Foreign buyers 'rush to beat property purchase ban'

Friday, 19 October 2018

A rush of foreign buyers snapped up New Zealand homes, trying to get in to the market before a law change made it impossible to do so, new data suggests.

Changes to the Overseas Investment Amendment Act prohibiting foreign buyers purchasing existing residential property in New Zealand will take effect on Monday.

But Chinese international real estate website Juwai said buyers had tried to beat it.

There was a 59 per cent increase in Chinese buyer inquiries on New Zealand residential property on the site in the third quarter of this year.

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Stats NZ data shows the level of buyers who do not have a residency visa - and will be excluded under the new laws - has been running at less than 3 per cent.

That does not include purchasers who buy using corporate entities. They make up another 8 per cent of the market.

Carrie Law, chief executive of Juwai, said she expected foreign buyer transactions to fall away over the rest of the year because of the number that had been hurried through before the ban.

They should then pick up again from early next year.

'New own-use buyers will enter the market, and developers will have the undivided attention of offshore investors who can no longer purchase second-hand property.'

Brad Olsen, an economist from Infometrics, said the data was in line with what he would expect.

'What's interesting is exactly what we define as a foreign buyer – this is something we haven't been able to nail down in the property transfer statistics from StatsNZ yet.

'There may be a small group of those who will remain eligible to buy property, who may have nonetheless been spooked by all the discussion around the ban, who may also be trying to buy property before the ban.'

He said the foreign buyer ban might increase downward pressure on house sales volumes in the near term. 'However, with both house price growth and house sales already slowing, we don't expect the ban to have a major impact on the housing market moving forward.'

Bindi Norwell, chief executive of the Real Estate Institute (REINZ), said the report matched anecdotal evidence she had heard.

'However, until Statistics New Zealand releases its updated figures we'll be unable to confirm this for sure.

'It is our view that 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 or affordability, nor will it help young people into their first homes. Increasing the level of supply, speeding up the consenting process, creating consistency at Councils around New Zealand and reducing LVR [Loan to Value] restrictions for first time buyers are all more appropriate measures that will help with affordability ahead of banning offshore investors.

'REINZ has worked closely with the Overseas Investment Office over the past few months to help ensure the industry understands the requirements and can begin complying with the act from Monday,' she said.

Law said it was other migration settings that made a bigger impact.

'A mother from near Shanghai told one of my colleagues that she expected her daughter to study at the University of Auckland in 2020. She is trying to find a home where her daughter can live,' she said.

'In the long run, rules for work visas and permanent residency are more important for Chinese buying in New Zealand than are foreign buyer restrictions. Most Chinese buyers here are purchasing for their own use while living in New Zealand. They are able to buy as locals rather than offshore buyers.'

She said buyers were pleased to see the government temper its ban. It originally required foreigners who bought apartments from plans to sell them once the building was complete.

Now the ban will allow foreign buyers to hang on to apartments or houses bought off the plan, as long as they are part of a development that is 20 or more units large.

Existing homes and apartments remain totally unreachable for foreigners who do not intend to reside in New Zealand long-term.

Law said Chinese buyers liked safe property investments that were easy to manage.

'They often prefer new or like-new property that is central, convenient, close to schools and universities, and easily rented. Many Chinese are worried about the Chinese real estate market and the Chinese economy. They want a safe investment overseas in a country that perhaps they also might like to live in one day.'