With a change in government comes a change in policy and the first of these is a ban on foreigners buying existing property in New Zealand. Just how much of an impact this will have on the New Zealand property market remains to be seen, with many experts believing only a small percentage of property buyers will be affected. Is the ban simply a political move or will it help curb rising house prices?
Labour bans foreign property ownership
At the end of October 2017, newly elected Prime Minister Jacinda Ardern announced that from early next year foreign buyers will no longer be able to buy existing houses in New Zealand.
Aimed at curbing the rapid rise in house prices driven by demand from overseas speculators, the policy will see existing housing classified as “sensitive” under the Overseas Investment Act.
"Kiwis should not be outbid like this,” Prime Minister Ardern said. "That is why we are introducing an amendment to the Overseas Investment Act to classify residential housing as 'sensitive'."
The ban will mean that anyone who is not a citizen or a resident of New Zealand will need approval to purchase an existing home. Foreigners will still be able to buy land and develop housing on it, while Australians would be exempt from the ban.
Very little impact
Many property industry experts are questioning the ban saying it will have little impact on the property market, citing data collected by Land Information New Zealand since 2015 which shows just 3 per cent of all property purchases are to foreign buyers.
Critics have also compared the policy to similar legislation in Australia where a ban on foreign ownership has had little impact on slowing down the market there, with Australia ranking as one of the most unaffordable countries worldwide.
Trade Minister David Parker said the change to house prices would be marginal, saying foreign capital flowing into New Zealand and pushing up house prices was more of a problem two years ago.
Parker stated that the move was not about fixing the current situation, but rather about protecting future New Zealanders, both in terms of supply and demand should the country experience another hot property cycle.
As Australian banks in New Zealand already have restrictions in place around lending to buyers without a local income, any further move to restrict foreign buyers is unlikely to make a big difference, says CoreLogic senior analyst Nick Goodall.
Measures like the bright-line test that would impose income tax on gains from residential land purchased and sold within two years, the healthy homes act and moves to improve tenants' rights were more likely to deter property speculators.
Changes to policy
As policies change, it’s vital you work with an expert who understands the market and legislature. Get in touch with a Mortgage Express adviser if you have questions or concerns about buying property in New Zealand.
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