Case for ban­ning over­seas house in­vestors

Nelson Mail - - COMMENT&OPINION -

New Zealand’s house prices are the most over­priced in the de­vel­oped world, The Econ­o­mist says.

New Zealand prices have grown the most, in real terms, since 1980.

They are the high­est when set against rents or against av­er­age in­comes, re­cently top­ping Canada and Aus­tralia on these counts.

The con­se­quences of this surge are pro­found, slow-burn­ing, and cor­ro­sive in a coun­try that has long prided it­self on a mea­sure of egal­i­tar­i­an­ism.

There are sev­eral im­por­tant causes of the hous­ing cri­sis, in­clud­ing un­usu­ally low in­ter­est rates, a fail­ure to tax prop­erty in­vest­ment fairly, over­bear­ing lo­cal body reg­u­la­tions and mar­ket fail­ure.

But there is also one more, the pur­chase of houses by peo­ple with no other con­nec­tion to this coun­try.

The case is strong for a ban on such buy­ing. When all the other prob­lems are com­bin­ing to leave sup­ply badly lag­ging de­mand, then there can be no good rea­son to al­low over­seas buy­ers to park their money in New Zealand houses.

Strik­ingly, this is the fac­tor that The Econ­o­mist, usu­ally an un­flag­ging cham­pion of for­eign in­vest­ment, ze­roes in on. ‘‘A grow­ing horde of rich for­eign­ers see New Zealand as a safe haven,’’ it says. ‘‘In 2016 over­seas in­vestors bought just 3 per cent of all prop­er­ties.

But their pur­chases were con­cen­trated at the ex­pen­sive end of the mar­ket …[which] helped push prices in the coun­try up by 13 per cent over the past year.’’ Even if the 3 per cent fig­ure were cor­rect, it would be a more ma­te­rial num­ber than it might seem.

Small changes in de­mand at the mar­gin can raise prices sig­nif­i­cantly. What is the ex­cuse for al­low­ing even a frac­tion of buy­ers to keep mak­ing a buck from New Zealand houses from afar?

Of course, to ask this will pro­voke howls about xeno­pho­bia from cer­tain cos­mopoli­tan politi­cians. But it is not racist for coun­tries to pri­ori­tise their own cit­i­zens and res­i­dents.

A re­stric­tion ap­plied widely to non-New Zealan­ders is no slur on any race. It is what the econ­o­mist Larry Sum­mers calls ‘‘re­spon­si­ble na­tion­al­ism’’, and it’s right for the mo­ment.

Nearly ev­ery­one can see the prob­lem, from the teach­ers who can’t af­ford a house in Auck­land, to the em­ploy­ers call­ing for a huge pub­lic house-build­ing pro­gramme, and per­haps even to the writer Eleanor Cat­ton, whose next novel, an­nounced last week, cen­tres on – what else? – bil­lion­aires buy­ing bolt­holes in pic­turesque New Zealand.

Why can’t the Gov­ern­ment see it?

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