At his weekly press conference in Wellington last week, Prime Minister John Key was questioned about the idea of reducing or slowing the rate of housing prices by limiting foreign purchases.

This isn’t the first time Mr Key has fielded the idea. But prices are currently rising at an annualised pace of about 14 percent, led by Auckland with a pace of 27 percent, and foreign investments continue to weigh on the public consciousness.

Mr Key replied, “In terms of foreigners buying, I think we all accept that there isn’t great data there. But in terms of the data we do have, it doesn’t support that view….The sales that are going to offshore are, at best…maybe about 2 percent.”

Mr Key was highlighting the BNZ-REINZ survey conducted last year, which showed that just 3.6 percent of people buying houses in New Zealand intended not to live in the country. The study also concluded that the only 4.5 percent of venders selling houses in New Zealand were based offshore.

However, in the end the survey reached the same conclusion as the Prime Minister. “"Further study is needed to verify this result especially in the context of the development of any government policy regarding controls on foreign purchasing of NZ property”, the survey summarized.

In pointing to BNZ economist Tony Alexander, Mr Key claimed that enacting legislation to control foreign interests would have little net effect. However, Mr Alexander himself said that he would support adopting legislation to limit foreign buying, similar to the system adopted by Australia. A ban of house sales to non-residents, as well as a tax on all houses owned by Kiwis offshore, are points five and six on Mr Alexander’s eight-point plan for tackling the housing market, although the economist has indicated that his overall plan is an aggressive approach, only to be taken if the New Zealand government truly wanted to get serious about housing costs.

How can Mr Alexander call for such sweeping regulation when his statistics show that the foreign purchases are having such a negligible effect on New Zealand housing prices?

Because he knows that this is just the beginning of New Zealand’s burgeoning relationship with China.

According to the 2013 New Zealand Census, the percentage of Asian groups doubled between 2006 and 2013, now making up 12 percent of the population. As Statistics New Zealand’s international travel data shows, much of the influx consists of people from China, which ranks second in the most common country of birth for foreign-born citizens.

In 2006, the New Zealand government predicted that the country’s Asian population would reach 790,000 by 2026, increasingly by a rate of 3.4 percent a year. Considering the Asian population increased by a rate of more than 100 percent from 2006-2013, I’m sure the government is rethinking their projections.

In large part, this massive influx of immigrants is due to China’s rapid economic growth.

Despite the fact that its GDP has grown at a preposterously fast rate of 10 percent for most of the last decade, in 2011 China boasted a Gross National Income per capita of only $4,940, which ranked 114th in the world, just behind Tuvalu. Over 170 million people in China still live below the $1.25-a-day international poverty line. Not exactly the type of statistics you would expect from a world super power.

So far, China has managed to counter this economic inequality with massive growth of their economy, success that is slowly trickling down to the masses. Right now, China’s middle class, defined by the Organization for Economic Cooperation and Development as “those with the means to make spending decisions beyond just subsistence,” consists of roughly ten percent of the population but is on pace to represent 40 percent by 2020.

As more and more Chinese find themselves with economic means to travel, or buy commodities overseas, thy will continue to look toward New Zealand. In 2011, China passed the U.S as New Zealand’s second-most most common exporter and importer.

The potential social, political, environmental, and economic ramifications of China’s rise are huge for New Zealand. But for now, let’s stick with housing.

Last year, Mr Alexander wanted to determine how concerned the New Zealand people really are about rising housing prices. He concluded that only 29 percent of responders were unhappy, with 42 percent indifferent and 29 percent happy.

However, financial website interest.co.nz decided to figure out which aspect of the housing crisis New Zealanders find the most concerning, using Alexander’s own eight-step plan.

In response to being asked which of the eight suggestions they most favored, 34 percent of the 880 readers who responded thought that banning house sales to non-residents was the best idea. This represented the largest block of supporters for any one plan.

It is likely that this opinion is founded in the gossip and paranoia surrounding foreign investors, not in fact. But New Zealander’s continue to think that foreign influence has played a significant role in the country’s skyrocketing housing prices. And statistics can’t say otherwise.

Mr Key’s response that, “there isn’t great data there,” is unacceptable. The Prime Minister can continue to point to Australia’s legislation against foreign housing purchases for evidence. But China’s rise hasn’t happened overnight, and the New Zealand government’s lack of response to Asia’s growing influence represents a much greater concern than simply a lack of quality data.

ENDS

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