Labour’s foreigner ban: lowering the tone, not house prices

Shearer Nelson Mail

From an article on Stuff yesterday:

Labour leader David Shearer has thrown down a challenge to his political opponents to say why his policy on foreign house buyers is bad for New Zealanders.

Well we’re clearly not his political opponents, but we’re quite interested in real estate so what the heck – challenge accepted.

Labour’s housing plan is this: ban foreigners from buying any existing houses, flats or apartments in New Zealand.

In short, it’s a rubbish policy tackling a non-existent issue. One could even say it’s dog whistle politics. If I did say that, I’d be one of many who already have.

Australians are excluded from the policy, which leaves one ethnic group, already with a large target on their back, especially highlighted.

It’s no secret that there’s an undercurrent of concern about “foreigners” buying up big in Auckland. It’s no surprise that when this is discussed it’s the most ‘obvious looking’ foreigners that are singled out.

Racist 1

BNZ economist Tony Alexander once commented that social media was “ablaze” with people complaining about Chinese buyers dominating the real estate market. In March he sought to find out whether these concerns were justified.

According to the BNZ-REINZ Survey of real estate agents just 9% of sales were to buyers from offshore. In comparison, 24% were first home buyers, and 19% investors (both foreign and domestic).

Of this 9%, 40% of them are planning to make New Zealand their home. Apparently residents will also be exempt under Labour’s rules. Whether people will need to bring their passports and visas to open homes is yet to be decided.

Racist comment 1Leaving that to one side, these figures suggest that, as of March, 5.4% of sales are made to overseas investors. Of these, 1.3% are made to Australians – so the ban would only have applied to a maximum 4.3% of sales.

The Survey’s May figures suggest an even lower number: just 3.6% of overseas buyers plan to remain offshore. With 0.4% Australian, the target drops to 3.2%.

Labour are relying on very different and shakier figures: the IRD has on their books 11,000 ‘overseas investors’ who own property here. As Rob Hosking wrote in the National Business Review (subscription only), most of these are expat New Zealanders who are renting out their properties while overseas. The figure also includes commercial properties.

A ban that targets so few properties will have virtually no effect on house prices, as many commentators have pointed out.

On top of all that, there is also serious talk that the ban would be in violation of our free trade agreement with China. It makes one wonder how much research has gone into the policy.

Other nationalist political parties, also with very little to go on, have predictably come out in support. New Zealand First’s Winston Peters ran his analytical mind over the policy and proclaimed:

“When I see Barfoot and Thompson’s top 25 agents and 19 are Asian and they’re not selling to the New Zealand population, they’re selling to foreign buyers, then we’ve got something seriously wrong.”

What wonderfully scientific evidence.

Racist 4

Here’s a fact that can be backed up: high house prices at the moment are caused by a lack of supply. It’s nothing to do with demand at all. Serious about lowering house prices? Make it easier, and cheaper, to build new houses. Prices won’t drop because a few foreign buyers aren’t allowed in.

One suspects that Labour, deep down, knows this. So what’s the point? It’s hard to conclude that it’s anything other than a way to get the attention of a particular type of person.

Racist 5 copy

You’ve got everyone’s attention. Now let’s see some constructive policy.

Portrait photography: a look behind the curtain

You’re in a mall with a couple of hours to kill. What do you do?

Faced with this scenario one sunny Hamilton day, I spied an exhibition by Seddon Portrait House which included a competition for a free portrait. That took care of a few minutes and I thus promptly forgot about it. Until a couple of weeks later when, checking my voicemail, I discovered I had actually won.

I had just moved to Auckland but, considering this was my biggest win since that dinner at Cobb & Co with the Nelson Giants, I returned to the Tron to find out how this portrait process worked.

 Family portrait

A few days before my appointment I received an email from SPH with some instructions.

“It’s all about you!” it began. “When you arrive at our studio, our Photographer will further discuss your design ideas and any unique preferences that you have for your photo shoot. One of our experienced photographers will create a series of beautiful images for you that captures you and your family’s true personalities.”

I could choose to have my photos taken inside or outside in the urban or green surroundings. SPH also do commercial, family and glamour shoots (check out their galleries for more on their capabilities). It took me until Shooting Day to decide what to do; with it being a little chilly I decided to keep it indoorsy.

With all the whiteness and brightness, the studio could have been mistaken for heaven if not for the fact I was there. In there with me was Rodrigo, the lucky photographer tasked with making me look beautiful.

Before moving into family and commercial portrait photography six years ago Rodrigo was a photojournalist in his native Brazil. This job entailed one exciting assignment after another; he even got to shoot the Brazilian president – albeit not in the sense many protestors might have liked.

It may not seem quite as thrilling but the portrait is an art form with a tonne of history behind it. Many of the techniques used by Rodrigo can be traced back thousands of years.

Take the ancient Egyptians. They understood how light could be used in portrait paintings to create that extra dimension – bringing an added sense of authenticity to the subject. Rodrigo agrees, saying the use of light was “important to bring out contours in your face”.

Leonardo da Vinci helped start the ‘sfumato’ craze, which required overlaying varnish and paint to soften colour transitions in facial tones. Today’s photographers, Rodrigo included, use softboxes to achieve the same effect. Rodrigo had me hold another reflector in several close up shots to add a touch of light to the other side of my face. A dark, umbrella-shaped reflector replaced this light with some contrast when we turned the white studio black for the final shots.

That saying “never work with children or animals” applies to photography about as well as it does to creches. You have no choice in this profession. Photographing children can be “the most frustrating or the most rewarding” experience says Rodrigo – but he’s quick to add “almost always the latter”. He is well equipped for those little people with even smaller attention spans: the studio has plenty of toys to keep them occupied and smiling for the camera.

A crucial part of the photographer’s job is to help the subject, no matter their age, relax and get used to the camera. Being a terrible photo subject I entered the studio with a fair few nerves. I was too old for the children’s toys, alas, so Rodrigo had to rely on his natural charm. Luckily he has this in spades, so it didn’t take long for me to feel able to pose for a photo without feeling like a total idiot. No mean feat.

Rodrigo snaps off about 70 photos in a shoot, “sometimes more, sometimes less”. In my case we shot about this number in a variety of positions – standing, sitting, leaning, smiling, and pondering.

In this instance I was pondering what would happen if, even after 70 photos, there’s nothing in there worth keeping. Never been a problem for him. In every shoot, Rodrigo said, there’s always at least one shot that stands out. I was to return that afternoon for the ‘viewing’ to see if he was right.

Couples portrait

Fast forward a few hours and there I was in the viewing room; essentially a comfy couch in front of a very large projector screen.

At her table, with slide show trigger finger at the ready, was Rebecca, one of SPH’s owners. Her task was to show me the 30 best photos, as selected by Rodrigo, and gauge my reaction.

To my surprise, considering what a harsh self-critic I am, there were a dozen photos I could be more than happy showing to others. From there, Rebecca helps you narrow it down to the very best photos, by getting you to choose between similar shots, until there’s a handful left.

How many photos you keep depends on whether you opt for a single portrait, a series, or an album. Once you’re happy with your selection the portrait designer will assist you with framing and matt-board selection.

From there it’s back to the photographer for some post-production work before being sent to Melbourne for hand enhancement and printing. Once back at the studio it goes to SPH’s very own Guild Commended Framer, Stephen Oldfield, for him to complete the framing.

You can easily tell from a conversation with Rebecca just how passionate she is about creating, as she put it, “heirlooms for families”. All materials used are the same you’d find in museums and archives. No shortcuts are taken; the whole process takes up to eight weeks. When creating a memory that will “not look good for five years, but fifty years”, the long way is the right path to take.

But what if, in this increasingly digital world, you’re looking for a photo for a business card or your Facebook profile? Not a problem – they can supply those in hi-res for you too.

Framing a blog is not easy, so I bought a digital version of my favourite photo.

Mike Poppins

Portraits in the past have been made, at varying times, either to record history or to reflect people’s status. Today’s portrait photography borrows from both camps. Through the use of lights, reflectors, the environment, and creative ingenuity, it can represent you any way you like – but always with your best foot forward.

A special thanks to everyone at Seddon Portrait House for their help.

Video: an introduction to Open2view

Thinking of selling your house and unsure how to go about ensuring your listing looks its very best? We made a wee video to explain what exactly it is we do to showcase your home at its very best.

We’d love to know what you think of our effort. And we’ll send a canister of M&Ms to the first Kiwi who recognises the narrator!

New lending rules will hurt first home buyers

Reserve Bank building

That nightmare for first time homebuyers we’ve talked about? Seems it’s about to become very real.

The Reserve Bank has given its strongest hint yet that restrictions on loan to value ratios are imminent. Said Stuff this afternoon:

A banking source said banks were told on Friday to prepare for restrictions which will impose a 12 per cent ”speed limit” on their total new lending going on low equity mortgages.

That will effectively halve the amount of high loan-to-value (LVR) lending that the banks are currently doing, making it much harder to get a mortgage with a deposit of less than 20 per cent. [Emphasis added]

According to Bernard Hickey, of the $9.2 billion that was lent out in mortgages in the year to May, about 30% of this ($2.76 billion) was in LVR categories of 80% or more. The planned new rules would mean no more than 12% of new lending could be to this category.

The result? A big drop in new lending, especially to first home buyers who are, generally, the ones who have smaller deposits.

There was some talk that first timers could be exempted; at least that was Prime Minister John Key’s hope. Ultimately that decision is not up to him or any other politician; the Reserve Bank Governor, once given the tools by government, gets to decide if, how and when they are to be used. Graeme Wheeler is no fan of loopholes.

End result: it’s going to suddenly get a lot harder for first home buyers – consisting mostly of Generation Y folk – to get on the property ladder.

We have blogged several times about how this isn’t the most fair, or effective way to cool the heated real estate market – and the effect on first home buyers will be worse than we expected. We hate to sound like broken records, but if more proof is needed about the low success rate of LVR restrictions here’s some from Israel, courtesy of BNZ economist Tony Alexander and the Wall Street Journal Asia:

Last October, it (The Bank of Israel) set the minimum down-payment at 30% for most home buyers, and at 50% for investment properties…Israeli home prices rose 3.2% in the four months ended in March…The lending restrictions can’t overcome the forces of supply and demand: Israel’s population is growing at a much faster rate than new homes are being built, so home prices just keep climbing…  “Evidently the measures we have imposed have not been strong enough to reduce the demand for housing sufficiently to stop prices rising,” the former central banker Mr Fischer concedes.

You cannot resolve a supply issue by attacking demand.

An official announcement is expected in the next few days, and the speed limit could come into effect with as little as a couple weeks notice. This would be to prevent an influx of new home loans before the changes take effect.

What do you think – are the new lending rules fair, or foul? Have your say below or on Facebook.

June property report: prices flatten, sellers doze, and Hone parties

Open2view ID293918 - River Rd 922 The BlockThis house belongs to Richard and Sarah, contestants on the 2012 series of The Block NZ. They put what they learned to excellent use, and if you get along to the auction on 10 July at 12.30pm it could all be yours.

We mentioned last month that winter is often a time of hibernation for real estate. Judging by the latest data, sellers have taken their temazepam, drunk their chamomile tea and headed off to Slumberland.

 

Sellers don’t seem to know it’s a sellers’ market

Their NZ Property Report from Realestate.co.nz tells us the “inventory of unsold properties in New Zealand has fallen to the lowest point in six years, reporting just 24.9 weeks nationwide.” This was driven by the lowest number of new listings in a June for seven years (9082).

Despite this, the mean asking price fell slightly to $450,178 – one percent down on May, but still 5.7% higher than this time last year. Auckland dropped 1.3% to $623,471.

Some commentators say the price increases is filtering down to regions outside Auckland and Christchurch. Does this report support this? Let’s have a look-see:

Regional-map-of-asking-price-NZ-Property-Report-Jun-2013

When you have five regions recording drops of 5+ percent then it’s hard to argue this convincingly.

Even more telling, figures released yesterday by the Real Estate Institute of New Zealand show that, of the $22,000 increase in the national median price they’ve recorded over the past year, 99.6% of that comes from Auckland and Canterbury. Price rises in other regions, they say, “have been minimal, with the median price for the rest of New Zealand $2300 lower than November 2007.”

Meanwhile, Barfoot & Thompson have recently reported some crazy stats. For the first time in 11 years their end of month listings have gone below 3000 properties. It is also the first time in that timeframe their listings for the month (1189) has come this close to their sales (1059).

Are they just becoming less popular? No, it’s just that potential sellers are becoming even more nervous than we’ve seen since we started these reports last June.

 

One theory why supply is in short, er, supply

Tony Alexander, Chief Economist for the Bank of New Zealand, writes a lot worth reading. The fact he looks a lot like Larry from Perfect Strangers is just a bonus. Check out his website – we don’t always agree with what he says but he always provides an interesting and insightful read.

Lately he has had some good theories on why supply isn’t picking up. For instance: with interest rates so low, fewer people need to sell their old home to help finance their new one. More buyers, therefore, are keeping their old homes as an investment.

Makes good economic sense: rentals are sound investments, and if you can buy without selling, and you don’t expect prices to drop, it’s a good time to get in.

 

It’s Survey Time

Tony also runs the monthly BNZ Confidence Survey, which reported back with its June figures last week. The relevant-to-us figures show 36% are happy with house prices rising, compared to 29% unhappy and 35% indifferent. The happy figure is 7% higher than in May.

The significance? As Tony explains, “this question now in order to get an understanding as to whether societal attitudes toward house price rises are changing in some way which might give the government greater, or lesser, scope for more interventionist policies aimed at influencing house prices and mitigating the deleterious effects on certain groups. In a nutshell, do we really care?”

The short answer is we do, but perhaps not as much as first thought. Another, quite simple, explanation is that those who own houses won’t mind a jot that their assets are increasing in value. Those who don’t own and want to are, of course, a different story altogether.

 

Hone’s housing policy: Man(n)a from heaven

Meanwhile, during the recent Ikaroa-Rawhiti by election, Mana Party leader Hone Harawira announced their housing policy. This consists of 10,000 new state houses a year – with 500 immediately in Ikaroa-Rawhiti, conveniently – and special low interest rates for Maori to buy a house, no deposit down.

Off the top of our collective head we can see a few problems. House prices have been rising, once again, because the supply is not there. If you suddenly increase the number of buyers in the real estate market, sellers will simply put the price up out of their reach. So that won’t help one little bit.

Or perhaps it’s doing them a favour. Helping low-income people – assuming Mana would assess eligibility by income as well as race – to buy a house carries good intentions – but not everyone can pay off a mortgage at the best of times. That’s why we have state houses and private rentals, and a good thing too.

At a time when the Reserve Bank are treating mortgages with a loan to value ratio of 80+ percent as ‘high risk’, we’d hate to think how badly they’d freak if houses were being bought with zero deposit by people with similar savings.

We emailed Hone Harawira’s office to ask if they had costed the policy, if they were concerned about pushing house prices up, and whether their proposed lower interest rates would rise in line with others’, but alas received no reply.

 

What do you reckon?

Will sellers finally start selling? Will rising house prices keep rising? And is Hone right, or just too far left? Share your thoughts below or over on our Facebook page. 

KiwiSaver turns six – and first home buyers are partying

KiwiSaver logo

Happy birthday, KiwiSaver!

Not since a young Mary-Kate (or was it Ashley?) Olsen stood up and said, “you’re in big trouble, mister” has a six year old been so wildly popular.

KiwiSaver gained 200,000 signees in its first two months, and latest figures show almost half of all New Zealanders (2.1 million) have a KiwiSaver account. In the last month alone it attracted 25,000 new members.

So what’s the attraction? KiwiSaver was started primarily as a retirement scheme and, with superannuation being such a political football, the idea of having some certainty of income at 65 appeals.

Where KiwiSaver is making a real difference right now, though, is for younger New Zealanders looking to buy their first home.

In 2012, 10,733 first home buyers withdrew $120.2 million – more than double the 2011 figures. On top of that, by the end of May the Government had dished out $15.7 million via the first home deposit subsidy – already beating last year’s total of $9.5 million.

And hey, why not? As Mary Holm told the New Zealand Herald yesterday, “it makes sense for younger people. For teenagers and people in their 20s, retirement is a foreign concept for them – it’s so far away. But buying a first home is not; it’s something they can aim at.”

Over at interest.co.nz David Hargreaves is less pleased with developments, accusing the Government of fanning the property market flames at the same time the Reserve Bank is trying to douse them.

Our views on why first home buyers shouldn’t suffer for the sins of others (indeed using an earlier column from Mr Hargreaves as evidence) have been made clear.

We must also make clear that we cannot legally give advice on joining KiwiSaver or what you should do once you’re a member – talk to your provider if you want specialist advice. But, if you’re looking to buy a house and are interested in how KiwiSaver can help, here’s some stuff worth knowing:

 

Withdrawing KiwiSaver savings to buy your first home

To be eligible you must have been a member of KiwiSaver for at least three years.

Any Government contributions cannot be withdrawn but everything else (your and your employer’s contributions plus interest) can.

If you’re a first time buyer you need to apply through your KiwiSaver provider. If you have owned a property before, and wish to try your luck, you need to get the OK first from Housing New Zealand. If you currently own property, then no soup for you.

If you have previously owned a house you may be eligible to withdraw savings if your combined annual income (before tax) is under $100,000 (for one or two buyers) or $140,000 for three or more. To find out if you qualify download and fill in the application form.

You cannot withdraw money to buy an investment property; only for a house you intend to live in.

More information on the savings withdrawal process can be found here and here.

 

KiwiSaver first home deposit subsidy

First home buyers can also apply for a subsidy of $1000 for each year they’ve been KiwiSaver members.

You must have been in KiwiSaver for at least three years. After five years you are eligible for the maximum $5000. Two eligible people buying a home together could, therefore, receive up to $10,000.

You must apply though Housing New Zealand rather than your KiwiSaver provider.

If you’re looking to buy a house with someone who doesn’t qualify for a subsidy, apply anyway – you may still be eligible.

You must actually live in the house you buy for at least six months, otherwise Housing NZ can ask for their money back.

There is a price cap on the house/section that you plan to buy. This is $400,000 for Auckland, Wellington City, Selwyn District and Queenstown Lakes District, and $300,000 for everywhere else.

This subsidy counts toward your total finance available for buying your first home – so take your confirmation letter to the bank when applying for a mortgage. You need to apply for the subsidy at least four weeks before settlement date.

You can get this subsidy preapproved before you search for a house. This preapproval lasts for 180 days; if you haven’t found a place by then you will have to reapply.

More information on the first home deposit subsidy can be found here and here, and you can download the application form here.

 

Over to you

Are you a happy home-buying KiwiSaver member? Are you a savings sceptic who hasn’t joined? Do you think it’s better to keep all your savings for retirement than to put any into a house? We’d love to hear from you in the comments below or on our Facebook page.