On Monday night last week I hosted a Law Society dinner with the Minister of Immigration as special guest. It was good timing, as a number of issues were ripe for discussion.
Front and centre was Hon. Michael Woodhouse’s announcement on Saturday of a set of policy changes intended to encourage migration to areas outside of Auckland. This includes:
- increasing the “outside Auckland” bonus points available in a Skilled Migrant Category (“SMC”) Residence application from 10 to 30; and
- increasing from 20 to 40 the points to be claimed in an Entrepreneur Work Visa Expression of Interest, to encourage migrants to set up businesses outside Auckland.
The initiative was also trumpeted by the Prime Minister, as reported by the New Zealand Herald the same day.
Naturally, someone in the audience challenged Mr Woodhouse that this was all a knee-jerk reaction to the recent arguments about whether Chinese buyers are hyperinflating the Auckland housing market. In particular, the disclosure of the surnames of Asian home buyers has inflamed passions about this topic in the last few weeks and has no doubt done the Government no favours. He responded smoothly that policy changes of this nature simply don’t come into effect that quickly, owing to the slow pace of bureaucratic change. Nor did the Prime Minister suggest that this was seen as some kind of silver bullet for the Auckland housing market.
I have to say that I’m ambivalent about this one. The package of regional migration incentives has probably been in the works for quite a while. Most people in the business would agree that the unbalanced preference of migration toward Auckland has been an issue for some time. After all, there has been an “outside Auckland” bonus in the SMC points system for years precisely to encourage people to move south of the Bombay Hills. But the timing of its release is hardly accidental. It is quite possible that it got shunted to the top of the Policy queue as the National Government came under increasing pressure to do something to stop massive price inflation of Auckland property values.
In a pre-dinner conversation with some of us, the Minister took the stance that what was forcing prices higher in Auckland was a mismatch between supply and demand, and that what was needed was a whole lot more housing stock to ease the problem. That is of course a commonly shared view, and one the Government has backed up with its efforts to open up land in the Auckland isthmus to developers on a large scale.
However, again I both agree and disagree, and with due respect to Mr Woodhouse. I agree that there is a major supply problem, and that more houses would help to keep prices from spiralling out of reach of even fairly well-off New Zealand first home buyers. But, if the price spiral is driven by foreign demand, and from China in particular, we can never build enough to meet the demand. If the wealthiest one per cent of China’s population decides they want to migrate, then that amounts to some 14 million people looking for a home outside of the People’s Republic. If even a fraction of those eye up New Zealand, then it is little wonder that the auction rooms are full.
So, one solution is a complete ban on foreign ownership. People will always find a way around that, perhaps by getting a Resident or Citizen to simply act as their agent. On the other hand, there is now increasing talk of imposing a tax on any foreign buyers of New Zealand property. That could either be some kind of stamp duty charged every time someone buys or sells, or (maybe preferable) an annual tax on the land, a bit like paying Council rates. I suggest that if you really want to dampen down foreign demand then this tax will have to be a stiff one, and regularly applied, so that it becomes unattractive to “buy and hold” with the prospect that capital gain will eventually wipe out the one-off tax you suffered when you bought the place.
There is another dynamic here that the numbers simply may not fix. We hear it time and again – New Zealand is just a better, cleaner, safer place to live. A lot of people around the world may be willing to pay a high price for a slice of Godzone Country. And even on a slanted paying field, we may not be able to outbid them.