Hive News Monday: Goff calls for Vancouver-style tax on foreign buyers; Key wary of unexpected interest rate spike

Auckland mayoralty candidate Phil Goff. Copyright Lynn Grieveson / Hive News

Auckland mayoral favourite Phil Goff has called on the Government to adopt a nationwide stamp duty on foreign buyers similar to the 15% one adopted in Vancouver with some initial success in August.

Goff told Morning Report Tim Groser had told him such a stamp duty was viable under New Zealand's trade agreements and was hopeful the Government would consider his call, despite its current reluctance.

"My preference would be to stop foreign investment in the existing housing, like Australia does, but I recall talking to Tim Groser when he was in Government and he was saying the Government might contemplate a stamp duty tax of around that level. That was one of the options still open under the TPP should that go through," Goff said.

John Key floated the idea of a land tax on foreign buyers in April last year ( see our July 27, 2015 Hive News for more detail ) and restated his openness to the idea in April this year ( see our April 26 Hive News for more detail ) He also said in late July ( see our July 28 Hive News for more detail ) a land tax on foreign buyers was possible before the 2017 election.

Goff was sceptical about LINZ data appearing to show just 4% of purchases in Auckland were by overseas tax residents, pointing out it excluded foreign students, those on temporary work visas and corporate vehicles. He said he'd seen estimates that the buying could be around 12% and the level of buying in Canada was around 5%.

"Even at 5%, that seems to have had at least a significant short term impact on stopping the huge level of inflation in property prices there," he said.

Goff said he did not believe the Government had ruled out the idea.

"They are certainly slow in coming to the party on it. They only to have to look across the Pacific to Canada. Trudeau has said that the housing affordability crisis is being pushed by overseas money. The state premier has said that demand and not just supply is needed to make the housing market more affordable. The Bank of Canada's Governor warned that foreign ownership was contributing to the unsustainable rise. Canada is not dissimilar to New Zealand. Vancouver is one of the three cities that is less affordable than Auckland. The problems are very similar," he said.

"I hope that they're ready to change their mind and I'll certainly be pushing them in that directions should I be elected as Mayor."

Elsewhere, John Key told an audience of bankers on Friday that the biggest risk to the New Zealand economy was an unexpected rise in interest rates. See more below in a report from that meeting.

In other economic and financial news...

Statistics New Zealand reported on Friday nationwide building consents fell 1.0% on a seasonally adjusted basis to 2,636 in August from July. The number of actual building consents in Auckland fell to 970 in August from 1,087 in July, but Statistics NZ said the trend for Auckland rose again in August to 923 from 894.

Economists welcomed the apparent resumption in consent growth in Auckland in recent months, but warned that delays in implementing the new Unitary Plan were a risk.

"We are concerned that a legal challenge to Auckland’s Unitary Plan could delay the implementation of the new density zoning rules," said ASB's Jane Turner. "Consequently there will be added uncertainty for developers, which could cause some projects to be deferred. It also reinforces that the RBNZ is likely to roll out loan-to-income lending restrictions next year (if feasible), given hopes of a supply response are likely to be dashed," she said.

Character Coalition Chairwoman Sally Hughes was quoted by RNZ on Sunday as saying the group's appeal had been narrowed, but has not responded yet to requests for confirmation.

ANZ reported on Friday its monthly business confidence survey found an improvement in September to the highest level since July 2014, although inflation expectations were unchanged at 1.4%.

Paula Bennett announced on Friday a 1.6ha site at Otahuhu that had been earmarked for a future school would be used as the site for 51 pre-fabricated houses for families transitioning to permanent accommodation.

Coming up...

John Key is expected to hold his weekly post-cabinet news conference at 4 pm today. Parliament is not sitting.

NZIER is scheduled to release its quarterly survey of business opinion at 10 am on Tuesday.

Globaldairytrade holds its next auction on Wednesday morning.

Have a great week

cheers

Bernard

3 October 2016