Friday, October 30, 2015

Who'd have thunk it?

It turns out that foreign criminals and tax cheats were a major driver of Auckland's property bubble:

Overseas investors are deserting Auckland's property market as the Government crack down on foreign buyers works, but experts say asking prices now remain too high for the remaining local buyers.

Managing director of Strategic Risk Analysis, Rodney Dickens, said the Government changes which came into force at the start of October had worked, driving overseas buyers out of the market.

From October 1, foreign investors were required to provide a New Zealand IRD number, with a New Zealand bank account, and, like New Zealand investors, will have to pay capital gains tax on any investment property bought and sold within two years.

More importantly, they're required to provide their overseas tax information number, meaning their transactions will be reported to the tax authorities of their home jurisdiction. Which makes NZ property a much less desirable asset for corrupt officials or foreign criminals seeking to launder money or hide their ill-gotten gains.

This hasn't deflated the market yet. But the fact that it has had such a noticeable effect tells us something about the sort of money we've been playing haven too, and how a deregulated market enables foreign crime and corruption.