that is far away the most successful. He buys everything in
cash. He has a contracting team on payroll that fixes whatever needs fixing so
he's not immediately outlaying any additional funds to fix up a property,
other than the opportunity cost of having those employees busy. He hasn't
mortgaged a property in probably half a decade or more.

If he thinks a property will appreciate and make money, he will absolutely buy
it and let it just sit on his books for a decade while the RE value increases
and he waits for an opportune time to develop or rehab it.

