New Zealand’s ministers have stated that they ‘feel like tenants on their own land’ after house prices across the country have risen by approximately 75% in the past five years, but that is about to change.
Upcoming changes to the Overseas Investment Act (2005) mean that overseas nationals will not generally be able to buy an existing home or residential land in New Zealand. Under the new legislation, someone who holds a resident visa, and has been living in the country for at least a year (including at least 183 days in the last year) will still be able to purchase a home.
The changes to the legislation are expected to be finalised and implemented in late 2018.
Minister For Economic Development, David Parker, admitted that the new amendment to the law had been hastily drafted because, he said, of the ‘incompetence’ of the previous government. He claimed that banning foreign buyers would result in house prices becoming more affordable for locals and an increase in the supply of homes. “We think the market for New Zealand homes and farms should be set by New Zealand buyers, not overseas buyers,” he said.
The current housing crisis has caused hundreds of New Zealand residents to become homeless, forcing some to live in tents and garages, or even sleep in their cars.
Mr Parker said the amendment to the Overseas Investment Act 2005 would benefit the economy and New Zealanders who “pay tax here and have families here. We don’t think they should be outbid by wealthier people from overseas.”
In 2017, a survey by the Economist found New Zealand to have the most unaffordable house prices in the world with only a quarter of all adults owning their own home.
The ban will apply to all nationalities, except buyers from Singapore and Australia. Statistics in New Zealand show that 3.3% of homes sold recently were to foreigners, mainly Chinese, followed closely by Australians.
The new laws would still allow foreigners to buy apartments in large-scale block developments (provided they were ‘off plan’ and not used as second homes) which it is hoped would help boost the country’s overall housing stock.
The government’s aim is to build 100,000 new homes in ten years and increase social housing by 6,400 homes in four years.
Economist Shamubeel Eaqub argues that although the government’s efforts are ‘better than nothing’ they lack some ambition. He said: “The foreign buyer ban would make it ‘cumbersome’ for foreigners to invest in building new housing stock in New Zealand and that could dissuade them from trying, meaning fewer homes and apartments could potentially be built. The kind of property that billionaires buy is never going to be used for public or social housing. Locking out multi-million dollar buyers does not mean developers will start building smaller, basic houses. There is never a market for poor people. It is not profitable to build houses for poor people.”
Finance spokesperson for the opposition party, Amy Adams, said that a ban on foreign buyers was ‘xenophobic’, suggesting it had ‘unnerved’ the international business investment community, as evidenced in business confidence falling to its lowest level since 2008.
“The government has put this up as some sort of panacea to the issue of housing affordability in New Zealand, but the evidence is that it is likely to make the problem far worse,” she said.
Estate agent, Hamptons, estimates that around 30% of homes in London were sold to international investors in 2017, prompting London’s mayor, Sadiq Khan to consider ways in which Londoners could be given priority over foreign buyers of less expensive properties.
If you’re thinking of buying a new property in London, or elsewhere in England or Wales, get an independent building survey carried out by your local RICS qualified Chartered Surveyor.
MRE/SH