Who does the foreign buyer ban affect and will it make housing more affordable?

Thursday, 16 August 2018

Who does the foreign buyer ban affect? First published in 2018.

The ban on non-residents buying property in New Zealand will not completely cut out foreigners from the national property market.

In June overseas buyers made less than 3 per cent of national house transfers, data from Stats NZ says.

The Overseas Investment Amendment Bill will make it more difficult for overseas buyers but exemptions mean some might be unaffected.

So who does this ban really affect and will it make housing more affordable?

**READ MORE:

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Who does the ban affect?

The Overseas Investment Amendment Bill will stop foreigners not intending to live in New Zealand from buying most types of homes, except for new apartments in large developments and multi-storey blocks bought off plans.

So Pay Pal founder and Donald Trump supporter Peter Thiel who is a New Zealand citizen is not captured by the ban.

Anyone holding a resident visa, and has been living here for at least a year, including at least 183 days in the past year, is still be able to buy a house.

Similarly, Titanic director James Cameron who has snapped up a swathe of land in the Wairapapa wouldn't be excluded as he has stated he will live indefinitely in New Zealand with his family.

Large developments are one or more multi-storey buildings that are part of a single development, where each building consists of at least 20 dwellings, but new build standalone houses are included.

Existing homes will remain off limits to non-residents but people from Australia and Singapore will be exempt from the ban due to free-trade rules, but must be screened by the Overseas Investment Office (OIO).

Anyone holding a resident visa, that has been living here for at least a year including at least 183 days in the past year, will still be able to purchase a home.

Damper Bay on Lake Wanaka, where Peter Thiel owns land.

What about overseas companies, trusts and other corporate structures?

Pitt & Moore lawyer Geoff Caradus said companies registered outside New Zealand and those that are at least 25 per cent foreign owned will still be treated as 'overseas persons' and need consent from the OIO to buy residential land.

They will be screened but not necessarily banned.

In June, Trade and Economic Development Minister David Parker announced plans for the ban had been relaxed to allow investors to buy apartments after pleas for tweaks poured into Parliament before the submissions deadline earlier this year.

The OIO will consider applications based whether the investment will bring significant benefit to New Zealand's economy, Caradus said.

Which areas could be most affected by the foreign buyer ban?

In the June quarter there were 48,453 property transfers, including 39,627 home transfers, up 1.5 per cent from the same time last year, according to Stats NZ.

About 86 per cent of the those were by citizens and residents, 2.8 per cent were by people who held student or work visas.

And as we saw earlier, in June overseas buyers made less than 3 per cent of national house transfers.

But 11 per cent of house transfers were to corporate entities including New Zealand or overseas owners. Information on the ownership of corporate entities is not available.

The highest proportions of home transfers involving overseas residents were in Auckland (6.5 per cent), Queenstown (5.2 per cent) and Hamilton (3.5 per cent)..

Within Auckland the suburbs with the highest proportion were Waitemata (the inner city, 22 per cent), Upper Harbour (9.2 per cent) and Howick (8.2 per cent).

Will it make houses more affordable for New Zealanders?

Depends who you ask.

Founder of Pay Pal Peter Thiel famously spent only 12 days in New Zealand before his citizenship being granted.

The Government thinks so.

Parker, who is responsible for the bill, said the 'significant milestone' would help make the dream of home ownership a reality for more Kiwis.

But Real Estate Institute chief executive Bindi Norwell said the ban won't really make a difference in light of the latest statistics.

'We have been very vocal over the past year that we don't believe that banning foreign buyers from purchasing property in New Zealand is going to have any impact on house prices nor will it help young people into their first homes,' Norwell said.

'Banning some 3 per cent of the market from purchasing homes in New Zealand is not going to have a significant impact on house prices.

'Increasing the level of supply, speeding up the consenting process, creating consistency at councils around New Zealand and reducing LVR restrictions for first time buyers are all more appropriate measures that will help with affordability ahead of banning offshore investors.'