New Zealand’s housing market is experiencing a surge in the price of residential property, and the government has just passed the Overseas Investment Amendment Bill which essentially bans foreigners from purchasing homes. The Bill passed its final reading on Wednesday and will come into effect in the next two months.
“This government believes that New Zealanders should not be outbid by wealthier foreign buyers,” said David Parker, Associate Finance Minister. “Whether it’s a beautiful lakeside or oceanfront estate, or a modest suburban house, this law ensures that the market for our homes is set in New Zealand not on the international market.”
The country’s Prime Minister, Jacinda Ardern, campaigned for the foreign buyer ban during the 2017 elections, by saying foreign buyers have made buying homes nearly impossible for young New Zealanders. The price of property has increased by nearly 60% in the past decade, driving local home ownership to its very lowest numbers since the 1950s.
The new law classifies residential land within the country as sensitive, and effectively, this means that non-residents and non-citizens cannot purchase any existing homes without the consent of the Overseas Investment Office.
Only foreign buyers who can prove that they intend on buying property to expand it or convert the land for other uses will be able to purchase property in the country.
Former Prime Minister, John Key, who opposed the ban, said that wealthy investors add value to New Zealand through their international connections.
“New Zealand is a little country at the bottom of the world,” Key told BusinessTech. “Will we get rich selling things to five million New Zealanders or selling things to three billion middle-income consumers? Personally, I think it’s the latter.”
“We are determined to make it easier for Kiwis to buy their first home, so we are stopping foreign speculators buying houses and driving up prices,” Ardern said, announcing the policy last year. “Kiwis should not be outbid like this.”
Foreign investors will still be able to buy new housing, but only under rent-to-own or shared-equity apartments. They will also still be able to invest in retirement villages and student accommodation.
Developers of large apartment complexes will still be able to sell as much as 60% of units to overseas buyers without the purchaser needing consent.
Resident visa holders who spend at least 183 days a year in New Zealand will be able to purchase homes without obtaining consent.
Australian and Singapore citizens are exempt from the rules to comply with existing trade agreements.
The housing market in Cape Town has also seen a sharp increase in the price of property in recent months, with many foreign buyers also snapping up prime real estate in some of its most expensive neighborhoods.
As property prices in the Mother City are much more affordable to foreign buyers, many decide to settle down in the picturesque city. Speaking to Property 24, Staurt Chait, Executive Chairman for Land Equity Group, said that this has caused prices here to skyrocket.
A lesser known cove on the Atlantic Seaboard called Balie Bay recently fetched R44.46-million for a penthouse apartment – setting a new record for the priciest penthouse in Cape Town.
Although the housing market has hit a slump, with many properties staying on the market for extended periods of time, it is still in a much better position now as compared to a decade ago.