But what affect are the Chinese actually having on house prices?

By Paul Walker 14/07/2015

With all the xenophobic rubbish we are getting from Labour and bizarre calls for bans on foreign ownership of housing by the likes of the BNZ’s Tony Alexander I find myself asking, But what is the actual effect of foreign buyers on the prices of homes?

I mean if I go to a house auction and bid $X for the house then all a foreign buyer has to do to get the house instead of me is bid $X+1. So the actual effect on the sale price of the house of having a foreign buyer in the market could be very small. But everyone seems to be assuming that the effect of foreign buyers is huge, But is it? What do we actually know about the effect of foreign buyers on house prices? What studies have looked at this?

I’m guessing the answer to the question is we know nothing and thus we get the sort of mindless, ill-informed scaremongering we see from Labour.

From what studies I have seen about housing problems, in particular Auckland’s housing problems, its the lack of supply that is the issue not demand. The likes of Labour and Alexander seem to want to fix a supply-side problem by affecting the demand-side. Well, that just won’t work. To lower house prices we simply need more homes. No amount of demand-side tinkering will  increase the supply of housing.