Patrick Bright suggests that Australian real estate prices are likely to escalate further now that the New Zealand government has moved to tighten up on its foreign ownerships.  We challenge that thought with Patrick.
Transcript:
Kevin Turner: Prospective home buyers are warned that Australian real estate prices are likely to escalate further now that the New Zealand government has moved to tighten up on its foreign ownerships, similar to what’s happened in Australia. That’s according to an industry expert, EPS Property Search Director and author of The Insider’s Guide to Buying Real Estate. No stranger to our audience, Patrick Bright. G’day, Patrick.
Patrick Bright: Morning, Kevin.
Kevin Turner: Good to be talking to you again. Why are you so concerned about this and what do you see happening, Patrick?
Patrick Bright: Well, just looking at the New Zealand government’s decision, they’ve essentially … New Zealand’s got a similar problem to Australia and other countries like Canada, around the world, and Canada shut down the foreign ownership situation a couple of years ago. New Zealand’s now done it. And attention, I think, will come towards Australia. Because it’s already here quite strong and if you rule out foreign buying, you start narrowing down where they can go, then where do you think they’re gonna end up?
Kevin Turner: The regulations, though, in Australia are much tighter than what they’ve implemented into New Zealand. So why do you think that Chinese investors … I mean, there’s evidence that they’ve already left Australia, so why would they come back?
Patrick Bright: It’s not just the Chinese investors. This is not a particular nationality issue. 66 foreign nationalities purchased property in Australia a couple years ago when the stats were last looked at in different countries. But the Chinese do make up a large percentage of that, there’s no question.
Patrick Bright: You’ve also gotta look at the fact that they haven’t actually completely left Australia alone. They’re still here, it’s just not in the volume that it was, because of certain restrictions that were put in place. But, really, when you look at it, it’s fiddling around at the edges. It’s not really stopping it, it’s just loading up the cost of doing it.
Patrick Bright: Now, if other countries are stopping it happening and they’re gonna get their money somewhere, then they’re gonna look at those costs and go, “You know what? I’ll wear it.”
Kevin Turner: I hear what you say. Chinese investment into Australian property has dropped by 50 percent, though. It has dropped substantially and I think if you look around Australia, foreign investment in the last 12 months … New South Wales has fallen by 70 percent, Victoria 60 percent, and Queensland by 80 percent. That’s a fairly dramatic drop.
Patrick Bright: It is, yeah. It’s coming off of very large numbers. So in terms of the drop, that’s great.
Kevin Turner: Well, is it great? I think it’s not good at all because we rely on foreign investors predominantly to buy our new stock, and if we slow down the production of new stock, that’s gonna put increase pressure on prices.
Patrick Bright: Well, yes and no. What it is is that they’re buying the stock, okay? And they’re paying at a price they’re paying is also pushing out the locals. So this is the problem that New Zealand’s government recognised, is that your local property market, the current generation, is being pushed out of those local markets.
Patrick Bright: So it’s not just investment, people are calling it foreign investment. I think it’s foreign ownership. ‘Cause they’re buying it, they’re owning the properties. They’re not just investing and they’re not putting money into the economy. I think foreign investment can be a good thing done well, but this is basically foreign ownership of assets.
Patrick Bright: And so it’s putting the local population into a situation where their only option is, if they wanna be living in these locations, is to rent, because it’s already foreign-owned. And so we wanna get people more into home ownership and not into ongoing, indefinite rental cycle.
Kevin Turner: ‘Cause the figures sometimes are exaggerated, too, ’cause they include commercial property. If you take that out, it still only represents about three percent of all purchases in Australia. And that is actually declining, those figures are something like 12 to 18 months old, Patrick.
Patrick Bright: Yeah, look, the stats I’ve read and seen from new property off the plan is where a lot of this is targeted …
Kevin Turner: That’s right.
Patrick Bright: It was as high as 40 percent in Melbourne, 30 percent in … 24 percent in Sydney and about 30 percent in Brisbane. So, that’s quite a lot, actually. When you look at maybe only 3 or 4 or 5 percent over the entire market, then it’s different when you look at it into the new stock, which is what is being talked about and what they’re trying to slow it down on.
Kevin Turner: Yeah, I guess the only saving grace here is that the restrictions, they’re only on, only allowed to buy new property. Therefore, existing homes are exempt. So it doesn’t really impact –
Patrick Bright: In Australia, the foreign investor is restricted to new properties, generally.
Kevin Turner: It’s the same in New Zealand, now. That’s what they’ve done in New Zealand, effectively.
Patrick Bright: Yep, so they’ve pulled that back as well. And it’s all this stopping and pulling it right back because it was getting well out of control, like it was here. But they’re still able to buy blocks of land and build new houses and things like that. So it’s not totally just brand-new, off-the-plan property.
Kevin Turner: They’ve limited, I think, blocks, haven’t they, to about 60 percent ownership. So they’ve made the restriction there as well.
Patrick Bright: In New Zealand, yes.
Kevin Turner: In New Zealand.
Patrick Bright: But in Australia we can still, developers can still sell 100 percent of any development.
Kevin Turner: Mm-hmm (affirmative). Yeah, New Zealand seem to me to have only gone halfway, you know? They’ve even offered an exemption to Australia, which is probably understandable, but also extended it to Singapore because of their free-trade agreement.
Patrick Bright: Yeah, well. You’ve got some … Obviously there’s some history there with Australia and New Zealand where Australians can buy New Zealand property, New Zealanders can buy Australian properties. So that’s kind of an understandable …
Kevin Turner: Understandable.
Patrick Bright: A long-running thing.
Kevin Turner: Yep. That’s right.
Patrick Bright: Situation. But yes, they have, I believe, we’ve extended it to the Singapore government as well.
Kevin Turner: Indeed, so it’s gonna be interesting to watch. Take your point, Patrick, and thanks for sharing that thought with us. Patrick Bright has been my guest, from EPS Property Search Director and author of The Insider’s Guide to Buying Real Estate, a great read. Patrick, thanks for your time.
Patrick Bright: A pleasure, Kevin.