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Tony Alexander BNZ Economist ‘Weekly Overview’ 31st March 2016

By Julie Halligan

In Sydney and Australia analysts are starting to notice something which has been a phenomena in Hong
Kong for many years. There appears to be a rising proportion of the housing stock sitting empty. In the case
of Hong Kong, discussed in terms of buildings having few lights on in the evening, it is attributed to mainland
buyers leaving flats empty rather than renting them out for a very low yield and this problem has been well
known for many years.
In the case of Australia’s largest cities the theorised rising proportion of foreign investors owning dwellings is
one reason given, but mainly the discussion is couched in terms of investors generally not bothering to get
tenants and risk property damage etc. when the rental yield may be only 1.5%. People are simply leaving
the places empty and waiting for capital gain. With borrowing costs facing investors so much lower now than
previously the cash flow cost of not renting an investment property out is less than in the days of high
interest rates.
Out of this then one gets the theory that as the proportion of a housing stock owned by investors rises there
will be a tendency for the proportion of the stock left unoccupied to rise and therefore for any given
population more houses are needed. The housing shortage is worsened in other words.
Statistics NZ this week reported some fairly strong numbers for dwelling consent issuance around the
country in February. Seasonally adjusted issuance was ahead from January by a healthy 11% and 3.9% in
the three months to February compared with the three months to November. Compared with a year ago
consents were ahead 17% in the three month period with growth in Auckland of a strong 37%, a fall in
Canterbury of 20%, and a rise in the rest of the country of 30%. Auckland annual consents now sit at 9,534
which is a 24.4% rise from a year earlier and 29% above the 23 year average of 7,400.”

for the full report please follow the link;Tony Alexander 31st March 2016

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