8. PITA PARAONE (NZ First) Link to this
to the Minister of Finance
Does he still believe that overseas buyers buying residential property are not one of the major drivers of the increase in housing costs, especially given that the Reserve Bank, in its June Monetary Policy Statement, said it could not confidently say what the impact of foreign buyers on the property market was, but that it was “quite influential” in some areas; if so, on what information does he base his belief?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
The available evidence is from the Inland Revenue Department and from Quotable Value, and continues to suggest a limited impact by foreign buyers. The most recent Reserve Bank Monetary Policy Statement makes the same point. But I have asked for further work on the extent of foreign purchasing, given some concerns about the quality and the coverage of the data.
Why does the Government consider that lowering its resident migrant target is an important means of easing inflationary pressure, yet it does not consider collecting information with which to properly judge the impact of foreign buyers on price inflation within our housing market to be important enough for it to gather?
Hon Dr MICHAEL CULLEN Link to this
As I said, I have asked for some work to be done on this matter to see whether the numbers are significantly larger than the data shows. I remind the member that the Reserve Bank Monetary Policy Statement he refers to concludes: “However, on the limited evidence we have, it appears that any national effect is likely to be small.” One thing that all the data does strongly suggest is that the rate of foreign purchasing has tailed off over the last couple of years or so, which is to be expected given the high level of the dollar, of course.
Dr Pita SharplesTēnā tātou katoa. Does the Minister recall the comment of the New Zealand Council of Trade Unions President, Ross Wilson, that homeownership is increasingly out of reach for low and middle income New Zealanders, because house prices have increased by 38.5 percent in the last 3 years, outstripping wages by 4:1; and what actions will the Minister be taking to address the housing affordability crisis?
Hon Dr MICHAEL CULLEN Link to this
There are a number of actions—almost too numerous to mention. Obviously, the growth of KiwiSaver will, first of all, divert a good deal of investment income away from purely property income, into other vehicles. We need people to be investing in more than simply the property asset class within New Zealand. Within KiwiSaver, there is assistance for the first-home buyer, which is quite significant assistance, as time builds up. The Government has a range of other programmes, which my colleague the Minister of Housing has outlined to the House on a number of occasions. Of course, at the point where we do start to enter the monetary policy easing cycle, interest rates will have come back. Already we see some signs of some easing in the housing cycle, but, as yet, not very strong signs.
Does the Minister agree that as our dollar readjusts downward, foreign buyers will find themselves in an increasingly strong position to buy our property; if so, why does he not accept that it is important to at least know the situation now, before the trickle of foreign buyers turns to a flood, and the situation for Kiwis buying a home worsens considerably?
Hon Dr MICHAEL CULLEN Link to this
One of the issues we do not know about is the extent to which foreign purchasing is counter-cyclical or pro-cyclical in the housing market. In fact, for the monetary policy cycle to ease requires that the rate of growth in house prices also ease. Of course, this is the irony of the situation: if houses become cheaper, they are easier to buy; if the dollar comes back down, they are easier to buy. I am sure nobody in the House will be arguing against a slowing down in the rate of house price increases, or arguing for the dollar to continue to push upwards. It has to be remembered also that quite a lot of these purchasers appear to be in two categories: firstly, New Zealanders overseas who, at some point, are intent on returning home to New Zealand; and, secondly, foreigners who are intent on coming to New Zealand.
I seek leave to table the article by the New Zealand Council of Trade Unions headed “House prices outstripping wages”.