4. Housing Market—Overseas InvestmentPHIL TWYFORD (Labour—Te Atatū) to the Minister for Building and HousingHousing Market—Overseas InvestmentPHIL TWYFORD (Labour—Te Atatū): Does he stand by his statement that the evidence about—[Interruption]Mr SPEAKER: Order! There is just too much chatter going on. Mr Mark if you wish to carry on a conversation do it in the lobbies. Phil Twyford could we have the question again please.4. PHIL TWYFORD (Labour—Te Atatū) to the Minister for Building and Housing: Does he stand by his statement that the evidence about overseas buyers impacting the New Zealand housing market is diddly-squat"?Hon Dr NICK SMITH (Minister for Building and Housing): That statement was made in response to the member's claim that 40 percent of Auckland house sales were to people with Chinese-sounding names and thus foreigners. We now have data on the tax residency of the buyer and seller of every property. In the first 6 months of this year we had 102792 transactions of which 2907 buyers were tax resident offshore and 2622 sellers were tax resident offshore. This net change of 285 out of 102000 is impacting diddly-squat of the housing market.Phil Twyford: Does he consider the $100 million in tax lost due to tax breaks for offshore property speculators—tax that hard-working Kiwi families have to then make up for—to also be diddly-squat; and if not how much diddly of the tax system will it take before his Government does something about the speculators who are ripping us off?Mr SPEAKER: In so far as there is ministerial responsibility the Hon Dr Nick Smith.Hon Dr NICK SMITH: The member's figures are incorrect and also overlook two significant facts—that is from 1 July law passed by this Government actually requires a withholding tax on all sales by non-resident taxpayers and actually given that rents are relatively flat I think most would accept the major gains have actually been in the value of the house rather than the rent. The second recent change is that the new loan-to-value ratio limits require a high level of deposit by investors and that will actually reduce the amount of tax deductibility that is available on interest. The third fact the member overlooks is actually if you look at the data from the Inland Revenue Department the New Zealand investors were paying less tax on their invested properties than those from overseas.Stuart Smith: Is the Minister aware of any concerns being expressed about the targeting of ethnic Chinese in New Zealand in the debate on housing?Hon Dr NICK SMITH: Yes I am aware of concerns. A number of people have expressed concern to me that assuming people with Chinese-sounding names are immoral foreign speculators is unfair. I am also aware that a particular mayoral candidate for Auckland has distanced himself and apologised to the Chinese community for Labour's racial profiling. [Interruption]Mr SPEAKER: Order!Phil Twyford: What is the benefit to New Zealand of negative gearing tax breaks which last year allowed 35 percent of offshore investors to pay no tax on their rental properties?Hon Dr NICK SMITH: Firstly the member is incorrect in that with the new tax law we now require withholding tax on the sale of any properties. As I said most of us would accept particularly in the Auckland market that the rents actually have not increased substantially and the gains would actually be in re-sale. The second point I would make is that the tax working party looked at the issue of negative gearing and concluded that there was no gain to the taxpayer from the changes that the member has advocated.Phil Twyford: How does allowing offshore speculators to own properties in New Zealand help young Kiwi first-home buyers when those speculators are so aggressively using negative gearing tax breaks that they are paying only half as much tax per property as local landlords do?Hon Dr NICK SMITH: The member's claim is incorrect. The number for overseas people was 35 percent; the number for New Zealand investors was actually 43 percent—i.e. there was a larger proportion of New Zealand investors in the property market. I also point out the fact that actually the level of offshore investment from overseas residents in respect of property is small.Phil Twyford: When will he stop backing offshore speculators and instead start backing New Zealand first-home buyers by banning offshore speculators and shutting down negative gearing tax breaks for property speculation?Hon Dr NICK SMITH: New Zealand tax law treats those who are offshore exactly the same in terms of their tax liabilities in New Zealand except with the change that we actually made on 1 July with requiring a withholding tax. I would also point out to the member—what has he got against New Zealand citizens who may be working overseas for a period who own a property in New Zealand and rent that property out? Why should they be taxed any differently from any other investor?"