David Hargreaves says assuming the Government's proposed ban on offshore buying of existing housing stock can be made to work the focus goes back on ensuring future consistent supply of housing

By David Hargreaves

Well, if the Government has indeed come up with a valid way of banning offshore buying of existing housing stock in New Zealand then it is to be applauded for tenacity and resourcefulness.

We need to see the shape of the legislation and whether there are any onerous bureaucratic costs involved through classifying residential housing as “sensitive” under the Overseas Investment Act, but on the face of it, look, all power to the Government.

Obviously, I didn't think the Government would easily be able to find a way around the restraints of our free trade arrangements and if it really has come up with a way that will stick so fairly quickly then questions will inevitably be asked about the previous Government and its justifications for a 'do nothing' stance.

The next question then is, will the ban really achieve much?

That's an interesting one. We still don't have convincing information available on just what the extent of offshore buying of our housing stock has been.

Therefore a ban remains in the category of a measure that's attempting to fix a largely unquantified problem.

What the move is though is symbolic. And that's presumably why the new Government was so keen to follow through quickly on the promise of such a ban.

It's a line in the sand. A statement that says 'New Zealand is no longer for sale'. 

So, symbolic, but maybe fairly meaningful too and likely to have a wider impact than is statistically noticeable.

Environments - by which I mean mood and spirit - are important. I think there's no doubt New Zealand has been seen as a 'soft touch'. People have emigrated here because it's seen as easy. They've bought houses here because the perception has been of a very light handed regulatory touch. And then there's the various goings-on regarding the registration of companies here that my colleague Gareth Vaughan has been highlighting.

The previous government appeared to be of the view that we had to bend over backwards, almost dare-I-say, prostitute ourselves as a country to attract overseas interest.

Well, that might have been the case once upon a time when this country was once memorably (and not entirely incorrectly) described by a US official as "a piss-ant little country south of nowheresville". But the world is a much smaller place now thanks to technology. We are on the map.

If we portray ourselves as an 'easy' environment then we are likely to attract the wrong kind of investment attention.

New Zealand shouldn't be offering large parts of the country for the highest bidder. Nor should it be doing things like offering low grade tertiary education that simply serves as a way for large-scale immigration. According to the Times Higher Education rankings New Zealand has just one university in the top 200 in the world (Auckland - at 192). Australia has SIX universities in the top 85.

We need to aspire to attract top people and quality investment.

The right sort of signal

So, as an aspirational measure, the Government's proposed foreign buyer ban sends the right sort of signals - and that might ultimately prove to be its most useful attribute.

As for where we are with the housing market at the moment, well, it is quiet and will be for the foreseeable future.

The RBNZ's 40% deposit rules for investors have done their bit. The 'credit rationing' employed by banks in recent times in response to their own funding pressures has also done its bit.

But just on the latter point, it is worth noting that household deposits held by banks increased meaningfully in September. That's consistent with anecdotal evidence that the squeeze on the banks has been lessening and means in the short term we should not see upward pressure on mortgage interest rates and banks might be more relaxed about lending - notwithstanding the RBNZ's various LVR restrictions.

Theoretically the availability of more money from the banks again at still low interest rates could provide more fuel for the housing market. That's where the psychological impact of the offshore buying ban could help, with less inclination for would-be buyers to indulge in what might be termed panic buying.

Earning its spurs

Having sent some of the right signals on the demand side of the housing market - something that the previous government was very adverse to doing - the new Government's got to attempt to earn its spurs by achieving credible things with supply.

That is likely to be very challenging.

Building activity in Auckland has flattened out at a rate of around 10,000 dwelling consents a year. Stats NZ estimated that in the year to June the population in the country's largest city grew by about 43,000. So, based on three people per home, over 14,000 new homes would have been needed in that period.

Whatever happens to house prices in the short term there will, longer term, be a squeeze on housing particularly in Auckland.

The challenge is to ensure consistency of building through good times and bad. That's something that has not been achieved in the past and is one part of the challenge this Government faces.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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29 Comments

Taking NZ citizen's property rights away on a whim isn't going to attract top people from all over the world. It will deter people from even considering NZ let alone invest. NZ is a country with population of 4.6 million far away from everything else and we have to come to terms of what we can and can't achieve and so the optics are important. So we can't just come up with xenophobic policies that basically tells the world foreigners can piss off then complain about how Australia has universities that are top 100 and GDP per capita of Singapore is much higher than NZ. The main thing is NZ needs them much more than they need us.

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Whim? People have been screaming for this to happen for years. Thank god someone has finally listened. Maybe houses will again become what they are supposed to be, homes.

Ok, so we are happy with policies being made out of fear and people's feelings rather than actual data. No data isn't a good excuse to take NZ citizen's property rights away.

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1. allowing foreigners to invest in our local housing market is insane
2. allowing low level students to become immigrants and take up jobs in cafes and taxis adds no value
3. why do people see xenophobia as a bad thing? Its natural to be wary of outsiders and make sure they fit our needs before the become insiders.

So it's ok for the government to act in haste to take away the property rights of NZ citizens who own property without any concrete supporting data? What's next? NZ citizens who owns a house in the regions can't sell to an Aucklander because all the Aucklanders are on a buying spree pushing the prices up? There isn't a huge contrast between this and Trump's refugee ban.

Banning low-level students whose sole purpose is to gain residency by working as a chef at McDonalds I'm in favour of.

As already argued, this decision is not taken in haste but is an urgent remedy for 15 years of neglect. Housing bubbles in the English speaking Pacific seaboards required regulation and there is plenty of evidence when you look.
It's dim to suggest anyone would regulate property purchase between provinces within New Zeaaland. Again, you could consider NZ people who can't own currently because of a back-pocket economy.
The ones I'm concerned for are those with scarce resources who are just managing to service enormous demands from bank investors.

So you’d be okay if in 30, 60, 90 years time an ever growing chunk of residential property in New Zealand becomes owned by foreign investors who now rent these properties back to New Zealanders? What does that do for our balance of trade?

"So you’d be okay if in 30, 60, 90 years time an ever growing chunk of residential property in New Zealand becomes owned by foreign investors who now rent these properties back to New Zealanders?" It is very evident that the likes of Stevo were quite happy for this happen. Furthermore, many National party supporters were either ignorant, apathetic or equally as selfish in this regard. Let us be frank, selling our assets to overseas buyers is at least short sighted. at most it is treasonous.

What a dim view of the competence of your fellow New Zealanders you must have, to assume that none of the money paid by foreign buyers to New Zealanders for the purchase of their homes is used to any advantage.

Why should NZers on NZ wages compete on the world market to buy a house?
I applaud Labour and consider the FTA's that invite foreigners to purchase NZ land or houses to be treasonous.

FTAs may allow foreigners to buy houses in New Zealand; they do not, and cannot, force New Zealanders to sell their houses to foreigners if they don't want to.

A house seller is not obliged to take the best price offered. He can, if he wishes, sell his house to a NZer at a lower price, rather than selling it to a foreigner at a higher price.

So are you saying that NZers who have sold houses to foreigners are treasonous?

No you’re right how could I have been so blind. The money is spent on imported consumer goods like flat screen TVs and cars.

It may very well be used to some advantage but assuming no inflation that capital our country received disappears in rent over 20 years and well if we factor in inflation then knock another 5 off that.

Stev-O - aka Mike Hoskings.

With this sort of response and mentality there is no way we are going to ever catch up to Australia but thanks, that made me chuckle a bit :)

Catch up with Australia? What does that mean?
You do know that Australia has banned the selling of existing residential properties to overseas buyers?

Yes, but did you look at their GDP/GDP per capita numbers? University rankings? Every aspect of their economy? They can afford to because they are in a much better shape than us. NZ still has lots of growing to do in every aspect and I'm sure if you work in the tech sector you'll know the graduates of UoA are just not up to par for us to compete with the best as the academics are severely detached from the tech industry's needs.

This is a straw argument, regarding removing property rights. Why should non residents have property rights here at all? I don't have any property rights in China, quid pro quo. This reframed, is a question on sovereignty , which you avoid; or more specifically about abdicating sovereignty to the highest bidder. Is that what you mean by top people? People with suitcases of freshly laundered notes? Australia and Singapore, have several top Universities and have had tighter restrictions on property rights then we have ever had. It seems we have been doing it wrong, to date.

Sorry Macadder, I should've clarified. I'm talking about NZ citizen's property rights. The property owners have the right to do whatever they want with their property. They have the right to give the property to their relatives overseas, they have the right to sell to whoever they want as well. What this is effectively doing is eroding our rights. Now if we actually had a proper data that says we have rampant overseas speculators then it's understandable. The fact is we don't and David Parker came out saying so. So what is this achieving other than a middle finger to the rest of the world? Why are we risking a downturn without proper data?

NZ fee simple title owners do not have these property rights you insinuate - just a nonsense - overthrow the Crown (or secede) and take it for yourself then you might have a point there.

Please explain. What NZ law currently prevents me from my house to whomever I choose, at whatever price is agreeable to me and the buyer?

Without knowing much about your "house" it may already be deemed "sensitive" under the existing OIA or perhaps it is in the path of a proposed motorway and under Public Works. Perhaps the buyer is on the radar of the AML or Proceeds of Crime - not in the Christchurch Red zone is it?

Australia has the same fsckng laws on foreign buyers ffs.

A bit more needed here.
Presumably those properties already in foreign ownership become sensitive and will only be able to be sold to local owners.
Carrying on from that and the definition of foreign control being any amount greater than 25% there may be a lot more existing foreign controlled property which will no longer be transferable even within family or partnership.
That is the way it could go (and maybe should go).

Further to this there needs to be onerous penalties for attempting to evade the new rules.
We penalise other tax evaders including imprisonment so as the only thing these people value is 'money' and we cannot imprison those offshore so confiscation is the way to go.

It is probably above board for a resident here to use family money overseas to purchase property in NZ I would imagine. Surely it is a fundamental human right to be able to do that. People like the Chinese are particularly family orientated and folk overseas will help out young families making a new start in a new land. It's a bit of a clash of cultures really.

I have no argument against help from family except then they should have no rights to the title and should sign off on that situation.
Further I am certain that where parents have been allowed into NZ they have brought their retirement saving and have used those to assist in a family house purchase. From observation there just happen to be older immigrants in elder social housing, indeed far more in proportion than their incoming numbers would represent. How did that happen?

NZ does not need wealthy Chinese or anyone else buying up numerous houses here and then immigrating here and living off the rent from those houses. They do not produce any jobs or create businesses,They are just parasites living off New Zealanders who have paid taxes all their lives.

I'm not sure if preventing non residents building a holiday house in the Bay of Islands or Central Otago is a good idea. Will they have to say it's for business use and design it with a meeting room?
Is stopping non-residents from buying an apartment off plans in Auckland for exclusive use going to prevent it from actually happening? Individual buys off plans and rents to a Company.
Too many variations already and too many loopholes - just leave it at existing residential houses and move on.

This Policy may well back-fire. UK have serious Housing problems but so far have resisted placing an embargo on Foreign buyers. The NZ plan could start a protectionest move throughout many advanced Economies...not good.