A ban on foreigners buying homes in New Zealand has come into force, as the Labour-led government fulfils an election promise that critics say could be a popular but won’t solve the lack of affordable housing.
Housing became a major campaign issue for an election last year that ended the National Party government’s near decade in power and landed Jacinda Ardern the premiership in a surprise result one year ago.
Ardern had blamed overseas speculators for driving up prices, making it unaffordable for many young Kiwis looking to buy their first home. Nationwide prices have gone up 60% in the last decade, and in Auckland, the largest city, prices have almost doubled.
But critics say the Labour-led coalition’s answer to the problem – banning foreigners – won’t make a big enough difference in a market where economists reckon there is a shortage of around 100,000 homes.
“Increasing the level of supply, speeding up the consenting process, creating consistency at Councils around New Zealand and reducing LVR [Loan to Value] restrictions for first time buyers are all more appropriate measures that will help with affordability ahead of banning offshore investors,” said Bindi Norwell, Chief Executive at the Real Estate Institute of New Zealand (REINZ).
Official figures suggest foreigners, mostly from China and neighbouring Australia, only account for 3% of the homes bought nationwide, though the data does not capture property purchases made through trusts and corporate entities.
Prices in New Zealand are beginning to fall. The latest benchmark QV house price index showed that nationwide residential property values fell 1.6% over the three months to August.
Australians and Singaporeans are exempt from the new ban. Resident visa holders in New Zealand are also exempted.
The government slightly relaxed terms of the ban in June, when it decided non-residents could still own up to 60% of units in large, newly built apartment buildings, but not existing homes.
Ultra-rich investors have been drawn to New Zealand, by the islands unspoilt, scenic landscape and clean environment.
Canadian filmmaker James Cameron, the director of Avatar and Titanic, has bought farmland near the capital, Wellington, and more recently, American billionaire tech tycoon Peter Thiel also snapped up several hundred acres of land on the South Island with a view of the snow-capped mountains.
Real estate data showed foreign buyers, particularly from China, rushing to buy property before the ban comes into effect.
Chinese buyer inquiries for houses in New Zealand rose by 59% in the third quarter, according to Chinese real estate portal Juwai.com. Data on actual purchases was unavailable.
But quick deals offered to beat the ban probably played a role in the recent uptick in house prices.
“The data clearly shows buyers from China have been anxious to complete their transactions in advance of the rules,” said Carrie Law, CEO and Director of Juwai.com.
“In the long run, rules for work visas and permanent residency are more important for Chinese buying in New Zealand than are foreign buyer restrictions. Most Chinese buyers here are purchasing for their own use while living in New Zealand,” she said.
Many young Chinese come to New Zealand each year for study and employment, while others have bought second homes for retirement.