New Zealand will ban foreigners from buying existing homes, joining a growing list of nations trying to make property more affordable for their citizens.
“Foreign speculators will no longer be able to buy houses in New Zealand from early next year,” Prime Minister Jacinda Ardern said at press conference in Wellington Tuesday. “We are determined to make it easier for Kiwis to buy their first home, so we are stopping foreign speculators buying houses and driving up prices. Kiwis should not be outbid like this.”
House prices have surged in recent years, driving the average value in the nation’s biggest city, Auckland, to more than NZ$1 million ($685,000) and putting property out of reach for many younger Kiwis. While New Zealand joins other countries in restricting sales of existing homes to foreigners, such measures have done little to curb prices in places like Hong Kong and neighboring Australia.
“Foreign buyers of existing homes have become the target of governments globally with increased taxation and buying restrictions,” said Sophie Chick, head of residential research at Savills Australia. “This though hasn’t really put the brakes on foreign investors who often prefer to buy off-the-plan anyway.”
Chinese money has pushed up home prices around the world, stoking concern among locals in cities from Vancouver to Sydney. Auckland is the fourth-least affordable property market in the world, according to Demographia.
Ahead of the Sept. 23 election, Ardern’s Labour Party campaigned on making home ownership — which has dropped to its lowest level since 1951 — more attainable for first-time buyers.
However, there is limited data on how many non-resident foreigners actually buy residential houses in New Zealand, with the previous government claiming they accounted for as little as 2 percent of overall purchases.
“This is a policy that’s designed to solve a political problem,” opposition finance spokesman Steven Joyce said. “Evidence in both Australia and here in New Zealand is that overseas buyers don’t have a significant impact on the housing market.”
Ardern said she nevertheless hopes the ban will “take some of the heat” out of a market that’s climbed 56 percent in the past decade amid record immigration and a housing shortage. While there has been some cooling in recent months, the average New Zealand house still costs NZ$646,000.
Ardern’s Labour-led government will introduce an amendment to the Overseas Investment Act to classify residential housing as “sensitive,” meaning non-residents or non-citizens can’t purchase existing residential dwellings. Australians won’t be affected because New Zealanders are exempt from Australia’s policy.
The law change also removes a hurdle to New Zealand signing up to the revised Trans Pacific Partnership, a trade agreement between 11 countries that may reduce tariffs and boost the country’s exports. Member states will seek an agreement on the TPP at an APEC meeting in Vietnam next week.
In its current form, the TPP would maintain foreigners’ access to New Zealand property. The new government, sworn in only last week, faced having to re-open negotiations, which risked scuppering the deal at this late stage.
The domestic law change on foreigners buying homes provides Ardern with a work-around.
She wants to introduce the legislation before Christmas and pass it early next year, before the TPP is ratified. She said it then won’t breach any trade agreements except the Singapore Closer Economic Partnership, which would be worked through with Singapore.
“The proposed change means we can move our focus away from land issues at the negotiating table at APEC,” Ardern said. New Zealand still has concerns about Investor State Dispute Settlement clauses in the TPP, she said.
— With assistance by Emily Cadman
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