The Government is likely to water down is proposed ban on foreign investors buying New Zealand residential property.
Parliament's Finance and Expenditure Select Committee, which has been considering the changes contained in the Overseas Investment Amendment Bill, has recommended foreign buyers be allowed to buy into larger, multi-unit housing developments such as apartment blocks, although there would still be restrictions on their ability to do so.
Where a new development had a minimum of 20 units, overseas investors would be able to buy units off the plans, and retain them as investment properties once construction was complete. However overseas buyers would not be allowed to occupy these units themselves and there would be restrictions on how many units in a new development could be sold to overseas buyers.
This would likely limit the number of units in a development that could be sold to overseas buyers at 60%, although that figure could be adjusted either up or down by regulation. These changes have been made to make it easier for developers to secure development funding for new housing projects and increase their supply.
Because units purchased by overseas buyers will be investment properties, it should also increase the supply of rental housing.
The Committee has not recommended making any changes to those parts of the Bill that allow overseas buyers to buy residential land as long as they develop housing on it. And they would still have to sell the property once the development was complete. That is to allow overseas developers access to the New Zealand market, which could also increase the supply of new housing.
The committee has also recommended relaxing the rules that define who is classed as an overseas buyer. Originally the Bill proposed restricting the ability to buy residential property to people with permanent residency. But it is now it proposed that the ability to buy residential land be extended to people who hold any type of residency visa.
There is also an exemption for overseas investors buying individual rooms within hotels. These are often sold on individual strata titles and are sometimes classified as residential than than commercial property. Regardless of their classification, overseas buyers would still be able to buy these rooms provided they are leased to the hotel operator. That is to encourage the development of more hotels.
And the Committee has bowed to pressure from the legal profession and recommended dropping a clause that would have required them to certify that the buyer of a property complied with the requirements of the Act. Instead, an intending purchaser of property would merely need to supply their lawyer with a statement saying they complied with the overseas buyer provisions of the Act.
Apart form that, the committee has not recommended any changes to those parts of the Bill that would prevent overseas buyers from buying existing residential properties.
"This law will ensure that the market for our homes is a New Zealand market, not an international one," Associate Finance Minister David Parker said.
"It is also a matter of values.
"We believe that from the most expensive seaside and lakefront properties to the most affordable homes in out towns and cities, New Zealanders should not be outbid by wealthier foreign buyers," he said.
He believed it would have a small impact on house prices.
Earlier this month, Statistics New Zealand reported that almost 20% of houses sold in central Auckland were sold to overseas buyers.
Parker says the effect on prices would be “at the margins” and won’t be enough to crash the market.
“Obviously, economically if there is lower demand there will be a slightly reduced effect on price.”
But he says house prices in Auckland are more affected by the balance of supply and the cost of new builds.
Under the new regime, overseas investors will be able to invest in new housing, particularly apartments, new rentals, and homes available to purchase under rent-to-own or shared-equity arrangements.
When it comes to the carve-out for apartments, Parker says officials were concerned if they were to be banned from being sold to overseas parties, it would shorten the supply of new housing, particularly in Auckland.
“The advice we had from officials was if we didn’t allow investment in apartment buildings, then the whole complex was likely not to proceed.”
This would mean there would be fewer purchase choices for New Zealanders, Parker says.
He adds that up to 35% of some apartment buildings historically have been to overseas buyers.
“From the point of view of the developers, that would have changed the economics of some of their developments and made them harder to ban.”
The two country's exempted from the overseas buyer restrictions will be Australia and Singapore because of existing bilateral arrangments with those countries.
Parker said the New Zealand and Singapore governments had agreed to meet if there was a big increase in the number of people from Singapore buying residential property here, to discuss the cause of the increase and how to address it.
National Leader Simon Bridges says the announcement is a “case study in bad lawmaking.”
“It’s going to have a number of perverse effects,” he says.
“This is a country that wants to build more houses, this is going to make it difficult, whether it’s plans for farms or whether it’s housing developments.”
With additional reporting by Jason Walls.
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46 Comments
we need foreign investment but we need to be less skewed than what it is now. Our manufacturing sector is in decline so we end up importing more stuff than we need to. Creating jobs in particular industries and not just cafes, dairies or accountants would help the economy more than just allowing them to invest in housing. Perhaps tweaking the tax system to let new business thrive and penalise the leechers in the housing market would do us good.
"Our manufacturing sector is in decline ..."
That is just a partisan myth. It isn't true at all.
Statistics NZ has been running a comprehensive survey of our manufacturing sector quarterly since 1992. The output of the sector has been rising steadily since then, dipping only minorly in recessions. Annual growth has averaged +3.7% over than whole period. Over the past year, the growth is +6.9% pa. That is far from decline.
Perhaps you are right about job creation in the manufacturing sector. But that is much more about modern processes than the health of the sector. And a very different issue. The sector is booming in 2017/18. The main feature is that the NZ manufacturing sector is internationally competitive. We got rid of the uncompetitive bits years ago, the ones that could only thrive if the fx rate was low and declining. That was the bit that only worked by making the rest of us poorer.
Not all types of foreign investments have the same impact on an economy. Investment in unproductive assets such as houses is just an influx of money from overseas without long-term benefits.
We should be aiming for greenfield investments in sectors struggling to gain traction in NZ such as high and medium tech, and agricultural research. The flow of money into the country comes perhaps with more valuable items - knowledge, skill and expertise from a seasoned player in a thriving sector. This helps build an economy around it in terms of employment, technical and support services, education and training, and growth in allied sectors.
It is easier to build a factory in China than to buy a house. Th result: some of the world's highest concentration of tech companies outside of Silicon Valley in places like Shenzhen and Chongqing.
There is also the part where in China individuals on both the median and average income pay a marginal tax rate of 25%. Our equivalents are 30 % & 33% respectively. Their business tax rates are also lower than ours. Even communist can attract more investment than our democracy by lowering taxes...
Finance is not the problem it's red tape.
Some places in the world just let you get on with it and build the house. For example this man decided he didn't want to hire any tradesmen and just got on with it. The house is impressive by NZ standards: https://www.youtube.com/watch?v=dzkX1BMZHrE
Here we have road blocks to productivity all over the place. Even though our houses are made out of crap like cold concrete foundations and cold window frames and so on we're required to pay all kinds of compliance costs because "at least it meets some standard". That standard doesn't even measure the real world air tightness or insulation properties of a house - it's all based on assumptions. The standards should be opened up and quality set by mandatory indemnity insurance i.e. if the house rots in 10 years the builder's insurance company are going to be reviewing their policy with that builder.
There are many useless box ticking exercises needed to build a simple cold sh!tbox house. Covenants, soil reports, valuations, rort consent costs, BRANZ fees in the consent, monopoly materials, scaffolding all over the place. By adding all these enormous costs the risks to home buyers are actually higher than having defacto standards.
There is always an equilibrium. Many people simply leave the country.
What a joke! I knew they would completely cave. So it looks like we will get a foreign buyer ban that is the same as Australia's where temporary residents (those on student or work visas) can still buy property and be a front for family overseas. And foreign buyers can buy and keep new apartments, which will never be rented out (because that would 'devalue" them) so we will be like Sydney and Melbourne where the big apartment blocks are only 25% occupied. And foreign buyers can still buy residential land and sit on it, so they can push up the prices of land, making housing even more expensive - as seen in Melbourne where Chinese buyers have bought 2/3 of all available residential land. So nothing will really change.
I'm sitting on the fence with this I'm unsure.
I've listened to above arguments and in a nut shell some say its still good because it will help pay for new development, on apartments, more apartments and intensification then more housing and reduced property prices. - Sounds reasonable.
Others say overseas people can live in these houses or have agent who can buy property. - Not sure about this, Non NZ citizens cant buy the property, sure an overseas person can give NZ citizen money, but this could happen even without the ban. The ban makes it harder to buy.
I'm still glad they are putting measures in place. Its a start.
I feel like a lot of the debate comes from the COL vs Nat supporters baiting each other.
Personally I think it's good in the short run as we are getting a capital inflow to get apartments/town houses constructed with at least some restrictions being put in, even if they are a bit limp.
However the downside will come from the annual outflow of rent from kiwis/residence to overseas investors and if these funds will remain in the country or get repatriated. This may bite us in the long run. But its hard to say how this will pan out overall.
Apartments, 2 beds plus for a family in Auckland central cost what a 3 bed house in Brian Crescent, Stanmore Bay, or practically all of Waitakere costs. Pakeha families or couples wanting kids do not want an apartment. Average age of immigrants to Auckland is 25-29 (other than students.) I note one contributor points out also that no requirement to rent it out once bought. The written declaration of "no I am not illegal" is pretty lame. Also, note that Parker said "end of year" it will be passed into law by. So much for a few days ago when said "next month". That gives all the last minute .com brigade more time to get their purchasing done. This will delay drop in prices (which people all seem v concerned about - only those buying in last 3 years need to be concerned and only when market funding ( 2 year) rate starts rising, at which point they are going to get caught in negative equity and rising payments trap.
The Foreign buyer ban means,in the main,foreigners cannot buy existing stock of residential property.
A resonant message that New Zealand is Not For Sale.
In that respect,Labour has been up to the mark consistent with its election manifesto.
To be fair, the onus of enforcement should not solely be upon the Ministry of Housing,OIA.
Other related agencies should also put a shoulder to the wheel.IRD could inquire into persons,entities who seemingly have nil or little income but are flush with cash to buy houses,meet mortgage payments,show a pattern of buying & selling houses etc.
This would help to flush out agents,proxies,nominees who seek to thwart the provisions of the law
IRD resources can be better deployed here rather than hounding small time businesses & tradesmen for cash sales etc.
Go for the sharks eg the one who collected a cool $20 million for the sale of his Parnell property ( part of it actually) . Why bother so much about the little anchovies
Ban investments in markets that have seen high growth and allow foreign ownership in under developed markets. We need to grow NZ nationally not just centralized to Auckland, Otago and the Bay. Makes for a better market and Country when wealth is distributed proportionately across many areas.
NZ is a joke has been for while now.
A once great relatively egalitarian place with a good standard of living for the majority is now just a sad little country at the bottom of the world that sells its self out to be tenants. Racial tension is at fever pitch and will continue to increase as a result of what sort of a future is being shaped for our younger Kiwis.
I cant understand how Kiwis just sit around watching the place that their predecessors built just disintegrate before their eyes. In 10-15 years it will be completely unrecognisable to the country I grew up in.
I would like to say one day to the younger generations that the best thing is to stay as NZ as its a great place but its not the case. A very sad state of affairs.
with respect but NZ a neither a joke or sad. Some challenges for sure, but we have so much to be grateful for, not the least living in a stable non-corrupt democracy. There's not too many of those in the world.
The fact people are queuing up to move here tells you something.. Yes its changing, it always has and for the most part thats good.
Just as the world today is a much changed and much better place for most of its inhabitants than 30, 50 or 100 years ago..
I loved NZ 30 years ago, NZ now is not the same, and I'm not loving it as much. Still great and if we can make changes, draw a line in the sand its not unrecoverable.
Immigration needs to be reduced back to what it was.
If you look at the UK, I lived in Leeds, there are part of Leeds I wouldn't walk through because of their immigration policies, look at Bradford, Luton etc. I don't want NZ to become like this.
We need to be able to integrate new people so they can become part of NZ, not have masses come in at the same time so its impossible to assimilate them.
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