Published: Thu, August 16, 2018

New Zealand stops foreigners buying homes

New Zealand stops foreigners buying homes

No, only non-residents are affected by the Overseas Investment Amendment Bill, which was passed in a 63-57 vote on Wednesday.

"This government believes that New Zealanders should not be outbid by wealthier foreign buyers", said David Parker, Associate Finance Minister.

Previously the housing market was open to investors worldwide.

Jacinda Ardern, New Zealand's popular 38-year-old prime minister, campaigned before September's election on a promise to clamp down on house price growth and reduce high rates of homelessness, in part by banning foreign buyers. Prices have surged more than 60% in the past decade amid record immigration and a construction shortfall, driving homeownership to its lowest since 1951.

However, statistics paint a more complicated picture nationwide where foreign buyers account for only 3% of buyers overall.

"New Zealand is a little country at the bottom of the world", Key told BusinessTech.

The Government slightly relaxed the proposed ban in June so that non-residents could still own up to 60 per cent of units in large, newly built apartment buildings but would no longer be able to buy existing homes.

Global buyers will still be permitted to buy new properties and land to be used for house building projects. They will need to convince regulators that whatever they do will have wider benefits to the country.

Andrew Weaver says the NDP has been tinkering with the problem, trying to address offshore speculation, but it needs to get serious. He added, however, that foreign buyers aren't the only reason for high home prices.

The ban comes as house-price inflation abates and a slump in business confidence threatens to further curb economic growth.

House prices have nearly doubled over the past decade, according to central bank data, and are up more than 5% so far this year.

There are some exceptions to the new rules.

In Metro Vancouver, data shows foreign buyers are purchasing a minority of properties but just how much varies considerably from city to city. House prices could stop rising before the end of the year or even begin falling, he predicted.

Almost all foreigners have been banned from buying most Kiwi homes in a bid to crack down on overseas speculators. "The RBNZ would likely react with OCR cuts in such a scenario".

The International Monetary Fund's executive board urged New Zealand to reconsider the legislation last week, saying it thought it was unlikely the move would improve affordability for New Zealanders.

But government data suggests that foreign buyers actually only make up a small part of the country's housing market. "Kiwis should not be outbid like this". They will also still be able to invest in retirement villages and student accommodation.

Skyrocketing home prices in Auckland have been of particular concern to New Zealanders, although that market has cooled over the past year. And while residents of China constituted the largest group of known overseas buyers, the next largest group hailed from Australia - which is exempt from the ban anyway.

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