In New Zealand’s runaway housing market, lots of people are looking for the reason why. In reality, it’s a combination of many factors, but much press has been given recently to the idea that foreign investors are driving housing rates up to the current insupportable levels. With new data to analyse, leading experts offer varying opinions on the role of overseas investors and the data itself.

Land Information New Zealand recently estimated the percentage of foreign buyers somewhere between 3-5% nationwide. However, there are admitted holes in the method of recording those numbers, with some uncertainty about homes purchased by companies or trusts, as well as by residents on a student or work visa. Most of what we know comes from the reporting of the number of IRD numbers issued recently to foreigners who expressly reported the reason for their application as property investment.

Most interestingly, the newly released data shows that over 50% of recent house sales were to investors from New Zealand. Finance Minister Bill English believes that the figures show that the influence of foreign buyers on the housing market is overestimated. "What you know is it's not 30 per cent and it's almost certainly not 10 per cent, it's less than that and I think it shows that the foreign buyer issue is a bit of a red herring," he said.

ACT leader David Seymour suggested that the furor over foreign buyers is little more than political scapegoating. The introduction of taxes on international property investors is therefore unlikely to affect rising home prices.

Said Seymour, "John Key needs to renounce the introduction of new taxes off the back of these numbers." For Mr. Seymour, the solution is clear. Regardless of the nationality of the property investors, "The reason that we have a speculative bubble is that it's too hard to build a home in New Zealand. If you solve that problem, you will solve all the other problems people talk about with tax and lending rules."

English agrees in principle. "The big issue though is there's a lot of demand. Most of it's from New Zealanders overwhelmingly and the market needs to supply enough houses to meet that demand," he said.

For another perspective, Barfoot and Thompson Director Peter Thompson said that the foreign investor figures represent too-short a measuring period in order to be extremely relevant. Though the 3-5% figure matches with what the giant real estate firm would expect, Mr. Thompson suggests that six months is the minimum reporting period in order to see the true reflection of home buyers.

"A three-month period, of which one of those months additionally is sort of the slowest month of the year, is possibly too short," he said.

Bayleys' Residential Manager Daniel Coulson agrees, adding that the accumulation of data will be key to determining the actual impact of foreign investors on the housing market. He says, "As this data continues to come through over the next 6 to 12 to 18 months, there's going to be less and less of that grey area" that makes for such a widely varying interpretation of the numbers.

Colleen Milne, previous   Real Estate Institute of New Zealand's Chief Executive, was surprised by the recent figures, but thinks that the time period used is long enough to generate decent statistics. "We've had some record volume sales through that period,” she said, “so I anticipate this is a good reflection on the non-resident buyers in the market.”

The last word goes to Mr. Coulson, who said that at the very least, the recent numbers do show a far smaller percentage of foreign investors than most New Zealanders likely thought. "There's lots of factors driving the market, not only in Auckland but around the country,” he said. “Foreign investment is just one of them."