David Hargreaves questions whether as currently drafted the Government's offshore house buying ban will prove counter-productive

David Hargreaves questions whether as currently drafted the Government's offshore house buying ban will prove counter-productive

By David Hargreaves

It is possible to have too much of a good thing. Ice cream for every meal for example. Seems like a great idea till you try it. Then, not so much. 

Just maybe, unless it is reworked through the select committee stages, the Government's proposed new law banning offshore-based people from buying New Zealand residential property will prove to be too much of a good thing.

While the new legislation doesn't say so as such, I believe it in-effect represents a total ban on offshore buyers either acquiring existing housing stock or building new stock. That's right, unlike Australia, an effective ban on building new stock. And yes, that last bit requires a bit of explaining, which I will.

For nearly five years now I have been commenting on this website in favour of some restriction on offshore buying of housing.

An Australian-type solution with a ban on sale of existing houses, but allowing offshore buyers to build new houses has always seemed the best approach to me.

Yes, okay, the effectiveness of it in Australia has been questioned. I guess because people have found ways around it. Maybe there are ways in which it could be applied better then.

The theory is certainly good. It means offshore investors are prevented from bidding up the prices of existing housing stock - but they can add to the new available stock. That latter thing would be a boon for New Zealand with our housing shortage. It's a win-win.

Now, I thought that the Australian combination was pretty much what we would get from the ban proposed by the new coalition government. But it isn't.

You can build - but then you must sell

Would-be offshore buyers can, at a pinch build new houses (if they prove their case to do so, and get an 'exemption' under the new law). But they then have to sell!

The preamble to the bill says this: "The Bill requires that conditions be imposed if an overseas person purchases residential land utilising one of these exemptions, for example, if an overseas person purchases residential land to build houses on it, they will be required to sell the land when the houses are built."


The Bell Gully law firm has done a nice little summary, giving its early impressions of the draft legislation.

Bell Gully makes the observation that the forced sale of the newly built property "appears to be an onerous condition that will effectively close down pre-sales to overseas persons who are looking for a rental property investment". 

And there's more: "It also does not appear to allow an overseas buyer to hold the property if there is a market downturn during the construction period. Conversely it would seem to result in any gain being taxable both under ordinary principles as well as under the two year bright line test," Bell Gully says.

So, I might be accused of going too far in saying this new bill represents a 'total ban' on any offshore investment in New Zealand housing - but surely, that will be the effect, if this bill gets passed into law as is.

Going through hoops

Why would anybody want to go to the trouble of going through various hoops (as would-be offshore buyers will have to) in order to build a new house in New Zealand - only to then have to sell it within a prescribed period out of your control? (The period in which the offshore investor has to sell appears to be 12 months although that's not absolutely clear). Then what about the additional risk of possible exposure to adverse market conditions within the sale period? Or on the other hand probable exposure (if the market's good) to taxation on the gains?

I wouldn't do it. Why would anybody?

So, for whatever reason - presumably philosophical - this Government is in effect saying no more offshore buyers of either existing or new houses. New Zealand is closed. Bugger off.

A lot of people will say "hurrah!", I know that. I understand the reaction. But, look, it's ice cream for every meal. It's a sugar-coated poison pill. 

No, we don't want hordes of offshore investors driving up prices for existing housing stock.

But we are short of houses. Attracting some offshore-based capital in to build new ones is a pragmatic response to the situation we are in. New Zealand's a small market that struggles to attract capital. It's not smart to start sending the signal to people in other countries that we don't want their money. Such a signal may be taken rather more broadly by offshore investors than just applying to housing. There may be nervousness about ANY investment in New Zealand.

We do want offshore money. We just need to control how that money is applied to our advantage as a nation. Make the pot bigger. All that kind of thing.

A big symbolic gesture

The Government has clearly intended this new legislation, being rushed through as part of its '100 Day Plan', to be seen as a big symbolic gesture. I agree with the idea that you send a signal that says this country is not an 'easy touch' that can be readily taken advantage of. National has spent nine years sending entirely the opposite signal.

But raising two fingers to the rest of the world (as I would argue this legislation does) is not sensible. Not particularly when we could do with some extra money pumped in to build some more houses.

If we limit our options totally in terms of where funding for new houses will come from then  it will get left more and more to the taxpayer to build the new houses. That's what will happen. Can we collectively afford it?

I hope this legislation gets reworked and that some sensible clauses will be added in that do give offshore buyers the realistic opportunity to fund the building of new houses in this country. 

Otherwise that ice cream could start to curdle in our stomachs quite quickly.

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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It is possible to both ban foreign investment in existing stock and simultaneously encourage foreign investment in construction? As the Australian implementation has demonstrated, the new construction component is a loophole for foreigners to invest in the existing stock. Policymakers (and those that comment on policy!) often over-estimate the power of regulations, and in this case we cannot have our ice cream and eat it too. We simply cannot effectively ban foreign investment in the existing stock while maintaining foreign investment in construction.


All good stuff IMO. If kiwis cant afford to build at the moment its just a sign of a skewed market. F*** the foreigners, lets get kiwis in to homes.


So, if Offshore Buyers don't buy The Land ( for all the reasons noted) then who does? New Zealand residents. "But they won't because they can't afford it. We need Offshore Capital to do that". The answer to both those dilemmas is - lower prices. Offshore Buyers WILL 'take the chance' if the entry cost is low enough (a lower price addresses both the risks mentioned), and local buyers will have the resources as well.
The policy may seem odd at face value ( And I, like you, thought The Aussie System would come in!) but the more you think about it, the more it makes sense.


If Kiwis can't afford land at the currently crazy prices and foreigners cannot buy it, then market forces will lower the prices to the point where Kiwis can afford it; simple economics. The minimum price that land will fall to is the price of farmland, which is the only other use that it has.

Simple economics except you missed the variable called time.

If an investor purchased land at $100 and subsequently government caused the land to be revalued at $50 without recompense to the investor that revaluation doesn't trigger the sale of the land at $50.

It could simply result in that land not being offered for sale for a very long time.

We could always setup a witch hunt against all the 'land bankers' the government created. We could have a wealth tax so they can't afford to cashflow the mortgage they have on the land and have to declare bankruptcy.

If we are really lucky we can declare the whole thing a failure of the free market.

I fail to see what is wrong with a witch hunt against land bankers. Like all investment there are risks and if govt made policies to advance those risks against land bankers, ie by making them ether build with high risk or lose a lot of money through land tax thereby forcing a sell then bad luck!? They bet on national keeping status quo and lost along with national and by not selling like their role model mr key had done they are now going to lose money or bankrupt. Companies go bust all the time when not adapting to change early on and this applies to land bankers too.

Here's an idea

The government could set up a "Twyford 100,000 Fund" and each foreigner wishing to invest in NZ property could be invited to buy $1 million Twyford Bonds that could be used to build the 100,000 houses, when built the foreigner can be offered to take title or accept a cash payout of an "affordable price" or on-sell it


We just need an Icelandic reset, then kiwis on kiwi incomes can afford homes again.

Economically it is bad policy, but largely irrelevant as poor capital gains of the last 12 months mean foreign investment is no longer a problem.

Politically it is brilliantly bad policy, for the government to scapegoat foreigners (primarily Chinese) with everything. Auckland has overpriced land, because the council has been restricting supply for 8 long years. The new government is opening up new land supply all around Auckland. The reduction in costs will allow more buildings to be constructed and may well end the housing crisis.

The ban on foreign investment, will allow the government to blame price falls on foreign capital flight and the surge on building on the elimination of foreigner speculation. If something like this largely irrelevant policy did not exist, it would be immediately obvious that the entire housing crisis was generated by Auckland Council.

I think the boat has sailed and the new legislation won't actually do anything.

The majority of the foreign buyers have stopped buying now so we are seeing a correction in the market. This is not unique in Auckland - Sydney amongst others are feeling the pinch. People are going to be bloody upset in a few months when their property they bought in Palmerston north for $650k is worth much less then.

sammnz, I agree with you as regards the legislation.It wont do anything. But the flat market is not a market correction. Have a look at how consistent the price data is over the last 30 yrs. Its at the end of a RE cycle pure and simple, not because of some market correction brought on by the flight of the Chinese buyers (3%, come on!).

If it was only 3% then shoudnt be a worry

This is not about adding new supply in Auckland, it is about labour punishing national loyalist particularly the land bankers and over leveraged PL. This behaviour is common when a new/opposition party comes into power. The first thing you do is how to attack your opposing parties voters base while strengthening yours so that the chance of re-election will be higher next time round.

We still have immigrants coming in, and in Auckland, the council still has its boundaries so land will still be in short supply.

Thank you for clarifying that foreignors must on-sell the houses they build. I was very much in favor of the new ban on foreigners buying existing houses but I agree 100% that if they have to on-sell, they won't build and that's not a good thing

Not a good thing is foreign landlords receiving top ups of their rent from the public purse. Of them we need precisely zero

Actually it fixes the big problem that Australia and Canada have both been experiencing - which is that when foreigners buy or build new properties, they keep them vacant (which is why these countries now have vacancy taxes). So not only are they not adding to the real supply of homes for locals to live in, they are tying up scarce capital and construction workers to produce something of no benefit to the local population. If the aim is to increase the supply of homes, then forcing foreign investors to sell the new houses is the only way to ensure that new supply actually ends up in the market. Seeing as we have a massive undersupply of homes, then hopefully this policy will ensure that supply continues to grow and prices fall more in line with local household incomes not the availability of money needing laundering by foreign owners.

Can you pay 650k for a house in Palmerston North????

If it's worth doing it's worth rushing.

"He who hesitates is lost"
"Strike whilst the iron is hot"
"Make hay whilst the sun shines"

lol - damn the torpedoes, full steam ahead


The foreign purchasing of housing policy is excellent, and is obviously going to be very effective - judging by the opposition to banning foreign purchasing by Treasury, large corporate lobby groups and neoliberal spokespeople protesting in the media ( not including this article which is well reasoned).
Once foreign purchasing of NZ land, housing & farms breaches minor levels then NZ is effectively ceding sovereignty.

“Don’t ban foreign ownership, if you do that watch as first home buyers deposits get wiped out and end up with negative equity”. “Foreign buyers only made up....what....3% of purchases so useless legislation”. Etc etc

Lol. So which argument is it then?

Not sure, i was mocking the rhetoric.

Yes, I was also mocking the anti- foreign ban schizophrenic rhetoric!

I think a lot of the confusion with the 3% of buyers being foreigners is that this number does not include the many "new New Zealanders" i.e. foreigners who have attained Kiwi citizenship. Anyone who was a regular at the Barfoot auctions on the North Shore knows that the majority of buyers have been ethnic Chinese, and most were speaking in what I presume was their mother tongue. I expect many of these people were in fact Kiwi citizens so while those attending the auction might comment that it seemed like a majority of buyers were foreigners, most are actually New Zealand citizens. Banning overseas buyers won't change a great deal, if my observations are anything to go by.

Our foreign buyer stats did not include those here on student or work visas and trusts etc were not included in the list either. I know that Aussie and Canada did include student and work visa holders, so our numbers were not counted the same. There were plenty more foreign buyers, concentrated for most of the time in Auckland, the figures were NZ wide. At some stage in parts of Auckland it is very possible foreign money made up the bulk of that which purchased houses. It is gone, now, called home, it shows. I reckon its now being conspicuous by its absence is proof enough of the effect it was having.

It's was never 3%.

Non citizen and non resident buyers was running in the 40% region for Auckland residential property sales for a long time.

The legislation is to prevent a spike like this occurring again.

"Non citizen and non resident buyers was running in the 40% region for Auckland residential property sales for a long time."

We have a winner for the Chinese Buyer Hysteria Prize. There was intense competition, but I think we can now call the game over.


All that loose dosh pouring in also pushes up the currency so making earning a living by exporting that much less profitable. Thus, ownership of NZ assets moves from residents to new residents and non residents. As you say, Treasury and large bank lobby groups are the enemy here.

Personally I am in favour of pretty much banning the purchase of new as well as existing houses by non residents. The article assumes that new build houses in Australia actually increase the housing stock available to rent. Is there any evidence to support this assumption, or are the new apartments being kept vacant (and thus in pristine condition, or not even fitted out) or used for a holiday flat or for family? Also, the author assumes that by and large people will not try to undermine or evade the regulation. I would argue that going along with the rules of our society is very much ingrained in us, partly as we have a certain input into them through the political process. People from overseas, particularly from more populous or non-democratic societies are more likely to see rules as stupid and imposed and thus seek to get round them.

Having said that, there is more than a bit of misdirection here. The new government can make a big noise about Doing Something, but the real issue of too much immigration escapes any action at all. I am hearing the expected backtracking here, what with "We need people to build our houses for us" and "We need people to build our roads for us" and "We need to find homes for those those poor boat people fleeing persecution in their home country" (actually I am torn in two on that one). Not being able to build our own houses is pitiful, how low can we go? The problem has been too many people coming in so that we are unable to build the required facilities (houses, roads, hospitals, schools, water supply) fast enough. I suspect nothing will get done and Labour will follow National policy just as National followed Labour policy on that one.

" I suspect nothing will get done and Labour will follow National policy just as National followed Labour policy on that one"

Depressing thought, lets hope they have the balls to implement the changes they promised.

I used to think the fashionable thoughts about immigration being a Good Thing. Now I think it can be good, and I do enjoy the variety it brings, but it has two serious difficulties that we have been turning a blind eye to.

Firstly, the rate of immigration must be one we can actually cope with, otherwise we get degradation of our society such as excessive housing costs, transport and public services get clogged up, crime rates going up, and a breakdown in social cohesion as everything stops working properly. This point is beginning to be understood more widely, but usually the "answer" seems to be more regulations which actually decreases our quality of life.

The second difficulty is the cultural one. This is so delicate, but do we really want people with bad habits? These range from really bad habits like honour killings and acid attacks and terrorism, to wanton theft, to just not moving aside on the pavement if you are a woman. Women are also at risk of being spat at for wearing what we would consider normal clothing. The stories out of Europe on this issue are chilling, despite the media trying to pretend they do not exist.

Thirdly, it is a Snake eating its own tail. Immigrants fill the gaps in our employment market, today. But they too, get old. So we need the next batch to replace them. It's a Vicious Circle..... Japan seems to have it about right. Deflate EVERYTHING, including your population to fit the sustainability of your country; not just keep sucking the marrow out of it.....

I agree MortgageBelt. We’re seeing some serious pushback from vested interests and neoliberal media. Portraying first home buyers as a human shield is another tactic. I saw someone commented that skilled workers miss out, what a joke. Skilled workers on high incomes are the biggest winners if house prices become affordable to them again. They buy a house and settle down. Skilled workers are currently leaving Auckland because they can’t compete with foreigners to buy upper quartile homes.

This is the only government we’ll get with the political will to actually do something. I hope they don’t get pressured into implementing a watered down version.

This is the only government we’ll get with the political will to actually do something. I hope they don’t get pressured into implementing a watered down version.

Agree. We potentially have one chance to make it as comprehensive as possible before any possible CPTPP (whatever the letters are now) signing.

Why would anybody want to go to the trouble of going through various hoops (as would-be offshore buyers will have to) in order to build a new house in New Zealand - only to then have to sell it within a prescribed period out of your control?

I thought they could lease it too? I would prefer they couldn't and had to sell, but as I remember this was in an earlier press release.

I get annoyed when I hear industries say lowering LVRs will help FHB in Auckland. Actually no, what would help is to keep these policies (and the proposed new ones) in place, and for house prices to continue to remain flat or decline. FHB need lower prices, not larger mortgages. Stop speaking "on their behalf".

I commented on this topic this morning .

Government needs to avoid making this so complicated that even high-skilled professional migrants on work visa'a cannot buy a home here .

They are going to need a special application for a Surgeon to buy a home if he comes here under the skilled worker category


I need a special application to buy a home here too... I think its called $200,000.

Well , there are some skill-sets that we just dont have enough of . Like the shortage of surgeons , air traffic controllers , SAP specialists or bio-chemists , science academics and professors , etc .

We still want these people to come here.

We have enough $2 shops , enough nail shops , enough hairdressers enough late -night retail liquor outlets and more than enough taxi drivers with Phd's in Nuclear Physics ( why do they bother? ) or other skills that that we dont recognise

If we strip lesser countries of their skilled citizens leaving them with their lesser skilled countymen to attempt to fill the gaps left by the exodus. These countries in turn become dependant on us for aid of all types.
While immigration could be good for us, there is always a loser.
Long term we are better off educating and creating the right conditions locally rather than importing a quick fix and creating problems elsewhere in the world.

Stripping of talent is what has been happening to NZ for decades as NZers leave for the bright lights and better pay.

"we are better off educatiing" exactly, but no one wnats to pay for that. I saw an interesting video, actually 2 this week. One was on Trump wanting to spend $130billion on new navy ships, the other was the cost of tertiary education, $60billion. To me its pretty obvious which is the better deal, but them I am not a vested interest.....

For the first group, it comes down to poor salaries. For the second group these are semi-skills on or near the minimum wage...the trouble is we need jobs for these ppl and they cannot become the first group/

Boatman - those jobs you mention are on the skills shortage list and people will be given permanent residency to do them so no issue for them buying houses.

Do we really want people here on 2 year work visas buy houses? If they can prove they are an ongoing asset to NZ then they can get permanent residency.

"Well , there are some skill-sets that we just dont have enough of ....air traffic controllers...

@Boatman. There are more than enough people in New Zealand that are capable of becoming Air Traffic Controllers. If there were to be a shortage, it wouldn't be from the lack of ability of New Zealanders, it would more likely be from lack of training and management.

It would really be good if people didn't make comments about industries that they have no understanding about.

But does the lack of ability to buy a house in other jurisdictions hinder their ability to attract the talent that is needed. May be interesting to find out.

An Australian-type solution with a ban on sale of existing houses, but allowing offshore buyers to build new houses has always seemed the best approach to me.

I agree with this... makes sense to me.

Apparently so. This one is $1.3m, and there are loads more that are more expensive.

and it's $330k below RV.

The Australian policy does not require offshore parties to build new housing. It allows them to buy new dwellings.
Like Roger I have some skepticism around this policy. At least anecdotally it seems many new dwellings bought by offshore remain vacant, so they do not really contribute to redressing the supply / demand issue.

I think OZ's are still facing the similar issue even with the updated legislations. The sky-rocketed Sydney and Melbourne can say it more than my words. I think what NZ is pushing forward is painfully (at this moment) a correct way to move forward. We should remember that when we have opened the door for immigration and China has opened the window to throw the money, I believe it will be arriving wherever suitable. NZ is not different than any other country in the world. I think we should not open the our doors so widely that the extreme blows of investors rather threaten to destroy the total economy and workforce in it. If we have gained the economy a bit, its time to use that kinetic energy to generate something else. Something to benefit long term not only to NZ itself, but also to human as a whole in the world. Opening the door for next generation research on agriculture, space science, smart city are just to name from those enormous number of puzzles the world is awaiting somebody to take lead on. Why should we miss that opportunity. It will be healthy for our next generation, who will be building better future that we can be proud of. In that run, I assume not only China, there will have lots of other countries going to potentially invest to this hard working and beautiful country.

As it stands it looks like foreign buyers can route any purchases via Singapore anyway. Anyway I think it’s all meaningless anyway.

I wouldn't say it's meaningless, however I would say a more meaningful policy approach would be to introduce both a land tax and a cgt

Quite possibly meaningless – but by definition – it’s at least something.

Which is more than it was before.

yes a very big loophole, strange how in Singapore they changed the law in 2005 to protect their citizens over foreigners and this is the society that our politicians hold up as the most open in the world and we should follow, yet we did nothing

Restricted Properties for Foreigners

An expatriate CANNOT purchase restricted residential properties unless he or she obtains an approval from the Minister for Law. These restricted properties that foreigners can’t purchase without authorization are as follows:

> Vacant residential land

> Terrace house

> Semi-detached house

> Bungalow or detached house

> Strata landed house (NOT within an approved condo development like townhouse or cluster home)

> Shop house for non-commercial use

> Associated premises

> Place of worship

> Worker’s dormitory, service apartments and boarding house

Actually if you think about it a bit deeper this may be good policy for the time being.

We keep getting told that our construction & building industries are running at 100% capacity, for foreigners to compete for that resource, will only push up building prices and I dont think the govt will be interested in having kiwibuild prices escalating

Hmmm -and then land banking - taking a hammer to that well overdue!

But I probably digress.


I think the intent is right - that being that foreign capital is welcome as a spec build-to-sell, but not as a build-to-let.

And that makes perfect sense to me. Given NZ's tourism boom and the high profit, easy money to be made via Air BNB and other residential short-term visitor accommodation, there is a great deal of interest offshore in our tourism market.

Point is though, we need to house locals before tourists and I can't see any offshore investors interested in the low yield, local home rental business.

This government has thought it through, and they've got it right.

The "forced to sell" rule is excellent

It's highly doubtful overseas people will be interested in build-to-sell. Can see the desirability of build-to-hold. Not sure commissioning a new-build is all that easy from a remote location. Assuming it could be made easy there is every incentive for local authorities to release swathes of land, get the land-developers in, do the roading and waters etc, the foreign build industry gets cranked up and lots of new-builds get done. If they could hold we could end up with a lot of ghost-suburbs, un-landscaped, un-kempt, tired.

Nice - thank you Kate - on the mark as always.

If overseas buyers can't buy houses because of the ban, they will buy commercial property instead.
The proposed new law only applies to residential property.
Makes you wonder if a commercial property has an element of residential in it e.g. shops plus a flat, would be that also be caught.

I had wondered exactly that, BD. Plonk up a multi-storey 'commercial' building, leave it at the column-and-plate stage. have a cursory look for commercial tenants, whoops, no takers.

Fit out the plates above ground level as apartments, bank the cash (purchase or lease, either works) and carry on.

It's the same stor(e)y every time: offshore (and, for that matter, onshore) Legal Beagles and BeanCounters are faster, more adept, and better funded than Gubmint drones. The former are used to finding the gaps and driving their clients' truckloads of cash straight through 'em. The latter then gape in wonderment as their Good Intentions end up in a Hell of a state.

T'was ever so.

Totally agree with the author here. The intent of this legislation is good but sending the message that we are not ‘open for business’ with foreign buyers is not good. We just don’t have the capital base to support the pace of housing growth we need to truly address supply and associated house price issues.

I reckon we are sending a message that "We are Open for Business!". Just at a lower price point.
I wouldn't buy an iPhone for $1499, but I would at $500 etc.
And as for foreign capital? There's more of it out there than you can shake a stick at! Give it a reason to come here ( a lower the entry price) ...and it will! Of course, the competition is hotting up!

A third of homes on the market have had asking price cut - by an average of £25,000..In London, 40pc of property listings have seen a price reduction – up from 37pc in July – by an average of £53,251. Kensington and Chelsea remain the most discounted Borough ( our Auckland? ), with average reductions of just under £130,000.. (Telegraph-today)

Not enough capital....probably because our capital is being sucked out in the form of mortgages and rent to the banks. We have low inflation but if you add housing to cpi inflations is at crazy levels. All of this is driving wages up. Traditional savers (retired folk) are going to take a hiding unless there is a reset.

Think we are on the right track?
Isn’t it all about keeping the supply in control? Doesn’t matter which government. End result will be the same.

Another loss for NZ
ANZCO now 100% owned offshore.

The breathless narrative from the media
“Rushed through”. “Foreign ban”. “Fiercely debated”.
They can’t believe a Govt would have the guts to protect NZ.

If the non resident purchases were only 3% then it doesn't really matter whether this new regulation is effective or not.

However it will send a message to all New Zealanders that there is no longer an external driver of house prices, this should be enough (by itself) to slow any price increases.

It doesn't fix the immediate issue however, houses are already unaffordable for many and unhealthy for the whole economy, without out a correction (through increase in wages or drop in house prices) New Zealand's economic performance will be impacted in the long term. For us to retain or regain our quality of life, houses need to become more affordable.

Sure there is some ongoing population growth, so more homes need to be developed/built, along with the necessary infrastructure, but we need to smart about how the development is done, continuous spread only increases the infrastructure cost per home and increases congestion on the motorways

Where is the plan to build a better future New Zealand

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