Housing and Urban Development Minister expects the ban to be passed into law early next year; will ensure house prices are set by NZ-based buyers, not people from overseas

By David Hargreaves

The Government's still going full speed ahead to get a ban on offshore based buyers of existing New Zealand houses in place by early next year.

And the Government says its move will ensure that house prices are set by New Zealand-based buyers, not international buyers.

Legislation to ban overseas speculators from buying New Zealand homes is to be introduced into Parliament on Thursday (14th) the Housing and Urban Development Minister Phil Twyford and Land Information Minister Eugenie Sage say.

The move was a key plank in the new Government's 100 Day Plan. 

While the previous Government had stated it wasn't possible to do such a ban, the Government announced at the end of October that it had found a way of implementing such a ban - by categorising residential housing as “sensitive” under the Overseas Investment Act.

House buying by offshore-based buyers has been a hugely contentious issue - not least because there has been inadequate information on just how many people from offshore have been buying houses.

Sage says the legislation being introduced means for practical purposes, that foreign buyers will not be able to buy residential property unless they are either increasing the number of residences and then selling them or converting the land to another use. "They will need to be able to show that this will have wider benefits to the country," she says.

New Zealand and Australian citizens will be exempt from the regime.

After the Bill has been introduced the Government intends it will be sent to a Select Committee "so New Zealanders can have an opportunity to comment on the details of the Bill", Sage says.

“It also gives the Select Committee the opportunity to make sure the regime is set appropriately so that people who want to make New Zealand their home are not discouraged.”

Twyford says this Government welcomes foreign investment in houses which add to the country's housing supply.

“However, purchases of homes by offshore speculators push first home-buyers and families out of the housing market.”

Twyford says the legislative changes demonstrate the Government’s determination to make it easier for New Zealanders to buy their first home.

“We expect the law to be passed early next year fulfilling a key pledge in our 100 Day Plan. The previous National government said it couldn’t be done without breaching trade agreements. They just didn’t try and in doing so, they put foreign buyers ahead of New Zealanders.

“This Government prioritises home ownership and housing affordability for all New Zealanders. This Bill will ensure that house prices are set by New Zealand-based buyers, not international buyers,” Twyford says.

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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85 Comments

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Good

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Hurry....................up.

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well done

Great !! ....that is one excuse taken off PT menu of moans, let's see who will he blame next year ...!!

Either way, I hope he does keep ticking off excuses so at least we can actually be more informed as to what the drivers of this housing mess are.

I just hope it doesn't encourage an upsurge in off-shore buyers buying a perfectly good dwelling in a desirable location and knocking it over and rebuilding a bigger better more expensive home or multiple dwellings under the change-of-use loop-hole

Probably will, sadly.

I suppose it depends on what you call "perfectly good". In my suburb, purchasing from an estate, demolishing the house and rebuilding far more expensive homes is an existing practice e.g. a 1,200m2 section with an old house was purchased for $1.6m, subdivided into two and the new homes were sold for a combined value of $6.2m. The same owners bought the property next to it and appear ready to do the same thing again.

That owner will only do such a project if it is profitable.
May I suggest that the forward view of housing in NZ will make it less likely than previously.

All first home owners who have bought property in Auckland during the last 3 years have just lost $100k to $200k, probably their entire deposit and life savings. You voted for it......you got it. Around the rest of the country not so bad. Probably only lost $25k to $50k, but again most lose their entire deposit and life savings. This will affect the typical 'Jacindarite'. Supporters of the Coalition of Losers. The one looking for hand-outs and a free lunch. So you'll get your miserly hand-outs and free lunches, but lose your life savings. Good on ya. For those of us who used our vote more wisely, we sit and wait to pounce on the mortgagee sales, the divorces and forced sales, the' tenants to be again' who we can crank the rent up on again. Isn't democracy great. Your greed is your downfall. When you get a little older and wiser you'll see how you really did identify the enemy to your financial security. Your enemy was within. For the young ones hoping to buy a home at the cheaper prices, yes the prices will be lower, but will they continue to keep falling after you've bought? probably so. But also, will you be able to afford 7% and 8% interest on your mortgages. Watch this space in 12 months.

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But at least they have a home eh? So you’re batting for the side that suggests foreign purchasers did have a considerable impact on house prices despite the 3% figure?

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Had to happen sometime.... i feel sorry for those that may be affected however If people over extended themselves given all the information about how unreal house prices are unfortunately that's life. You sound like a lovely chap.........

It appears unlikely that any generation gets a clear financial run. Early settlers had a big recession in the 1890s, then wars, stock market crashes and an ensuing depression nobbled my grandparents generation. My parents generation had the oil crisis and Muldoon. We shared the '87 crash, interest rates at 22%, then we lost jobs in the early 90s recession. There's no reason to expect my children's generation to be spared. Crashes and recessions are cr@p to live through, but you do come out the other side. They too will learn the value of a steady income, putting away money for the future and living within their means. Anyone thinking that it will be nirvana for FHB are likely to be disappointed. New builds will slow down, you will wait for the bottom that you miss (because you listen to the bears too long), the banks wont want to lend when you want to buy (valuation vs purchase price) and you'll see the monied group picked the eyes out of the market before you knew what happened.

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Ex Expat, apart from the oil crisis and Muldoon, your parents generation had access to Housing Corp loans from 3% when everyone else was paying up to 20%!

True, for their first home at least. I visited it a few years back. Basically a brick shack. Their second home was employer funded at 3%, limited to a one time draw. Their second mortgage was 6%. They never owed more than $25,000 according to my father, which is lucky as neither parent has had a meaningful income for the last 25 years and it’s starting to show in the home maintenance, even with modest inheritances. I’m trying to work out a way to provide them with liquidity and maintain a roof over their head. I’d like them to have no money worries at this stage in their lives.

Retired Poppy
Actually a State Advances Loan could be less than 3%
My father was in a senior position and paid a point more than our Post & Telegraph worker neighbour who was paying no more than 2.25%
Completely different times & expectations you have to remember a phone was on a party line

Party Lines still existed out at Linton Military Camp back in 1983/85.

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It sounds like the enemy to our financial security is you.

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Wow...you're a little bitter...

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"your greed is your downfall" says someone who is waiting to "pounce on the mortgagee sales" and the "tenants to be again".

You are exactly the type of person I hope goes to the wall, I'll raise a glass to your financial demise.

X2

SolidNam
I shouldn’t raise a glass to spruikers

Allears...at some point interest rates were going to rise,it's better for the younger ones if that happens with a 200K mortgage than a 500k one...yes there will be collateral damage,just as lots of pensioners lost everything with the likes of Blue Chip when it went belly up...

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Seems a bit hysterical Allears, I find it strange that National supporters were so adamant that foreign buyers didn't need to be banned because there were so few of them it was a waste of time, but now it's happening they are changing to now saying it's going to completely crash the market.
I wish they could make their mind up..
Only a fake housing market is reliant on overseas buyers anyway.

Some ugly sentiments there, Allears. Eating alone?

This won't necessarily be the work of this policy. House prices in large metro areas are dropping over the world. This policy is too little, too late

Foreign purchasers appear almost Schrödinger-ian. They're both present and not present, make all the difference and make no difference at all, and it's apparently impossible to observe them.

Schrödinger-ian purchasers are easy to measure.

Place a live mouse outside their Box, and listen for Excitement inside....

ShapeShifters Rick!

@Zachary @Kate
28 Kenny Road, Remuera
To be sold by auction on 14 Dec (tomorrow)
http://rwepsom.co.nz/properties/residential-for-sale/auckland-city/remue...
2017 CV = $3,800,000
2014 CV = $2,300,000
Jul-2014 SOLD price $2,350,000
Dec-2017 homes.co.nz median price estimate = $3,760,000
Sold at auction tomorrow = $?,???,???

Well. it's definitely going to sell by the looks of it. 3.8M I reckon.

Apparently this auction has been brought forward after only a week in the market, which is telling me that the vendor has accepted a pre-auction offer so the reserve tomorrow will be the offer price! I also think around $3.8M ^^
https://www.trademe.co.nz/property/residential-property-for-sale/auction...
Note - this property is not in the DGZ but if you can have a Kenny Rd address, you probably don't need GZ LOL!!

DGZ, This is a nice property with good location, but if it can be sold for 3.8m or above tomorrow, how about that one at Ranui in the DGZ? If can get that one under 5m, a better buying than this. DGZ is a very important fact, also Ranui one has a beautiful appearance design and bigger floor area.

Thanks Cherrytree. The Ranui Rd property had the highest bid at $4.65M on auction day but it was passed in. The asking price is now $4.98M so I think it will go somewhere in between...maybe $4.8M. I know DGZ is very important for a lot of people...all the schools around here are either Decile 9 or 10 plus there're so many high profile private schools e.g. Kings, St Cuths, St Kent, Corran, Dio, Baradene etc etc...you name it. Also it is almost 'priceless' to live in a leafy suburb, with wide streets, close to amenities and the CBD - all feel good factors. That's what people are paying for.
Note - I'm not a RE agent LOL!!

Yes I mean high 4m is reasonable price. :) It’s fine if anyone is RE, they work hard for both vendors and buyers, earn commissions for themselves and their company and pay taxes.

The architect for 23 Ranui Rd is Sholto Smith (from Canada), one of my fav's. His masterpieces are truly out of this world! ^^

I like the special design. Hope the owner get good price.

Yes I love it too...in fact I love all arts and crafts type houses!!

This is a beautiful home, but it is only barely, just barely "arts and crafts". The external is loosely within the style, but none of the handmade bespoke features that define the movement are there and the inside has been entirely painted and modernised, losing a lot of the arts and crafts vibe. In particular the garage, kitchen and outdoor oven area completely ruin the period look. A great shame for what would otherwise have been a stunning house.

Here is a classic arts and crafts style house for sale which hasn't destroyed the period features;

http://www.rightmove.co.uk/property-for-sale/property-51168009.html

OMG that's my forever home gingerninja!!

DGZ - Are there any really old houses (circa 1900) left on Victoria Ave?

Ex Expat, yes there are plenty :-) some of them have long driveways and are not street front. However, some have also been replaced by contemporary build's.

Thanks, I have an image of a relative in front of their Vic ave house in 1902. I’ll find out more about the location and go hunting.

I like that house but its just a house, weather board, nothing amazing. Nearly 4 million thats nuts.. This took me seconds to find, there is so much more in this world, to buy something like that for 4 mill.

https://www.prestigeproperty.co.uk/15-bed-french-chateau-limoges-haute-v...

700,000 EUR plenty of money for a fix me up. Rent out some rooms I dont know but 4 million for a weatherboard run of the mill home, in Auckland. Nuts.

@swapacrate it is the location

What Auckland. In the middle of nowhere, closest country is Australia. USA is miles away as is Europe. Where most NZers earn pesos compared to Europe.

That place is in France with an approximate population of 60 million surrounded by Italy, Spain, England. Fly a helicopter etc. 4 mill is nuts for Auckland. NZ market size is tiny with a limited number of buyers who can afford it.

Europe has plenty more then that property its just an example, in Europe people earn way more money and have more money.

Buy a Chateaux in South of France live the lifestyle wine cheese or buy a weather board house in Auckland and fight the traffic to pay off your debts while you drive to work.

Sounds Great.

Going cheap in NZ standards, but I bet they do not risk leaky building construction and the wood in the kitchen looks real... real wood in cabinetry again. Man that is what I miss. Even in the MDF kitchen cabinetry factory the stuff going for free was a hard sell to people and even then you could not burn it so most just went straight to the dump a couple of containers a week. Nice new fittings, good exterior custom made furniture including seating windows, kitchen. Mouldings added. How our building industry should hang their heads in shame.

DGZ...all we hear about are the leafy suburbs which to a certain degree will always command a premium,but we will never really know whether those properties may have got half a mill more when the good times were rolling,it is all pretty subjective...who I really want to hear from is the owners of the Clendon & Ranui hardiplank leaky rot boxes on cross leases...the mugs who listened to the property guru spruikers and have a 'portfolio' of 5 or more of those shockers...bet they not sleeping too well ...and not because of the heat....wait until it's time to re-finance those puppies...

DGzzzz makes anyone snooze
It’s about boosting his ego
Speaking as someone who actually lived in the best streets of Remmers it’s appalling to see magnificent homes described in mere dollar terms
It’s just not done in good company
This is what happens when little men think they’ve arrived

Well, you did abandon the place Northern Lights and now spend your time, far away, telling us how shite NZ is.

Only people like you Zach

you should consider it, you'd probably do quite well

I'll stick with my A2 shares bought for 10c a long time ago...

VMan
Well done I’d like your A2 shares !

why...you having trouble finding someone to off load your sh*t boxes too?

Do quite well at what ?
He has what degrees ?
None

Just drove past the place and saw a sold sign.

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This is so transparent it made me be a little bit sick in my mouth. It's almost like one desperate sole with multiple accounts having a conversation with themselves, I use the word almost in complete jest.

Agreed.

OMG Boring spruikers agreed

Agreed, the coming slump will fence these property spruiking Glory Hogs.

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Twyford will need good enforcement mechanisns and harsh penalties for this to work; and avoid the shenanagins like they have in aussie of offshore people buying through relatives and freinds etc

But if the property is not in the "owners" name what is stopping the nominal owner from selling the property and pocketing the proceeds. Any number of schemes can be invented but there is one problem - the courts will not enforce an illegal contract.

you can prosecute people participating in these schemes with beneficial ownership rules as they do with money laundering.

with your example you are right i think, these schemes could be risky for real owners

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This is great news for New Zealanders. It’s not perfect but it’s a little impediment to foreign real estate speculators, and it brings NZ inline with other OECD countries. The sad truth is for many non home owning kiwis in their 30’s and 40’s this will be too late. IN upper quartile Auckland where all the doctors lawyers scientists and engineers would like to buy, house prices have at least doubled, more like tripled in price from 2010-2016. It’s a pretty simple calculation to see how long it takes for 3% wage inflation to catch up with a doubling in price ln(2)/ln(1.03) = 23 years. Subtract eight years to bring us to now and you’re left with 15 years. So we need 15 years of flat house prices for doctors lawyers scientists and engineers wages to catch up with 2010 house_price:income ratios so they can buy homes in upper quartile Auckalnd again. In 15 years someone who’s 30 will be 45 and pushing the boundaries of mortgage eligibility – you see the problem. Perhaps with lower interest rates and likely price declines in upper-quartile regions the problem may not turn out that bad. However, the National party have pushed a generation of non-home-owning kiwis in Auckland to the brink of financial ruin. I’m not surprised all the teachers are leaving. Thank you Labour / NZF / Green for doing something!

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Great news. I hope more can also happen on this front. There seems to be a trend of wealthy overseas buyers buying up large blocks of land by our fresh water lakes. Why the overseas investment office keeps granting these sales is beyond me. How can this be benifiting New Zealanders long term.?

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This government that has much more sensible policies than that last one, is changing the OIO rules as well.
Some very good and long over due policy changes happening..

So glad this will be out of the way. Time to concentrate on seeing to it that Auckland has a food basket at the end of all of this immigration madness.

Not from what I see out Pukekohe. Its plainly stupid the council allowing residential housing to consume all that fertile volcanic land.

Wouldn't surprise me in this mad world that one day cabbages will be flown in daily from China.

Great for future generations :)

Apologies if this a dumb question, but would the proposed legislation prevent Facilitators from purchasing on behalf of foreign buyers?

I only ask this as my partner recently mentioned that a Facilitator from Australia had just approached their Real Estate Company (not mentioning any names) and had a few Chinese Buyers wanting to grab some NZ Property and they had a nice wee budget of $10 mill.

As we are looking to be FHB i find this slightly concerning if there are still easy loop holes for them to get around.

First time comment, go easy on me :)

I worked as an expat in a country where foreigners could not legally own property. It didn’t stop them buying them through third parties, although required trust on the part of the owner. If you come from a culture where you would never rip off a family member I’d say it was even easier than those buyers had it.

Dear ExPatt
My former neighbour in Auckland bought multiple homes & farms for family & friends back home all using his name in filings via companies & trusts
Nothing special there

Agree it will need to factor a strategy to fence that off from abuse.

How about say all funds need to show NZ paid tax bill to match the volume of funds? Put the onus off proof on the money. I also think there should be a massive fine for the accountant, lawyer, Realestate firm for anyone found to be assisting the bypass of this legislation to the tune of the unpaid tax equivalent of the capital used in the purchase. Cant pay, assets seized by the tax payer and resold into the NZ domestic market.

You can Bet the Farm that even as we (who have little or no Skin in the Game) Common Tate harmlessly away here, there are bevvies of clevver Legal Eagles, BeanCounters and other Birds of Prey, poring over the OIC processes and leaked first drafts of the legislation, figuring out all the byways and back alleys.

And they are smarter, faster, and infinitely better funded than the Gubmint wallahs.

It has always been this way: this time is no different......

Of course there will be many ways to circumvent the ban but to the pollies it’s about perception and fooling the gullible voters into believing there is a ban in place.

DelBoy
You aren’t stupid
I agree with you it’s about perception
Wonder if they ever do something about taxhavens too ?
It’s pretty bad up here

Why work and be burdened by massive mortgages for a dog house when you can get a beautiful townhouse similar to those that are asking for million dollars in Flatbush when you hop onto HNZ?

http://www.stuff.co.nz/life-style/homed/houses/99811170/Whats-a-new-stat...?

Why save for the future when you can simply hop on welfare at 65 too?

NZers have the right to a pension at age 65
Let’s try and keep that or does NZ wish to erode its society even more than the housing policy disaster and open immigration policies

I'm not against the pension, I'm pro consistency.

Even earlier if you are a 'qualified partner'. It's good to be a toy boy....

I understand that Australians have been buying property as part of their Super schemes. CER should be changed to restrict their investment to a house that they can only occupy personally.

BasilB
The farce that has been the great Australian Super Personal Account is laughable
The AU govt let the rules allow its citizens to borrow against their Superannuation accounts !
It was the AU govts plan to help keep their E Con o my running along
Alas now their “Diversified Super Accounts” are collateral on their 2nd & 3rd property investments ! All exposed to any drop in the AU housing market !
It’s Australia ! It’s always smoke & mirrors

I hope that those foreign investors already holding property here are forced to sell up with a time limit set.
Also if they change the ownership in any way (even in family transfer ) they have to meet the new rules in full