National refuses to say if party will scrap foreign home-buyers ban if elected

Friday, 14 July 2023

The National Party's housing spokesperson Chris Bishop told Q+A that there was a dire housing crisis in New Zealand.

National is tight-lipped over whether the party intends to scrap the foreign home-buyers ban introduced by Labour if it wins the October election.

When pressed on the subject, a spokesperson for National said: “You’ll see our policy when it’s released”.

The ban on foreign home-buyers was brought in by the Labour Government in 2018, as a way to take some of the heat out of the property market and keep foreign speculators away.

Associate Finance Minister David Parker said removing the restrictions would add heat to the market, because demand from overseas investors would rise.

“National should come clean about what it would do with the restrictions, including explaining why it would make housing less affordable for New Zealanders by allowing foreign buyers back into the residential land market,” he said.

“Homes are for people to live in, not for foreign investors to get rich on.”

National has already pledged to scrap a raft of Labour-introduced policies designed to help first-home buyers.

The plans include reducing the bright-line test from between five and 10 years to two years, making any form of capital gains tax more easily avoided for investors, and returning mortgage interest deductibility, which would allow them to subtract mortgage interest payments from rental earnings for tax purposes.

Parker said data showed the restrictions on foreign home-buyers had helped ease demand pressure on the housing market.

Statistics New Zealand data shows the number of homes bought by people without New Zealand citizenship or resident visas reduced from 3801 in 2018, to 492 in 2022.

According to CoreLogic, on average 90,000 to 100,000 properties are transacted a year, suggesting foreign buyers were not a huge contributor to demand, but were a contributor.

Parker also pointed to a reversed trend that has occurred since the ban was introduced, which showed more foreign owners were now selling, than buying.

“This policy is one reason why proportion of homes sold to owner-occupiers has grown – it has been a successful policy.”

The proportion of sales going to first-home buyers has increased markedly in recent times.

CoreLogic data shows first-home buyers’ share of purchases in the second quarter of 2023 was 25.2%, their highest share on record.

CoreLogic head of research Nick Goodall said this was in the context of a slow market overall.

He said the strong showing from first-home buyers would be due to a number of factors, including stricter restriction on investors, such as loan-to-value ratio requirements, and stricter lending rules for banks.

Christopher Luxon has announced a number of policies that are expected to boost the housing market.

The Overseas Investment Amendment Act 2018, which introduced the ban, does include exceptions designed to allow overseas investors to make investments that would increase housing supply.

These included allowing 60% of the apartments in a new development to be sold to foreigners, and the increased housing pathway, which allowed overseas persons to purchase land for development under certain circumstances.

Australians and Singaporeans were also excluded from the restrictions.

“These exceptions, combined with the restrictions on overseas ownership, support the Government's objective to use the Act to add to new housing supply without fuelling demand,” Parker said.

“The restrictions on foreign home-buyers have helped ease demand pressure on the housing market, as confirmed by housing data from Statistics NZ.”

David Parker says the ban was designed so foreign investors who wanted to increase housing supply could still invest.

New Zealand Property Investors Federation (NZPIF) president Sue Harrison said her organisation was neutral on whether the ban should be lifted.

She said lifting the ban would likely put more heat back into the market and increase the price of homes investors held, but she said investors would also find themselves competing against foreign buyers for properties.

She said most local investors bought to hold long-term, and higher prices would probably mean many could not make a purchase.

Harrison said the NZPIF were more interested in fighting for the reinstatement of mortgage interest deductibility.

Labour labelled the tax advantage a “loophole” which gave investors an unfair advantage over first-home buyers, because they could outbid them, taking on large debts, and deduct the interest payments on those debts from rental income, keeping their tax bills low.

Under leader Christopher Luxon, National has also abandoned the bipartisan Medium Density Residential Standard (MDRS) which would have allowed the building of three homes up to three storeys on sites in most urban areas.

National has instead pitched its own housing plan, which will focus on greenfield developments on city fringes, a move National housing spokesperson Chris Bishop said would create more competitive urban land markets by “smashing urban limits”.

Also on the chopping block if National return to power is a requirement on the Reserve Bank to take sustainable house prices into account when setting policy and lending rules.

Economist Shamubeel Eaqub was critical of National’s plan, saying the requirements made it explicit that sustainable house prices were integral to a stable financial system, and that the Reserve Bank had an obligation to take house prices into consideration.

In 2022, Labour also introduced rules to increase the transparency of companies and reveal their beneficial owners, in order to help identify overseas buyers using companies to skirt the foreign home-buyers ban.