Rant time: House sales to non-residents

By Matt Nolan 11/07/2013

The rant isn’t here – it is over on interest.co.nz.

I’d note that I’m relatively sensitive about the idea of prejudice and how social norms form against “groups”.  Policy that is formed in this sense has a massive institutional weakness – namely that it relies on using an “indirect signal” to try to transfer, a signal that can be misinterpreted.  As a result, when defending against those sorts of policies I become a bit more willing to show my hand and express directly how uncomfortable it makes me.

Essentially I make three arguments in the piece:

  1. A ‘bubble’ from foreign owners is a transfer to NZers – no problem!
  2. A medium term affordability issue does not stem from foreign owners – it has to stem from supply issues!
  3. Any normative/distributional concerns about the transfer of resource from current NZ owners to current (and future) NZ buyers is legitimate – but better to deal with it through the tax and benefit system and intergenerational equity, rather than stopping trade and banning non-residents from purchasing!

A broader point was that, if we want to use a “solution” we should actually have a problem in mind first … just making a “solution” and hunting for a problem is not a good form of analysis.  Although it is one we are all guilty of at times!

Update:  I’ve been told that a lot of people are complaining about being called xenophobic.  Well that is nice for them, the action of pushing for house sales to foreigners being banned is still xenophobic – these people have a fear of someone else trading with someone else who just doesn’t have a NZ passport.  They are willing to hurt both foreigners and the people who would trade with them, simply to allay this fear.  I’m not going to stop saying it just because it offends your sensibilities – I think the entire idea of these bans is morally wrong, why would I go back on this just because it makes you feel funny.

Banning non-residents from buying houses isn’t “brave policy to save the poor in New Zealand”.  It is weak and pathetic policy for those who are uninterested in the real poor and would prefer to pretend they are doing something by limiting people’s rights due to their nationality.  I can only rationalise the fact people are willing to try this by stating that they don’t really understand what they are saying – hence why I stated in the article that we need to define what the problem is and then we can show that for every “problem” there is a better “solution”.

If you find it difficult to actually think about these trade-offs, and to accept your inherent bias against other human beings, then STFU about policy.  If you want to actually discuss trade-offs and stay away from arbitrarily attacking non-New Zealanders, then I’m more than happy to chat and to investigate the data and research that is out there on these especially complicated issues.

Note I’m not even rallying against capital controls here, I realise in specific extreme situations they may have a place (although just doing it in housing for foreign buyers doesn’t really make sense) – but the debate out there isn’t about this, it is about whether non-residents can buy property without really discussing why (usually first home buyers blah blah blah).  And is often filled with commentary about “Asian buyers”.  A level of tacit racism that really needs to GTFO.

Oww, and if you want to know what kind of “vested interest group” I am, I own zero properties – I rent.  I live in Wellington.  I am 29.  I am male and white.  Enjoy.  I am in the group who is being “ripped off” by the fact I can’t just buy a cheap house … I’ve just learnt to actually think about others in the marketplace before I rant incoherently ;)

0 Responses to “Rant time: House sales to non-residents”

  • I’m glad that you accept the problems caused by the unequal distribution of these wealth gains and the massive advantage that this inequality gives those who were lucky enough to be born at a time when houses were more affordable. It is well known that wealth inequality is positively correlated to crime.

    The purpose of the New Zealand government, which is entirely funded by the taxpayers of New Zealand, should surely be to protect and improve the lives of New Zealanders i.e. Permanent Residents and Citizens. It boggles my mind that anyone would say the government should significantly compromise the lives of those people because of some “moral” obligation to wealthy citizens of another country or some fear of being “xenophobic”. Perhaps we should only allow citizens of other countries buy our land if their own countries don’t have “xenophobic” policies that prevent us from buying theirs?

    The people who are struggling with house prices are families on average incomes with children to support. Supporting four people and paying a mortgage on a single income may be a difficult scenario for anyone who is not in that situation to envisage – but please sit down with a piece of paper and do some real calculations to see how that would work for you on your income. I know you address this, but I’m not really sure that you really understand how difficult this is now.

    ‘An obsession with being an “owner”’ is well justified, not some kiwi quirk or mind-set that needs to be ‘corrected’ – try living on a New Zealand pension while still paying rent.

    • 1. Inequality and crime… it might be well-known, I’ve not seen good evidence on it though.
      2. It isn’t the fear of being called “xenophobic” that should cause us to consider that people outside of New Zealand are humans equally deserving of respect, it is rather that they are humans who are equally deserving of respect.
      3. If other countries want to jump off a bridge, would you jump off a bridge too?
      4. Agree that house prices are high, and agree that there are advantages to ownership over renting. The fundamental underlying cause of it is supply though, not demand from foreigners, no matter how much fun it is to blame foreigners when the fault lies entirely with local goverments’ insistence on making it too hard to expand supply. Demand will make things jump around in the short term. But if supply can adjust, then a hike in demand from foreigners just stimulates more building. Regulations making it too hard to increase density in existing parts of the city and also making it too hard to expand on the outskirts of town are what drive the long-term run-up in housing costs.

  • Hola Bart,

    Eric has covered off a number of things – but there is an overarching point here.

    In your mind you seem to have a model where, for some reason, foreign people buying property creates the poverty/lack of income being faced by some. However, the link really isn’t there.

    If we actually did care about these issues, we would deal with them directly – instead of arbitrarily saying “lets stop people without a NZ passport being able to buy property.

    The interesting thing is, in the entire article I never actually included the value of people from overseas – even though I believe we shouldn’t ignore them, my argument never ever included them in its “implicit calculation”. Banning foreign ownership is an example of doing something that hurts NZers in order to pretend we are doing something to help – this is a touch perverse.

    I also find your example of renting while on superannuation interesting. What exactly was this individual doing their whole lives? Were they one of the people who lost all their money when the finance companies collapse. Trust me, I do feel a significant amount of empathy about this – but banning foreigners from buying property has absolutely nothing to do with this hardship and misfortune. Surely our interest should be on understanding and “solving” any real issues?