The Government's coming under pressure to make changes and exemptions in its legislation barring offshore buyers from owning existing New Zealand houses

By David Hargreaves

The Government's proposed new law banning offshore-based people from buying New Zealand residential property may yet see fairly substantial changes, with a huge number of submissions having been received.

One interesting possibility is whether the Government will decide to exempt "luxury houses" owned offshore from the ban. Apparently the Select Committee considering the bill actually asked one of the submitters to offer up a new clause for the bill that exempted "luxury houses" from the new rules. The submitter has now done this and presumably this will now be considered.

Submissions for the bill, which is before Select Committee, had to be in by April 10. Over 300 have been received.

A report from the Finance and Expenditure Committee is due by May 31.

A number of potential issues were raised with the bill in its original form, including complications for companies such as power companies and telecom companies with substantial offshore ownerships that might routinely buy land, or with holders of forestry rights. 

These issues will need tackling and appear likely to have been done so by the next reading of the bill in Parliament. A Supplementary Order Paper dealing with the forestry issue and some other related issues has already been produced.

But there may well be other changes made too - given the pressure the Government's coming under.

The Queenstown Lakes District Council has submitted vigorously that the current legislation "does not recognise the important distinction between the role of overseas buyers in the regular housing market and those in the luxury home market".

The Queenstown area has some very highly valued properties and attracts substantial offshore interest from wealthy buyers.

QLDC said in an earlier submission this year that according to Land Information New Zealand data, the Queenstown area currently welcomes the second highest number of international buyers in the country.

"When considered in the context that we are the 32nd in the country when ranked by population size with a population base of just 32,410 people, it is clear that the relative negative impact of this Bill will be disproportionately shouldered by our community." 

The council says in its latest submission that the legislation cuts off the significant benefits, investments and philanthropic donations currently received from overseas buyers in the luxury home market. It also detrimentally affects a thriving industry of tradespeople, businesses and artists that support the luxury home market.

"This industry would arguably struggle to exist without the high end investment in craftsmanship that these buyers generally aspire to."

In their submission the Queenstown Mayor Jim Boult and chief executive Mike Theelen say that when the council had appeared before the Select Committee earlier this year "we were asked to recommend wording for the development of an exemption clause for overseas investors in luxury homes".

This they have now done, with the suggestion that houses above $2.5 million be excluded.

QLDC therefore seeks the following addition to the definition of “residential land” in clause 4 of the Bill to achieve this exemption:

"(c) does not include land on which there is or will be a single residential dwelling together of a value in excess of $2,500,000 (or such higher amount as is specified in regulations) on the district valuation roll for a territorial authority that is specified in regulations; and different values may be specified for different territorial authorities."

The Queenstown council submission says if the exemptions are not made "the shock to the luxury housing market will be considerable".

"Without the above changes, the Bill will cut off the significant benefits, investments and philanthropic donations currently received from overseas investors, who also participate in the luxury home market.

"Purchasing property within the country is often the start of a far deeper relationship with high net worth individuals that benefits the country in terms of expertise, connections, investment, development and philanthropy."

The Queenstown Council has also recommended that, assuming exemptions are applied, every exempted overseas investor is required to make a compulsory contribution of 2.5% of the value of their purchase, to an affordable housing scheme in their district.

"For example, a purchase of a $2.5M property in the Queenstown Lakes District, would require a compulsory contribution of $62,500 to the Queenstown Lakes Community Housing Trust (or other nominated scheme)." 

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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79 Comments

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36

Foreign buyers not a factor.

Suddenly, foreign buyers are a factor.

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35

One law for all, except the rich. They can buy whatever they want!
Surely a Labour Govt will not enshrine these principals in law.

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12

It can only lose them support if they do.

Where would that support go?

Where it has always been

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37

Foreign buyers constitute a mere 3% !!! Very strange what was trotted out by National as a negligible ripple is suddenly showing the makings of a tsunami.

It is clear that powerful business interests are merging to bring pressure to bear upon the government.Including perhaps marshalling IMF support .

One hopes that the government will remain steadfast and not cave in to self-serving interests notwithstanding their spin on serving the wider interests of the community.

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24

Agreed. I wish they would stop dithering with select committees and put this into place. The longer they drag this out, the less hopeful I am that an effective piece of legislation is put in place

3% by number could still be 50% by value

Purchasing property within the country is often the start of a far deeper relationship with high net worth individuals that benefits the country in terms of expertise, connections, investment, development and philanthropy

Is anybody in the media interested in getting some measurable definitions of the above and then going and proving or disproving such marketing slogans?

QLDC maybe the only area these relationship values applies to significantly?

Bollocks.

Look at the Peter Thiel example.

Purchasing property within the country is often the start of a far deeper relationship with high net worth individuals that benefits the country in terms of expertise, connections, investment, development and philanthropy

Well, that itself is more a declaration than anything else...

I think everyone know's the trickle down effect is nonsense. Bryan Bruce uncovered some Canadian research showing that high net worth individuals, that arrive on wealthy migrant visas, declare less tax than refugees. Unfortunately there's no data for NZ so we cant say either way.

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16

"The Queenstown area has some very highly valued properties and attracts substantial offshore interest from wealthy buyers."
It is imperative that all homes and land are included. Unfortunately some of these highly valued properties include land of significant natural and cultural value to New Zealanders and sale to foreign owners often means loss of access.

It doesn't apply to farms, only residential land.

I suggest that the definition of residential land can be blurred. Given the low productivity of much of the Central Otago region, fairly large blocks of land could be deemed as residential as they are not economically viable as farms.

The government needs to have a policy on farm foreign ownership, not blur the lines. Orchards and vineyards are 'farms'.

There is a luxury property at Tinakori Street, near the intersection of Harriett Street and Motor on-ramp. I hope it will be put on market soon to free up some big debts.

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25

So the QLDC seem to think it is OK to create an exclusive enclave, that will in effect, exclude ordinary Kiwis? The makings of apartheid as in South Africa where the whites created gated communities to keep the black riff raff out. Do we really want this in NZ? Already ordinary Kiwi workers find it hard to afford to live in the area due to housing costs, and we are now trying to make it harder? How soon until they start building the wall to keep us out too? The Americans can help with that!

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15

Do not fear, you'll be able to get in there. They'll need a ready-made servant class. That can be the Kiwi role.

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18

Hate to burst your bubble but those roles will already have been filled by 'highly skilled' immigrants from India and China on 'essential skills' work visas. They'll say the job is 'too complicated' for kiwi's, only highly skilled immigrant workers need apply.

On my recent IT project work, we had several bidders from India and one from China. They were almost 50% cheaper than those Australia/NZ based companies. So bubble has been burst long time ago.

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11

They may be cheaper during the sales cycle but that does not mean the eventual delivery will be.

Unfortunately, tell that to the program manager and he/she will give you a funny look!

Not a problem if they raise the exemption price from $2.5m to $5m. How many 'ordinary' kiwis are buying $5m houses in QLDC? Wanaka is on the road to becoming another Queenstown. Arrowtown is already a preserve for the wealthy if you are looking for a nice house.
QLDC area relies on backpackers to employ - so there will always be some riff raff ;-)
edit: reply is to murray86

I love the cynical humour some display here! Are the houses actually worth $2.5 or even $5 mil? i doubt it. Just another way to achieve some level of exclusivity.

To Rick Strauss I would ask though where they plan on locating the Soweto class slum or favela. I would build it up wind, just to remind them daily of our presence.

Given $2,500,000 is 4.5x the average NZ house price and about 3x the Auckland house price, I'm surprised at the reaction here. Were you potential buyers of these properties? How many of them are there in NZ at this level? What difference does it make to you? Finally, you do realise this is a submission and not Labour policy, right?

as you mention, the pricing is exactly that. It is the point i am making, a way of achieving some form of exclusivity. Exempting it from any restriction makes the entire law a joke, if it goes ahead. If foreign buyers cannot buy the properties, what do they become worth then?

as to it being a submission - it is until some prat with a sense of superiority based on his wallet size decides it is a good idea and gets (or buys) some gullible pollie to enact it in to law. now is the time to challenge it, before it does become a law!

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12

The issue I have with the proposed ‘luxury’ Queenstown carve out is it still pumps up the housing cost artificially for New Zealanders who want to buy a house below the $2.5MM limit - squeezing them out of the market. This request is much more about wanting to preserve the inflated Queenstown housing market than it is to help starving artists. Something has to be done because the amount of population abroad with extreme high net worth and an open door policy effectively all of Central Otago will be foreign owned in 10-20 years.

Queenstown is not in Central Otago District Council area. Central Otago district council area includes the towns of Roxburgh, Ranfurly, Alexandra and Cromwell and all points in between. It will not all be foreign owned in 10-20 years. QLDC district includes Kingston, Queenstown, Wanaka, Hawea.

Its done that in the UK, where a lot of the Super Rich have bought in Sloan Square, Chelsea, Knigtsbridge. This has pushed the lowly millionaires out to Clapham, Battersea etc. Then the guys who only earn £200K plus are being pushed to pay higher prices or move out to the commuter belt.

Now there has been a stall in prices in the commuter belt though.

I have business interests in Queenstown supplying the 'thriving industry of tradespeople, businesses and artists that support the luxury home market'. Genuine Kiwi toilers, whose lives would be the poorer without these top end overseas investors. They are taxpaying, community building Kiwis. People who understand that NZ spends more than it earns so must import capital. And realise that it will go elsewhere if we lock these top end investors out.

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19

Spoken with true self interest, on behalf of the peasants.

Actually on behalf of the aspiring self employed entrepreneurial kiwis who drive our country's economy forward and help deliver NZ a far higher standard of living than the small thinking on display here at int.co this morning, would.

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18

OMG, Sir Middleman Key. Surely these lines were plagiarised from a National party flyer? Thought you would be too busy securing directorships of Chinese Banks to grace this forum.

Surely the proletariat can speak for themselves?

For itself. Your state school education is showing.

We normally call it Public Schooling. They also learned me Ad Hominem their.

Not bad. Thumb up from me.

Then a new Industry can be created Middleman. Renting very high end houses to the foreigners. They are desperate to be here apparently.

Is there any proposal to make the rules reciprocal: they can buy here if we can buy there? Sounds fair to me and how many countries would it apply to?

QLDC submitted if the exemption is not made"the shock to the luxury housing market will be considerable".An admission then the luxury housing market there is infested with overseas High Net Worth Individuals (HNWI) ???? Surprised that 'philanthrophy' is touted among the justifications for their presence.
I thought this word was extinct to them.Or are dinosaurs making a come back?

Yes, no list of the philanthropic good deeds these HNWI's have done to date. It seems that rather than rely on their good will the council wants to Tax them 2.5%.

Most philanthropy is deeply rooted in tax exemptions.

It will be a shame if government dilutes the ban. Should know that ban is bound to affect many speculators and rich though were saying earlier that foreign buyer are only 3%, but now are panicking.

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10

If a kingdom prefers to employ its resources to build palaces for princes from foreign lands. Sooner or later the poorly housed peasants will revolt.

... so very very true ... there's a lot of revolting people in the Kingdom of Orc Land ...

Exempting property values over $2.5Mil from the ban seems sensible. The reality is Kiwis generally cannot afford these properties and it’s not fair on the owners of higher priced property that foreign buyers will be locked out.

... no ... 'cos , even with uber expensive properties , there's a trickle down towards the lower priced houses ...

This flow on effect from highly priced down to lower priced houses is a well known economic phenomenon . ...

...in Orc Land they call it " the leaky house syndrome " ...

Shouldn’t be any exemptions, if this lot want to bring it in!
It will backfire on them though as they will not get foreign investment into NZ!
Day by day the rabble look evermore incompetent!

Look, it's not the kind of foreign investment we need.

We need foreign investors coming here and starting up greenfields businesses. Employing people.

Them buying a house does little to help our economy.

We want foreign investment, for Biotech, Software, Technology industries etc that need highly intelligent people and is easily scalable worldwide. Not sure how high property prices help with this, we don't want the ponzi scheme to continue.

I'm happy for tax cuts to attract this type of investment into these type of industries. I think lower property prices will help for these type of industries as the workers will have more disposable income.

If this coalition has any credibility it will not weaken to this request if they are going to continue with this banning of foreign buyers!
If they have credibility then there should be no exemptions for anything and they should be including the family home in the capital gains tax as well!
They know that they will not get back in if they did this!
Reality is that the capital gains tax won’t come in because this lot will be gone at the next election without doubt, the way they are going!

As far as I am aware the government has not proposed a CGT. But it is extending the 'bright line test' (a form of cgt) to 5 years)

It is important to ask in Queenstown's case : what is letting foreigners buy high value houses actually achieving when the short term economics is stripped out of it. Answer: Many of the most prestigious locations in the area are permanently taken out of the hands of New Zealanders as we allow wealthy foreigners to set the price.
Not a good outcome.

queenstown is a good example of too much foreign money, yes its needed to buy the units in hotels to allow more to be built for tourists , but the amount of money purchasing the houses has pushed the prices too high for locals and rental investors who for that town are needed to house the seasonal workforce.
they now have created a situation where many businesses in the town can not attract workers due to the lack of affordable rentals
riches had to buy houses for their bus drivers, nz ski had to bus them from Cromwell
i know of one expanding nz business that wanted to set up there that turned away because of the issue of finding staff and so now is looking at Wanaka.
the mayor needs to talk to many of the business owners who will tell him they dont need 2.5 mil houses but cheap plentiful rental houses
Staff accommodation is a big issue for Queenstown's hospitality industry, according to Penny Clark, general manager of the Goldridge Hotel and the regional chair of the Tourism Industry Association.
The first question she asks prospective employees is whether they have somewhere to live.

https://www.stuff.co.nz/business/money/75504590/Severe-shortage-of-Queen...

https://thespinoff.co.nz/society/24-03-2017/40-people-to-a-property-eigh...

Present Queenstown Mayor puts in submission, while ex Queenstown mayor gets approval to build Golf course with houses.

http://www.scene.co.nz/queenstown-news/davies-familys-big-resort-plans/

I wonder where the buyers will come from and what prices the houses will be?

you gotta wonder. Golf in Queenstown...just stay at home if you wanna play golf - not despoil the natural beauty of the NZ landscape with one of these enviro retard playthings.

the golf course developer also owns nz ski and ultimate hikes, both rely heavily on a seasonal workforce.
maybe he should put his money into building an apartment building for them

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12

Put the ban in place immediately - no exemptions - then review the results in 2 years time - if the feared doomsday occurs then change course - it's time the tidal wave recedes for a while and Queenstown can just go and take a break for a year or two

The only effect on Queenstowner's above $2,500,000 is they "would" have to put in an OIO application which they are supposed to do now - aren't they?

This is all is just very silly, $2.5m, well just how do we get around this Mr Solicitor if you ...............................then
................ Once you start these sorts of ideas it's rorted in no time. Then we have a special set of rules for Queenstown then what about Taupo on and on goes people never seem to learn

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13

Report on how Chinese gangs are laundering drug money from fentanyl sales through Vancouver real estate and casinos - what odds that exactly the same in play for auckland and queenstown? Factor behind the bubble in nzproperty ?

https://globalnews.ca/news/4149818/vancouver-cautionary-tale-money-laund...

https://www.bnn.ca/video/money-laundering-and-vancouver-real-estate~1325744

That second link is funny, no video there.

Edit: Was my ad blocker

Bet it's a factor here

The proposed QLDC exemption is absurd.
One law for all.

Interesting. I thought that the foreign purchases had already been banned. That explains what my spies are telling me - At the moment the country is awash with Chinese "tourists" travelling around by the bus load, or chauffeured limousines, buying as many properties and farms as they can. When asked about the foreign ban they were not worried in the slightest and said that there were lots of ways around it.
The government needs to frame a very simply worded law that is very general and broad, covering any arrangement that can be interpreted to be circumventing the rules. With property seizure and retention of all costs plus say 30% of the sale value.

I think they're up to a bit more than that!

Taking over the oceans. Academic influence. Corporate espionage. Special economic zones designed to take resources. You name it they're doing it.

https://youtu.be/z6Mqe9CwyB4?t=73

What would constitute a “luxury house”? The answer is every single house in any desirable suburb of Auckland. This would of course render any foreign restrictions meaningless. Just to put that in context 783a Riddell Road (or 1 Wairara Rd) is a crappy 2 bedroom cross leased flat which sold a couple of years ago. I went to the open home. A metal pole holding up the balcony was rusted right through at the base. The carpet was threadbare. The bathroom, nay the whole flat, was in an awful state.

Guess who was marketing it….. Sotheby’s International!

Is it over $1,5mil?

Close, which is, by my estimate, is at least two times what domestic buyers would, could, or should pay for it. Even 750K is an outrageous price for such a piece of crap.

This may just result in the minimum price for a number of houses going to 2.5mil. Why are we wanting foreign competition at that range? Why are we okay to give away our valued property if it’s above a certain value? This screams of vested interests and would be within the parameters the gov is trying to tackle, one would think. Agree with others, don’t dilute the law, make it strong. Especially if we can’t easily tweak once CPTPP is signed. Don’t back down Labour, do it for us little folk.

It is either a good idea to ban foreign buyers or it is not. This rule needs to be the same countrywide with no exceptions, exceptions lead to market distortions, which then leads on to people exploiting the distortion that has been created and we end up back where we started.

I understand Queenstown's perspective, and it's not without merit, however I tend to agree with those who think there should be no exceptions. As Neil says, exceptions lead to market distortions. They also lead to more complex legislation which is never a good thing (simplicity is desirable)

Probably too little too late, foreign buyers left the market last year. This is now just local demand and supply issue. Like I said before no more land created, people need somewhere to stay.

Yes very much agree. I doubt that Mr Key would be able to sell his home for $20 million now.

Though if the government is still going to allow money laundering with this new loop hole, they might be able to make those kind of figures.

If the government allowed for such out ragous loop holes to the Foreign Buyers ban. They would be very quickly voted out of power.

We all know that foreign buyers are very able to exploit political loop holes.

They need to hold firm to their pre-election promises and not entertain such blatant back peddaling.

rather than worry about foreign buyers they need to fix this in queenstown.

Queenstown housing crisis bites, tourism giants buy staff accommodation

Queenstown's tourism giants are purchasing and renting residential properties to house workers who are struggling to find somewhere to live.

Queenstown Lakes District mayor Jim Boult said the lack of workers accommodation was an "ongoing" issue for the town where house prices are the most expensive in New Zealand.

"It will not get resolved until we get some purpose-built seasonal accommodation for workers."

https://www.stuff.co.nz/business/103017338/queenstown-businesses-plan-mo...

mmmmmo will they comply with the tax consequnces? Supplying accomodation as part of a job requires that value to be taxed... so there is still a cost to either employer or employee - it is not a solution unless tax laws are flouted. Is the IRD going toi turn a blind eye? Are these employers going to be targetted in the same was as joe self employed contractor?

Dumb.

This is what happened when the National Government introduced a "High Net Worth" investor visa requiring $1½ million, suddenly desirable houses leapt up in price to (funnily enough) $1½ million.

Suddenly a lot of houses would magically become "luxury" and the problem would continue

Try defining what constitutes "luxury" with a built in escalation mechanism

https://www.interest.co.nz/opinion/60396/thursdays-top-10-10-japanese-pe...
https://www.interest.co.nz/news/76472/concerns-about-housing-affordabili...

I think this will be an opportunity for all the investors to make their investment 'Luxury'; another shameless trap and lobby by the investors actually to increase the price further on other regions like Auckland and Wellington. I think government can potentially add a clause here that in order to purchase a property you will have to build one first; like buy one build one for government/kiwis for free in the same area. This will consequently help the country stake up the house list for free.