A list of growing countries are trying to make real estate more affordable for local citizens, and to do that they are banning foreigners from buying existing homes in their countries. This global trend has now reached New Zealand.
Prime Minister Jacinda Ardern, stated at a press conference held last week that, “Foreign speculators will no longer be able to buy houses in New Zealand from early next year, we are determined to make it easier for Kiwis to buy their first home, so we are stopping foreign speculators buying houses and driving up prices. Kiwis should not be outbid like this.”
With prices of real estate surging in the last few years, and driving the average value of the nation’s largest city Auckland to more than NZ$ 1 million which makes property prices extremely high and out of reach for many local citizens.
However, even with New Zealand joining countries in restricting or heavily taxing sales of existing homes to foreigns and non-residents, such restrictions haven’t done so well in countries like Canada, Hong Kong or even Australia for that matter.
Sophie Chick, who is the head of residential research at Savills Australia said that “Foreign buyers of existing homes have become the target of governments globally with increased taxation and buying restrictions, this though hasn’t really put the brakes on foreign investors who often prefer to buy off-the-plan anyway.”
The Majority of the foreign investment coming in Vancouver, Canada and Sydney, Australia come from China. This has pushed up prices across the world. Auckland, is now regarded as the fourth-least affordable property market in the world.
However, there is extremely less data available on how many non-resident foreigns actually buy residential existing homes in New Zealand. The previous government of New Zealand claimed that it accounted for more than 2% of the total transactions in a given year.
Obviously, this announcement by Prime Minister Jacinda, has become a hot political debate in New Zealand. With the opposition claiming that there aren’t as many foreign investments happening in New Zealand. However, the spokesperson for the opposition party, Steven Joyce did admit that this move would take care of the current spurt in the real estate market.
The real estate market in New Zealand has risen by 56% on average in the past 10 years, and this has happened during while there is high immigration and low housing availability. Even with the recent months of real estate becoming cool, an average house in New Zealand still costs NZ$ 646,000.
With Prime Minister Jacinda Ardern’s labour-led government, is set to introduce an amendment to the Overseas Investment Act to classify residential housing in New Zealand as ‘sensitive’, which would mean that non-residents and non-citizens will not be able to purchase any existing residential housing in New Zealand.
However, New Zealand will still be allowing Australian citizens and residents to purchase exist housing property because a similar deal in favour of New Zealand was struck when Australia banned foreigners from investing in real estate.