Banks Stop Loaning to Foreign House Buyers

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Forums › Finance and wealth management › Banks Stop Loaning to Foreign House Buyers

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1923 posts

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#1570637 12-Jun-2016 19:23

JimmyH:
oxnsox:

Whilst I agree with your comments the greater point I was making was that in the current climate the 'silver-bullet' has to contain a number of elements in order to have any long term effect.

But rent controls shouldn't be one of those elements.

You could even make the problem worse in respect of supply - my making it less attractive for investors to build houses.

You will certainly make housing quality worse, by making landlords more reluctant to invest in maintaining/improving the standard of their house. If they are stuck charging a below market rent in an undersupplied market, then there is a much reduced incentive for them to invest in the habitability of the house, as they won't see it reflected in either the rental or tenant retention.

You will also make it harder for some marginal tenants (larger families, people with pets, people with poor english) to find houses - why rent to someone with a large dog that can damage the property, if there are fifteen other prospective tenants who don't have dogs and you are required to charge them all the same.

Finally, as another poster has pointed out, these regulations never work well. People find ways around them.

It's all very well to want to fire a silver bullet, but you need to make sure the gun is pointed away from you.

oxnsox

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#1570641 12-Jun-2016 19:27

Fair enough.

The issue in the current market though appears to be the 'investors' taking a hugh profit simply by turning over properties in short timeframes.
Maintenance issues are more a regulatory issue, just as RMA issues are.

Geektastic

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#1570751 12-Jun-2016 22:18

Fred99:

Geektastic:

mattwnz:

MikeB4: Lockwood have a good system, it's fast but expensive.

There are other very similar systems. I don't think the insulation in them is as high as you can get with a house that has wall cavities, as you can really upspec the insulation well beyond the minimum standards in a house with wall cavities. My old lockwood which was one from the 70's I don't think had any insulation, and creaked like anything, but they have improved them since

On the other hand, cavities in walls should not be breached by filling them as it permits water to cross between the leaves, at least if you are building both inner and outer with brick/block. The insulation should come from the dead air between the two and from the thermal mass of the materials. That is why cavity wall ties (the butterfly shaped wire items used to tie the two leaves together) have a drip point in the middle - so that water passing along them (if any) falls off half way across.

A standard building spec clause in the UK is that the builder shall not permit any materials to fall into unfinished cavities. I once made a builder remove an entire section of wall in a 2 storey house he was building for us because when I visited the site for a stage payment inspection, when I shone my torch into the cavity from the first floor looking down, I found bits of timber off cut, polystyrene packing, plastic and even his men's lunch wrappers, cans etc.

I told him he would get no more money until the cavity was cleared out to my satisfaction - something that probably cost him 2 weeks of unpaid work.

]

Very unusual to have double brick (or block) cavity construction in NZ. There were a few in Chch - not many left now though!

Lots of good explanations above for high building costs in NZ. It all adds up, compliance, costs for connection to services, design to fit the largest possible house on the smallest possible section, NZ infatuation with large houses, OSH requirements - most building sites are now fully fenced, you need edge protection scaffold even with low roofs, netting across ceiling joists etc. Every house I've seen built there have been delays/escalation, a couple of houses built by the now defunct Stonewood, failed building inspections and remedial work required meaning work was stopped until that was passed, then several changes of head builder/project managers during the build, subcontractors not turning up because they hadn't been paid for previous jobs - the jobs turning into an expensive mess due to that poor management and loss of continuity.

Many of those things are not really explanations: they've been required in Europe etc for decades. Additionally, builders there get sued for injuries and so on so have insurance costs NZ builders would never dream of paying.

It's mainly lack of professionalism and disorganisation as far as I can see - as you suggest.

gzt

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#1571209 13-Jun-2016 18:22

^that's another topic. good one too.

Meanwhile, ASB joins the list of banks turning down overseas income.

"In a statement this afternoon ASB said: "Overseas income will no longer be considered in applications where the customer does not hold New Zealand citizenship or permanent residency. Where a customer does hold New Zealand citizenship or permanent residency, we will consider overseas income on a case-by-case basis subject to certain conditions.""

mattwnz

20164 posts

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#1571224 13-Jun-2016 19:26

oxnsox: Fair enough.

The issue in the current market though appears to be the 'investors' taking a hugh profit simply by turning over properties in short timeframes.
Maintenance issues are more a regulatory issue, just as RMA issues are.

Considering the average properties are being kept for in Auckland is just around a year, that is very likely. I wonder if all these people who are flicking on properties are paying their tax on their capital gains.

Fred99

13684 posts

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#1571317 13-Jun-2016 21:15

Geektastic:

Fred99:

Geektastic:

mattwnz:

MikeB4: Lockwood have a good system, it's fast but expensive.

There are other very similar systems. I don't think the insulation in them is as high as you can get with a house that has wall cavities, as you can really upspec the insulation well beyond the minimum standards in a house with wall cavities. My old lockwood which was one from the 70's I don't think had any insulation, and creaked like anything, but they have improved them since

On the other hand, cavities in walls should not be breached by filling them as it permits water to cross between the leaves, at least if you are building both inner and outer with brick/block. The insulation should come from the dead air between the two and from the thermal mass of the materials. That is why cavity wall ties (the butterfly shaped wire items used to tie the two leaves together) have a drip point in the middle - so that water passing along them (if any) falls off half way across.

A standard building spec clause in the UK is that the builder shall not permit any materials to fall into unfinished cavities. I once made a builder remove an entire section of wall in a 2 storey house he was building for us because when I visited the site for a stage payment inspection, when I shone my torch into the cavity from the first floor looking down, I found bits of timber off cut, polystyrene packing, plastic and even his men's lunch wrappers, cans etc.

I told him he would get no more money until the cavity was cleared out to my satisfaction - something that probably cost him 2 weeks of unpaid work.

Very unusual to have double brick (or block) cavity construction in NZ. There were a few in Chch - not many left now though!

Lots of good explanations above for high building costs in NZ. It all adds up, compliance, costs for connection to services, design to fit the largest possible house on the smallest possible section, NZ infatuation with large houses, OSH requirements - most building sites are now fully fenced, you need edge protection scaffold even with low roofs, netting across ceiling joists etc. Every house I've seen built there have been delays/escalation, a couple of houses built by the now defunct Stonewood, failed building inspections and remedial work required meaning work was stopped until that was passed, then several changes of head builder/project managers during the build, subcontractors not turning up because they hadn't been paid for previous jobs - the jobs turning into an expensive mess due to that poor management and loss of continuity.

Many of those things are not really explanations: they've been required in Europe etc for decades. Additionally, builders there get sued for injuries and so on so have insurance costs NZ builders would never dream of paying.

It's mainly lack of professionalism and disorganisation as far as I can see - as you suggest.

I wonder what the relative costs for building actually are between UK and NZ. Tradespeople generally get paid more over there. Earthquake standards here are much higher for obvious reasons. Average dwelling size is much larger - I believe that only in US and Aus are average new homes larger than NZ. Larger market should mean lower material costs, much higher population density should mean lower cost to connect to services. From what I see of UK planning, "heritage" restrictions etc, it seems as bad or worse then here.

OTOH when I was in business dealing with Europeans who'd visit, they were gobsmacked by the opportunity and lifestyle here, to own a home, to set roots, have a vege garden of your own. That was a fantastic thing in NZ - achievable to anybody once. The decline in home ownership from 80% to what looks like close to 50% is a significant social change and not a good one (IMO) in terms of what NZ should be.

Geektastic

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#1571331 13-Jun-2016 21:57

Fred99:

Geektastic:

Fred99:

Geektastic:

mattwnz:

MikeB4: Lockwood have a good system, it's fast but expensive.

There are other very similar systems. I don't think the insulation in them is as high as you can get with a house that has wall cavities, as you can really upspec the insulation well beyond the minimum standards in a house with wall cavities. My old lockwood which was one from the 70's I don't think had any insulation, and creaked like anything, but they have improved them since

On the other hand, cavities in walls should not be breached by filling them as it permits water to cross between the leaves, at least if you are building both inner and outer with brick/block. The insulation should come from the dead air between the two and from the thermal mass of the materials. That is why cavity wall ties (the butterfly shaped wire items used to tie the two leaves together) have a drip point in the middle - so that water passing along them (if any) falls off half way across.

A standard building spec clause in the UK is that the builder shall not permit any materials to fall into unfinished cavities. I once made a builder remove an entire section of wall in a 2 storey house he was building for us because when I visited the site for a stage payment inspection, when I shone my torch into the cavity from the first floor looking down, I found bits of timber off cut, polystyrene packing, plastic and even his men's lunch wrappers, cans etc.

I told him he would get no more money until the cavity was cleared out to my satisfaction - something that probably cost him 2 weeks of unpaid work.

Very unusual to have double brick (or block) cavity construction in NZ. There were a few in Chch - not many left now though!

Lots of good explanations above for high building costs in NZ. It all adds up, compliance, costs for connection to services, design to fit the largest possible house on the smallest possible section, NZ infatuation with large houses, OSH requirements - most building sites are now fully fenced, you need edge protection scaffold even with low roofs, netting across ceiling joists etc. Every house I've seen built there have been delays/escalation, a couple of houses built by the now defunct Stonewood, failed building inspections and remedial work required meaning work was stopped until that was passed, then several changes of head builder/project managers during the build, subcontractors not turning up because they hadn't been paid for previous jobs - the jobs turning into an expensive mess due to that poor management and loss of continuity.

Many of those things are not really explanations: they've been required in Europe etc for decades. Additionally, builders there get sued for injuries and so on so have insurance costs NZ builders would never dream of paying.

It's mainly lack of professionalism and disorganisation as far as I can see - as you suggest.

I wonder what the relative costs for building actually are between UK and NZ. Tradespeople generally get paid more over there. Earthquake standards here are much higher for obvious reasons. Average dwelling size is much larger - I believe that only in US and Aus are average new homes larger than NZ. Larger market should mean lower material costs, much higher population density should mean lower cost to connect to services. From what I see of UK planning, "heritage" restrictions etc, it seems as bad or worse then here.

OTOH when I was in business dealing with Europeans who'd visit, they were gobsmacked by the opportunity and lifestyle here, to own a home, to set roots, have a vege garden of your own. That was a fantastic thing in NZ - achievable to anybody once. The decline in home ownership from 80% to what looks like close to 50% is a significant social change and not a good one (IMO) in terms of what NZ should be.

Planning is a bit different.

Planning consent not only gives you permission to build the house, but approves what it will look like, what materials will be used and so forth. In what we would call heritage areas the restrictions will run even as far as using horse hair plaster if the the building being renovated or whatever was built that way originally and is listed with higher levels of protection.

In terms of sub division, it is the planning consent that allows you to sell for development, as consent attaches to the land. It is the responsibility of the person executing the development to build roads, lay on power and so forth, unlike here where we lump that cost on the landowner.

There is no "issuing of title": if I own Whiteacres and get permission to build Blackacres on half of it, all I need to do is mark the boundary on a plan, hand it to my agent and solicitor and say "Sell this". The act of sale creates new title automatically.

Dwellings here are probably larger (although not massively so) mainly because there is far more space and far less people. London, for example, is 11 Aucklands worth of population - or 3 New Zealand's worth, roughly.

Costs are far lower for materials and because houses are usually developed by housing developers who build two or three hundred at once, complete often with new shops, libraries and so on, they tend to have a spread of standard designs across the whole scheme, so can buy much higher quantities of plaster board, bricks, blocks, insulation, concrete etc etc so save a lot of money.

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Geektastic

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#1571336 13-Jun-2016 22:01

So far, HSBC has no concern....see here

tdgeek

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#1571341 13-Jun-2016 22:20

Geektastic:

So far, HSBC has no concern....see here

Which needs to be regulated. For OBVIOUS reasons.

oxnsox

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#1571349 13-Jun-2016 22:38

mattwnz:
oxnsox: Fair enough.

The issue in the current market though appears to be the 'investors' taking a hugh profit simply by turning over properties in short timeframes.
Maintenance issues are more a regulatory issue, just as RMA issues are.

Considering the average properties are being kept for in Auckland is just around a year, that is very likely. I wonder if all these people who are flicking on properties are paying their tax on their capital gains.

Isn't that the 'brightline' test(?) where you have to pay tax on the capital gain if you sell within 2 years?

Guess when you're likely making multiples of your deposit (pin) money in a few weeks/months, you can swallow the tax bill.
And the Govt can point and say, yep we can track these people and they're paying the tax on their (capital) gain...... and if pushed they can also say '...capital gains taxes are shown not to work'.

Geektastic

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#1571352 13-Jun-2016 22:42

tdgeek:

Geektastic:

So far, HSBC has no concern....see here

Which needs to be regulated. For OBVIOUS reasons.

Not obvious to me.

Banks have been lending to buy property overseas for as long as I can recall. My grandfather had property in the UK and Australia, my father in the UK and USA and neither of them ever worked outside the UK.

You can't regulate who foreign banks lend to or for what purpose.

Geektastic

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#1571353 13-Jun-2016 22:44

oxnsox:
mattwnz:
oxnsox: Fair enough.

The issue in the current market though appears to be the 'investors' taking a hugh profit simply by turning over properties in short timeframes.
Maintenance issues are more a regulatory issue, just as RMA issues are.

Considering the average properties are being kept for in Auckland is just around a year, that is very likely. I wonder if all these people who are flicking on properties are paying their tax on their capital gains.

Isn't that the 'brightline' test(?) where you have to pay tax on the capital gain if you sell within 2 years?

Guess when you're likely making multiples of your deposit (pin) money in a few weeks/months, you can swallow the tax bill.
And the Govt can point and say, yep we can track these people and they're paying the tax on their (capital) gain...... and if pushed they can also say '...capital gains taxes are shown not to work'.

Capital Gains Taxes don't work, if what you're expecting them to do is affect house prices beneficially.

They do work if what you're expecting them to do is raise money for the government to waste on your behalf...!

Batman

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#1571356 13-Jun-2016 22:49

When I was in the Cook Islands I dreamt of owning a beach house and living there forever. But alas, foreigners weren't allowed to own anything over there ...

tdgeek

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#1571357 13-Jun-2016 22:50

Geektastic:

tdgeek:

Geektastic:

So far, HSBC has no concern....see here

Which needs to be regulated. For OBVIOUS reasons.

Not obvious to me.

Banks have been lending to buy property overseas for as long as I can recall. My grandfather had property in the UK and Australia, my father in the UK and USA and neither of them ever worked outside the UK.

You can't regulate who foreign banks lend to or for what purpose.

When you have a small country and allow unfettered access to many millions, you upset supply and demand, thats very obvious. You know that. Its not Economics 101, its Economics 1.01.

tdgeek

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#1571359 13-Jun-2016 22:53

Geektastic:

oxnsox:
mattwnz:
oxnsox: Fair enough.

The issue in the current market though appears to be the 'investors' taking a hugh profit simply by turning over properties in short timeframes.
Maintenance issues are more a regulatory issue, just as RMA issues are.

Considering the average properties are being kept for in Auckland is just around a year, that is very likely. I wonder if all these people who are flicking on properties are paying their tax on their capital gains.

Isn't that the 'brightline' test(?) where you have to pay tax on the capital gain if you sell within 2 years?

Guess when you're likely making multiples of your deposit (pin) money in a few weeks/months, you can swallow the tax bill.
And the Govt can point and say, yep we can track these people and they're paying the tax on their (capital) gain...... and if pushed they can also say '...capital gains taxes are shown not to work'.

Capital Gains Taxes don't work, if what you're expecting them to do is affect house prices beneficially.

They do work if what you're expecting them to do is raise money for the government to waste on your behalf...!

CGT. Makes buying a second and third home uneconomic. So that doesnt happen. Home buyers begin to be "home" buyers.

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