Two Very Different Houses

Economic Literacy in Oz, Ignorance in NZ

New Zealand appears to have a strong streak of xenophobia.  It also can be characterised as excelling in economic and commercial ignorance.  These things tend to come out especially during election campaigns, but they are always there, simmering away just beneath the surface, waiting to break out like a bad case of acne.

One traditional cause célébré is residential housing and whether New Zealanders can afford it.  Prices are rocketing up in some locations (Auckland, Christchurch) bringing forth pronouncements of doom.

But attitudes across the ditch appear to be very different.  House prices have ratcheted up in that country as well, particularly in Sydney and Melbourne.  And, more to the point, the  presence of strong Chinese demand is having a significant impact.  In New Zealand, a similar phenomenon has produced xenophobic reactions against Chinese immigration and house-buying.  Not so in Oz--at least not in the Sydney Morning Herald, which is hardly a denizen of right wing, pro-business, free market economics.

House hunters may complain, but the “phenomenal” influx of Chinese money into the local residential property market may be the best thing that happened to the local economy as it struggles to make its difficult transition from an unprecedented mining boom.

The demand from foreign investors for Aussie bricks and mortar is set to intensify for at least three years, driving a boom in apartment construction activity and boosting the bottom lines of listed companies such as Lend Lease, Mirvac and Goodman Group, according to exhaustive new research by broking group CLSA.  And while there have been plenty of warnings about foreign investors pushing property prices beyond the reach of a generation of local prospective homeowners, Chinese investment may be the catalyst for growth in a non-mining corner of the economy – building and construction – that traditionally is a strong generator of employment. . . .

China is already the number one source of source of foreign money in the local real estate market, and anecdotal evidence suggests that that position has only strengthened this year. Sydney and Melbourne have overwhelmingly been the destinations of choice. . . .

Existing regulation, administered via the Foreign Investment Review Board, restricts non-residents to new properties. There is anecdotal evidence that these rules are circumvented to illegally allow foreign capital into established properties, but the extent of that is hard to estimate, says CLSA senior analyst Andrew Johnston.  But Johnston concedes that “there will be some Australian residents that are homebuyers that get displaced from buying a new apartment due to price, such that second-hand apartments become relatively more attractive”.  While the news is mixed for some home buyers, it’s great news for the bottom lines of the country’s biggest listed property developers – and potentially their shareholders.

Around about now, in New Zealand, howls of outrage would be heard condemning monied interests profiting from the discontent of the less advantaged.  And at the same time, out of the other side of the mouth, shrill calls would be made about the need for New Zealanders to save an invest more--in listed companies--to prepare for their older age years. 

Go figure.  Australia at this point is far more advanced and discerning.  New Zealand remains locked in an ancient iron mask of socialist egalitarianism.  It's what happens when the entire statist education system is bent toward reinforcing the idea that everybody and everything "owe me, big time" and that "the gummint should be doing more to help people like us."