Oliver Woolley Project 1

O L I V E R  W O O L L E Y

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Project 1, Post 2.

Article: Rethink on Foreign Home-Buying. By Adam Bennett.

http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11238208

This article speculates the concerns of New Zealand First leader and MP, Winston Peters, in regards to foreign ownership of New Zealand properties. The raise for concern comes from what Peters believes as a lack of information as to who and where from is purchasing residential property in New Zealand (Bennett). These foreign investors increase demand in our local property market and in turn drive up the house prices, making them unaffordable for New Zealand citizens. Peters wishes to implement a policy which prohibits or restricts foreign ownership, he made the following comment regarding the policy "who are not New Zealand citizens from buying our houses and land, except if they first meet a stringent criteria related to New Zealand exports and economic interests" (Bennett). Labour also has a policy that if elected, it would block all purchases of existing property by people who did not live here, or did not plan to live here (Bennett). The Green party has suggested less popular but more effective solutions in taxation, advocating a capital gains tax on residential property that is not the owner's primary dwelling. They might also stop losses on rental property being deducted from taxable income (The New Zealand Herald). Other parties such as ACT believe that bans on foreign home buyers will make New Zealand citizens worse off as sales do not benefit from the overseas investors willing to pay higher prices (Hargreaves). Prime Minister John Key has acknowledged the concerns of his opposing parties and has deemed it necessary to begin collecting more in depth data on the subject but believes in no way is a total ban necessary, he believes the real issue in high property prices is the lack of supply and increasing population (Bennett).

The national government in attempt to reduce property supply issues has signed an ‘accord’ with the Auckland City Council, which will allocate more land for property developments and speed up the consent process (The New Zealand Herald). A New Zealand Herald article suggests that the governments beliefs that housing problems lie within the supply-side issue are false, “In fact all of the Government's supply-side measures sound like a desperate attempt to deny that the problem is one of excessive demand. It is the demand for residential property as an investment that is driving prices ever higher. The supply of houses is quite adequate, just about everyone has a house to live in. But too many are renting because the price of ownership has risen far beyond an affordable ratio of average incomes.” (The New Zealand Herald).

The likely outcome of this scenario is that foreign homebuyers will remain free to purchase New Zealand property faced only with the possibility of new laws enabling data collection. This means the demand of these buyers will remain unchanged, keeping the market busy and prices relatively higher than what they would be if laws of prohibition were to be implemented. With prices remaining high and pressure on the government to solve the apparent housing problem, an increase in supply through government influence is becoming more and more feasible. The government interventions will mainly center around increasing housing supply to bring back equilibrium prices to a more affordable level. The interventions will come in the form of faster building consent processes, making housing projects available faster. And more government influenced developments, large scale projects aimed at dramatically increasing supply.

Both the influence of foreign homebuyers and the possibility of government housing supply solutions will have positive affects on Welly Real Estate, as demand will remain high and supply increased. This will be beneficial for Welly Real Estate as property sales are certain to rise meaning the market which they benefit from is expanding, increasing possible profits. For Welly Real Estate this is a good time to expand to benefit from the expanding market, with specific focus on the residential market, as this is where most expansion will be seen. Large residential property developments an area that Welly Real Estate could easily profit from with such large numbers of individual housing within one project, it would allow the company to reduce operating costs as all the properties are on the same site and of relative similarity whilst retaining the some amount of income thus increasing net profit.

Other areas or markets where Welly Real Estate may choose to prioritise in order to benefit from are the overseas homebuyers, which seek to purchase property in New Zealand. To be able to benefit from this market the company would need to provide new services, which work with strengthening communication with foreign customers. The globalization of the company could mean a severe increase in customers and therefore profit through sales.       

Works Cited

Bennett, Adam. Rethink on Foreign Home-Buying. 15 April 2014. 25 April 2014 <http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11238208>.

Hargreaves, David. Ban on overseas house buyers would make Kiwis worse off, argues ACT Party. 17 April 2014. 25 April 2014 <http://www.interest.co.nz/property/69522/ban-overseas-house-buyers-would-make-kiwis-worse-argues-act-party>.

The New Zealand Herald. Editorial: Taxes best way to fix housing problem. 17 April 2014. 25 April 2014 <http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11239372>.