One of the Government’s most controversial pieces of legislation, which would limit foreign buyers from purchasing Kiwi homes, will likely become law this week.
The Overseas Investment Amendment (OIA) Bill has been making its way through the legislative process since December last year and will have its third and final reading in the House on Wednesday.
As it has the support of Labour, the Greens and New Zealand First it is very likely to become law.
National and ACT both oppose the legislation.
The Bill has been on the Government’s Order Paper – its list of the bills to be debated in Parliament – for several weeks and has slowly been making its way to the top.
When it becomes law, the Bill will limit the extent to which foreigners can buy houses in New Zealand and will give extra powers to the Overseas Investment Office to help enforce the rules.
Getting this bill submitted and on track to become law was on the top of the Government’s list in its “100-day plan.”
In fact, the introduction of the Bill was one of the first announcements made by the new Coalition Government, late last year.
“Foreign speculators will no longer be able to buy houses in New Zealand from early next year,” reads the first line of one of Prime Minister Jacinda Ardern’s first press releases on October 31 last year.
At the time, she said the legislation would take effect once it has been passed “in early 2018.”
The bill was intended to pass earlier in the year, as it needed to be in place before the The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) came into effect.
But once the timeframe for the CPTPP was extended, the Government extended the process of the OIA Bill so to allow for a longer process.
The bill attracted hundreds of submissions when it was going through the select committee phase.
The New Zealand Institute of Economic Research said the Bill was a “poorly-designed solution to a poorly-defined problem,” while the NZ Initiative said there was “no evidence that has been put forward that establishes any plausible offsetting benefits,” of the Bill.
Even the IMF had a crack, saying the legislation is “unlikely” to have a significant impact on housing affordability.
After the bill had been picked apart and debated by MPs, the Finance and Expenditure Select Committee recommended some changes, including allowing overseas buyers to buy new apartments off the plans or to develop new homes.
The OIA Bill is tabled to be debated for the last time on Wednesday afternoon.
125 Comments
JUST DO IT ...............
The distortions in our property market due to the structure and mix of out taxes has prejudiced us for long enough .
Quite simply, we have the simplest least taxed property market on the planet , and its caused young folk to be locked out of home ownership
We have NO LAND TAX ( other than rates )
We have NO TRANSFER DUTY on property sales or purchases
We have NO CAPITAL TAXES
We have NO ESTATE DUTY
We have NO GIFTING TAXES
We have a free -open market currency , unlike China which manages its currency 100%
We have free remittance of interest , profits , rents and dividends
And it seems we dont even have a register of the nationality of those who have bought our houses
Little wonder foreigners are piling in here to make a quick buck
The Chinese economic slowdown coupled with threats of a fully-blown trade war could see a serious amount of capital flowing out of China and into long-term assets in havens at least until global affairs start making sense again. Especially since monetary easing is back on the quick-fix list for China's central bank.
https://www.scmp.com/news/china/economy/article/2159297/china-warned-cu…
Riding a dead horse. Insights from the Dakota Indians with reference to the markets. (in this case housing)
The tribal wisdom of the Dakota Indians, passed on from generation to generation, says that when you discover that you are riding a dead horse, the best strategy is to dismount.
In modern economies, however, a whole range of far more advanced strategies are often employed, such as:
1. Buying a stronger whip. (more debt at cheaper terms)
2. Changing riders. (Find someone else from abroad who has more money than you do)
3. Threatening the horse with termination.
4. Appointing a committee to study the horse.
5. Visiting other sites to see how others ride dead horses. (Follow suit and keep lowering interest rates)
6. Lowering the standards so that dead horses can be included. (Lend the young 7 times multiple of income rather than 4)
7. Re-classifying the dead horse as “living, impaired”.
8. Hiring outside contractors to ride the dead horse.
9. Harnessing several dead horses together to increase the speed. (Leverage on a few buy to lets)
10. Attempting to mount multiple dead horses in hopes that one of them will spring to life. (Buy some more in the hope that profits may come from somewhere to off-set losses elsewhere)
11. Providing additional funding and/or training to increase the dead horse’s performance. (Interest Only debt)
12. Doing a productivity study to see if lighter riders would improve the dead horse’s performance. (30 years terms rather than 25 and interest only debt)
13. Declaring that as the dead horse does not have to be fed, it is less costly, carries lower overhead, and therefore contributes substantially more to the bottom line of the economy than do some other horses.
14. Re-writing the expected performance requirements for all horses.
15. Promoting the dead horse to a supervisory position.
16. Try and find a camel to fide instead.
Anyone watch the 'The Project' this evening. Interview with representative from NZ property federation was hilarious....... He was so against the ban on foreign buyers for half the interview and then suggested that even if it did come in it would have no effect.. It's well worth a watch just for the laugh!
that's garbage, Chinese banks won't lend, it's all risk and no reward.
https://www.bloomberg.com/news/articles/2018-08-12/china-faces-problem-…
If the government impliments it in a week will know shortly (few months) its effect on the property market and also the debate about 3% foreign buyer or 30% will be put to rest.
If the Labour does impliment it this week will say, better late than never and it will prove many people wrong (Myself included) who thought that Labour is trying to delay the process.
Still wait and watch.
Totally agree and negative gearing on property investment should also be withdrawn as a rort against the taxpayer and the youth of the country (who the babyboomers need to stay to pay for their pensions over the next 20 years), whilst they cream the tax advantages But doing too much at once really would collapse the market. First things first, withdraw the funny money and foreign speculation. Then deal with the tax avoidance to level the playing field. If the government pull of the first then the second should be an inevitability.
If you read on Steve Keen a 3% change can actually be a significant change and given you dont want to crash the market and cause a severe recession do one thing at a time and observe the results/impacts.
For all people say prices are too high we are now stuck with it best to make capital gains flat for a decade and make it obvious that is the intent then the speculators will also exit.
For markets such as Auckland, those exiting speculators are considerably more than 3%... the exiting speculators would have a rather significant influence on the market!
I need to go read the actual bill so that I understand it more detail than via the media provided synopses. Will it be "from this day forward" only, or will it mandate a divestment from current foreign ownership? I'm hoping for the latter, but have almost zero expectation of that being the case.
The average house price will remain the same in Auckland for years to come (people can still take out x amount for a mortgage based on y earnings) but all the houses will just slide down a bracket or 2. Everyone will get a better house for the same money, but the average purchase price will remain the same.
NzDan
So what you are implying is that the banks have never cared about the 'value' of the security against which they have leant, just that the loan has been made? I do tend to agree First Home Buyers should now be ignoring the 'hype;' at the bottom end of the market and look to make low offers on the middle market that is sticky and encourage those vendors trading up to pass a bigger haircut up the ladder! Equity evaporation on the horizon for those that bought in the last 4-5 years.
Nic
Yes but despite this we don't have it any different to say, Sydney who has a lot of those issues you mentioned and are still in the same position.
Ultimately the lower quartile price is set by how much one can borrow from the bank based on their median income and how much they can afford to repay. This foreign buyer ban will only affect the higher priced suburbs such as Remuera and Grey Lynn but will not affect anything else.
The LVR restriction was a good attempt to subdue the problem but it has just created two classes of citizens, one who can afford a house and one who cannot.
LOL, have no cards Pragmatist, there are based on simple facts and observation many refuse to see ...and pieces of info many refuse to read.
Everyone knows that this Bill is useless, diluted, and full of holes, and there are many legal ways around it -- it is aimed specifically at some Chinese buyers who usually buy properties most NZers cannot afford.
I read some stupid analogy about how selling an expensive property in remuera to a chinese buyer could propagate 100 times all around NZ and inflate the market - No one bothered thinking what if the buyer was a Kiwi?
Most Chinese investors will still buy using relatives and friends already residing in the country, or through Trusts and companies based in Aus or Singapore ( which will be allowed) ...lol ... we just don't comprehend how these o/seas investors operate.
Let's wait for figures of the month after the bill is passed and see.
One thing is certain, in my view, the list of excuses as to why it didn't make a dent in the market is getting compiled as we speak, spin doctors are busy preparing for the worse and claiming victory before the battle even begins.
Property prices will still gently rise as we are having an early Spring and the stability of this market will continue until this CoL leaves office ( soon) ..:)
Foreign Buyers ban kicking in, more news on Kiwibuild
Today's announcement comes ahead of the first limited release of three and four bedroom homes in Papakura. We'll let you know just as soon as they're ready to go to market.
And there will be plenty of time to put together your application, view the available KiwiBuild homes and make an informed decision about becoming a homeowner. The ballot for the first limited release of homes in Papakura will open in September.
Remember, this is the first ballot and KiwiBuild is a 10-year programme. More ballots will be announced as the programme scales up, and we'll give you enough time to organise your documentation.
Where and when will we see more homes?
Over the next decade, homes will be built across New Zealand to help meet the growing demand for affordable housing. The initial focus will be on areas with high housing demand and affordability pressures including Auckland, Wellington, Hamilton, Napier-Hastings, Queenstown-Lakes District, Tauranga, Whangarei District and Nelson-Tasman.
Bring it on.. long may the long slow decline of Auckland house prices continue :)
I think only an interest rate increase on new mortgages , could reduce the prices a bit. First home buyers are not really 'scared' or worried by the prospect of higher interest rate. Banks are playing it wisely, offering competitive rates on new mortgages...
Nic J's analogy of antelopes running for water is very apt !
It's a tax deductible expense. I don't know of any owner who has increased their rent to cover Trademe fees. Personally I review rent at the end of a tenancy and set asking at slightly under market rate, so the property doesn't sit empty. It is not like you can just add on $20 per week to cover a newly incurred expense. (you can try, and plenty of landlords do. However, after a month or so of sitting empty they must eventually come down to market rate for the area)
About time and it needs to be implemented immediately to not distort the market with a further rush. I remember in the UK when they announced the implementation of a further 3% surcharge on Stamp Duty Land Tax for second home buyers in Novemeber 2015 with a date to start of March 2016. What happened? Prices on buy to let stuff went up 10% in 4 months of panic purchasing and then subsequently became unsellable as the market collapsed after the implementation. Time to get on with it and give the market some certainty again.
"Even the IMF had a crack, saying the legislation is “unlikely” to have a significant impact on housing affordability."
Given that most of the 3% was in Auckland and in some areas recently being reported as 20% of sales going to foreigners, I cant see how this wont have a massive effect on the Auckland market.
About time! Good news for everyone.
Kudos to Labour & its coalition partners for standing firm on the OIA.
While in power National had brushed aside any concern that foreign buyers were churning the market , asserting it as a mere 3% .Now yelling another tune,notably led by an ex-PM ,that this 3% would plonk business confidence!!! Phew!!
what kiwi in their right mind would disagree with this law
I'm a kiwi and I disagree with it. In my opinion it would be better to allow non-residents to purchase but with a 15% stamp duty applied (only for non-residents), then use that money to provide services at a lower tax burden on locals.
Maybe the 10% of kiwis who hold 40% of the country's mortgage debt would? But when only 1/3 of households have a mortgage 2/3 should find things a lot easier when not having to mortgage their future to compete with foreign cash. It's a win/win for all but the speculators. How big will the price adjustments be? We'll have to wait and see but people looking at the top end of the market are likely to see the largest reduction in competition so that is where the biggest correction will probably occur. That's likely to be where most of the remortgaging for buy to let has occurred too, so choices for those, sell the investment or downsize the house. Spring could see in influx of properties at both ends of the market.. The middle market is already heavily mortgaged and sellers may find themselves stuck for the time being.
That's just residential debt but I do believe that many in the agricultural sector will have also overpaid with debt on land to compete with foreign cash. The fact that Fonterra can't seem to work a return for shareholders would suggest to me that the overleverage in the farming sector could be just as prevalent.
I
The 3% is a national figure whereas the percentage for Auckland is 20% for the same number of sales, and most of the foreign-buyers are buying in Auckland. Calculating the percentage of Auckland sales over the whole of the country was always intended to minimise the result
BuyLowSellHigh, with or without the ban, the sales downtrend trend has already kick started here in Auckland; https://www.interest.co.nz/property/95114/reinz-report-says-sales-milli…
Upper quartile price weakness is next. Are you allowed to view gloomy economic forecasts in sunny Papamoa or is it controlled by censorship?
These graphs are a more accurate representation of the "trend" https://www.interest.co.nz/charts/real-estate/median-price-reinz
Auckland looking very flat.
The peak was 2016/17, flat until 2021/22.
15.25% chance there will be another GFC before 2020.
In another GFC, prices would probably drop by up to 10%, and then recover a few years after, similar to what we saw during the last one. All indicators are that this slowdown is simply part of the normal cycle - I think we're at 5 o'clock(ish).
BuyLowSellHigh, knowing that interest rate stimulus buffers are spent globally, what conventional/unconventional tools will Central Banks deploy to foster this quick recovery and to dissolve the epic levels of global leverage there is and so quickly? Keep in mind China is our biggest trading partner and then Australia. There are some pretty big cracks starting to appear.
Are you talking spontaneous debt forgiveness on an epic scale or what? Sounds pretty awesome!
As you know, major superpowers are now arguing over trade. With such cooperation lacking, if another crisis breaks out, it seems more likely to be more like a race to the bottom with "beggar thy neighbour" policies. I think a longer slump than anticipated seems more plausible than it did a year ago. This aside, I think a very prolonged period of flat prices (say ten years) is a best scenario outcome. Despite any gloomy conclusions you've come to about my comments, I do hope it's the latter!
BuyLowSellHigh translated "this scenario is beyond my intellectual abilities. I cannot comprehend it"
You're a complete fool if you think the RBNZ are not already considering the same scenarios when discussing the expansion of their toolkit. Should they move their HQ to sunny Papamoa too ;-)
...yes true, the RBNZ also said something like "the chances of needing unconventional tools are the highest in history" Nope, I'm certainly not convinced it's inevitable but, it's more probable than a year ago.
Just as an observation. Like a few other resident property bulls, you seem to have a myopic self entitlement to financial success.
Good luck Sunshine.
NZdan.
Rule of thumb, that most people fail to realise is that with a 25 year term only 10% of the debt gets paid in the first five years...lots of rent gets paid to the bank in interest, but not much capital. So if you think prices will fall by more than 10% in the next 5 years, I'll put it out there and say that I believe they will fall further than that, then you are as good renting as buying at present and if you think they will fall further then there is no way you want to be buying until they have.
NB. most first home buyers take on 30 year mortgages as well so in first five years are probably only paying back 6-7% of capital..... It's a very clever ruse by the banks that most people don't get because maths education is so poor.... even the brokers seem oblivious or complicit.
Yay. Hope they keep a team post implementation looking for bypass transactions. Seize the asset and fine parties involved. Perhaps a 3 strike law for lawyers, RE Agents and accountants acting on behalf, 3 strikes amd your registration to operate is perminantly terminated.
Agree Nat promising to undo this will see them stay in opposition. For middle class working people this is the number 1 political football. Labour, NZF, Green scoring a home run here.
I challenge all Labour, NZF, and Green voters and supporters to SELL their Residential Investment Properties TODAY if they are real believers in supporting the Holy cause of bringing property prices down and supporting the FHBs.
Come on, flood the market and put your money where your mouth is !!
Let's Do this !!! :) ... if you dare!
I also challenge ALL the DGMs and the likes here to talk their Parents, Friends, and relatives to do the same ...come on ...go out and do it instead of endlessly Barking here and elsewhere everyday.
ha-ha :),...now your getting real desperate. Either your target group have already sold or don't need too. The writing has been on the wall for some time now. Maybe your conscience is warning you that it's now time to abandoned your prized but flightless recovery.
No , I am challenging your mates to come clean and practice what they preach ... I will be there buying what they SELL if they cause a market distress - but I want to see the hypocrites cough out and show their true colors.
Funny that your understanding of a simple challenge is so impaired RP !!
Most just need a house for basic shelter, not an investment ponzi hence nothing to sell.
The issue is about returning NZ to a model where kiwis can access the basic need of shelter at a price that can be supported in the NZ domestic economy. The model of being enslaved by debt stacking property owning kiwis following the "I must offset tax seminar" model, and International money hiders was very clearly voted down at the last election.
Instead I challenge you! ............Buy up, leverage up, put the seminar music on loud -"it can only go up!!!!".
Look forward to you hearing how it goes.
Ex Expat, nice try buddy ;-). I challenge you put up a link to the alleged comment/s where I've supposedly discussed this. Making false claims to support your narrative is pretty desperate don't you think?
For the record, I've never discussed Land Tax with anyone on here - until right now.
so it is more important to hold onto your existing citizenship than take up one of the country you want to live in.
sounds very much like wants my cake and eats his too.
with that attitude i now agree with only NZ citizens should be able to own land in NZ.
and if you dont want to become a citizen, so you are not in for the long haul then rent or lease for your stay
Still will wait and watch till is passed. Also will it be implimented with immediate affect or will government give time to speculators / foreign buyers. A window to rush and buy.
If not implimented with immediate affect will be a big boom for all real estate agent for that time.
If the foreign buyers are very small percentage and will not effect THAN why are they worried is a Question that should be asked
https://www.newshub.co.nz/home/politics/2018/04/opinion-why-the-ban-on-…
Caught in their own argument.
If you are worried means will have impact or why else will you be upset. This itself proof that ban is a right step.
Trying to put pressure on government. Last ditch efforts.
Interesting news for property specuvestors-
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12…
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