The Labour Government’s election promise to ban non-resident foreign property buyers from buying existing property in New Zealand kicked off on 22 October 2018. So far, the change to the Bill seems to have had little impact on the market, despite dire predictions, and buyer activity remains stable.
No surge of activity
On Labour Day 2018, the Overseas Investment Amendment Bill came into effect, officially barring non-resident foreign buyers from buying property in New Zealand. The Bill aims to address the country’s housing shortage and affordability issues, effectively opening up the market to more New Zealanders wanting to buy homes.
While the ban restricts foreign buyers from buying single, standalone homes, it still allows them to purchase large, newly built apartment buildings and developments for the purpose of selling. Residents of Australia and Singapore are also exempt from the new laws.
Despite predictions of a plummeting housing market or a flurry of foreign buyers getting in “before the door closes”, it’s been business as usual. While real estate data from the third quarter shows buyer enquiries – most notably from China – increased by 59 per cent, buyer activity does not appear to have spiked.
Chief Executive of Real Estate Institute of New Zealand (REINZ), Bindi Norwell commented, "Our view is the houses bought by foreign buyers make up such a small percentage at the moment, so it’s really minimal."
Little to no change
Quoting recent figures from Statistics New Zealand which show the proportion of foreign buyers fell from 3.3 per cent in the March 2018 quarter to 2.8 per cent in the June 2018 quarter, REINZ says the passing of the Bill will do little to improve affordability given the relatively low numbers of foreign buyers within the market.
“If we look at other countries that have implemented similar policies, we can see that it’s had a very minimal impact,” said Ms Norwell.
An increase in housing supply, reducing the LVR restrictions, and simplifying the home buying process are initiatives REINZ believes will have more of an impact.
CEO of Property Institute, Ashley Church, says the new law will do nothing to reduce house prices, and believes it could even have an adverse effect on the New Zealand economy as the country has previously welcomed foreign investment.
Whether or not the Bill will have any effect on house prices and affordability remains to be seen. As with any changes to legislation, it takes time for the impact in the industry and market to be felt. If you are considering buying property – either your first home or an investment or rental property – talk to our team of professional mortgage advisers first, to ensure you’re getting the best deal.
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