Will the new 'golden visa' affect the housing market?
Sunday, 16 February 2025
Changes to visas for wealthy investors, and speculation alterations to the foreign buyer ban will follow, have led to worries about the impact on the housing market.
But experts say those concerns are misplaced.
Last weekend, the National-led Government announced the amount of wealth a foreigner needed to apply for an investor visa would be lowered, and the requirement for applicants to speak or understand English would be removed, as part of an overhaul of the “ golden visa” scheme.
Economic Growth Minister Nicola Willis said it was about “rolling out the welcome mat and encouraging investor migrants to choose New Zealand as a destination for their capital”.
While the government’s emphasis was on the potential for foreign investment to grow the economy and create jobs, questions about how a sudden influx of migrants might affect the housing market soon emerged.
Could lots of wealthy investors flood the market and push up house prices? We talked to the experts, and here’s what we found out.
What is happening?
From April, the weighting system behind the Active Investor Plus visa is going to be replaced with two simplified categories.
One will be a “growth category” for applicants to make $5 million of higher-risk investments, including direct investments in local businesses and managed funds, over a minimum of three years.
The other is a “balanced category” of mixed investments, with a minimum threshold of $10m over five years. Investments in this category include bonds, listed equities, existing commercial property, and new residential property developments.
Once the changes come in, investors in the “balance” category will only need to spend 105 days over five years to be eligible for residency. For investors in the “growth” category, it will be just 21 days.
Why could that impact the property market?
It could lead to an increase in the number of migrants who can afford to buy property.
Greener Pastures New Zealand works with wealthy investors to gain residency through the Active Investor Plus programme. The company’s managing director, Dominic Jones, says the changes will be attractive to the type of high-net-worth “global citizens’ they work with.
With global uncertainty on the rise, these “global citizens” are seeking security, stability, and opportunity, and New Zealand can offer them that along with a great lifestyle, he says.
“Uptake in the active investor category has been low in the last couple of years, but the visa changes will help increase uptake. They are a huge opportunity for the country, and the more we can attract the better.”
But in other countries, such as Greece and Spain, “golden visa” programmes have provoked a public backlash because of property market pressures, and the perceived impact on prices.
But doesn’t New Zealand have a foreign buyer ban?
Yes, the previous Labour-led government introduced it back in 2018, and immigration experts say it will continue to hold back foreign investors.
Queen City Law managing director Marcus Beveridge works with overseas investors and developers, and he says the ban leads to a lack of confidence in potential investors.
“When you are talking to wealthy investors and have to say ‘you can’t buy a house here’, it’s a mumble into your handkerchief type scenario because it’s so embarrassing.”
It is possible for someone who has a residence class visa, but is not yet “ordinarily resident” to buy a home to live in as long as they get official consent before they do so, he adds.
“But you have to live in it for a certain period of time, and once you spend six months here you are a tax resident and liable for your worldwide income, so that’s another issue.”
Immigration law expert Mark Williams, from Lane Neave, describes the ban as “counter-productive”.
It was introduced in response to concerns about off-shore speculative investors buying multiple houses here and pushing prices up, he says.
“But the type of investors the visa changes are targeting are different. They will be contributing to the country, and also present less risk.”
Could the ban be amended?
In the 2023 election National campaigned on removing the ban for those purchasing houses that cost over $2m, but taxing them at 15% of the purchase price.
This policy bit the dust in the coalition negotiations, as New Zealand First has always been staunchly opposed to lifting the ban.
Over recent weeks, rumours that changes to the ban are in the works have been circulating. And this week BusinessDesk reported an agreement with NZ First to allow wealthy migrants to purchase homes as long as their value is above a certain threshold, perhaps $5 million, was nearing completion.
Williams says that if someone is going to invest from $5m to $10m in the country, it seems reasonable to create an exemption for them so they can buy a house to live in.
Allowing them to do so would reward their commitment and encourage them to develop greater connections to the community, he says.
And what would be the impact if the ban was changed?
Not as big as people might think.
Williams says the huge general migration figures that have been seen in the past are inflationary for the housing market, but the sort of numbers the visa changes are likely to attract are not.
They will do well to attract 500 wealthy investors a year, and if they all bought a home, that is not a huge amount of extra sales in the grander scheme of things, he says.
Last year, there were about 80,000 residential property sales nationwide, and this year about 90,000 sales are expected, according to CoreLogic.
“Typically, if wealthy investors do come and buy a home here, they tend to buy homes, which are expensive and at the top end of the market,” he says.
“Those types of properties usually take longer to shift, and there’s a lack of liquidity in that sector, so it shouldn’t be an issue in terms of general price inflation.”
Sam Stubbs is chief executive of KiwiSaver fund Simplicity, which funds build-to-rent developer Simplicity Living. He agrees the numbers of investors likely to buy a home will be too small to affect the property market generally.
“It might have a bit of impact at the very top end of the market, but that’s not relevant for most New Zealanders. I can’t see someone moving here to invest over $10m, and then buying an average priced house.”
The “balanced” visa category includes investment in property developments. What could that mean?
New Zealand has a notorious shortage of housing stock, and it is widely recognised the market would benefit from an increase.
Beveridge says having property development as an investment option could help to build more houses that are desperately needed.
He points to Auckland’s North Shore as an example of somewhere that developers, originally from other countries, have been building a lot of new houses for years.
“When we talk to potential investors, many of them like to invest in stuff they can see or touch - like houses. So you’d expect that a lot of money would flow into housing development.”
Stubbs does not expect to see hordes of wealthy investors arriving as a result of these particular changes, but says some of those that do come may choose to put their money into property development or businesses that build homes.
“For many investors in foreign countries property is their first port of call. Potentially that could lead to more housing being built, and it would be great to see more investors building housing here. So wouldn’t it be wonderful if they do it?”
Could a high-end foreign buyer “boost” be good for the market?
NZ Sotheby’s International Realty managing director Mark Harris says the changes have not made it any easier for internationals to own property here yet without becoming full time New Zealand residents.
Giving internationals the ability to buy a home here above a price point that protects the entry level of the domestic market is what needs to happen, and will encourage further investment into local businesses, he says.
“As a suggestion, if there was an additional tax added to the purchase price as well, then that income could be used to re-invest into local housing trusts to assist local residents entering the market .“
Real estate agent Caleb Paterson specialises in luxury real estate, and he says there has been a decline in purchasing activity at the high-end of the market over the last 12 months.
“A shift in regulation could be the catalyst needed to reignite investment in high-value residential assets. I’ll look forward to any potential developments that could restore confidence and liquidity in the luxury market.”