WELLINGTON (BLOOMBERG) - New Zealand's new government said it will change the law to prevent foreigners from buying existing homes in the South Pacific nation to reduce speculation and make it easier for first-time buyers to enter the market.
"Foreign speculators will no longer be able to buy houses in New Zealand from early next year," Prime Minister Jacinda Ardern said at press conference on Tuesday (Oct 31). "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. Kiwis should not be outbid like this."
New Zealand house prices have surged in recent years, driving the average value in biggest city Auckland to more than NZ$1 million (S$932,000) and putting property out of reach for many younger Kiwis. The law change will bring New Zealand into line with other countries including neighbour Australia, where non-residents are also restricted from buying homes unless they are newly built.
Chinese money has pushed up home prices around the world, stoking concern among locals in cities from Vancouver to Sydney. New Zealand has also become a favoured place for the rich to buy boltholes to escape to. But there is limited data on how many non-resident foreigners actually buy residential homes in New Zealand, with the previous government claiming they accounted for as little as 2 per cent of overall purchases.
"This is a policy that's designed to solve a political problem," opposition finance spokesman Steven Joyce said. "Evidence in both Australia and here in New Zealand is that overseas buyers don't have a significant impact on the housing market."
Ardern said she nevertheless hopes the ban will "take some of the heat" out of the market.
Her Labour-led government will introduce an amendment to the Overseas Investment Act to classify residential housing as "sensitive," meaning non-residents or non-citizens cannot purchase existing residential dwellings. Australians will not be affected because New Zealanders are exempt in Australia.
The law change also removes a hurdle to New Zealand signing up to the revised Trans Pacific Partnership, a trade agreement between 11 countries that may reduce tariffs and boost the country's exports. Member states will seek agreement on the TPP at an Apec meeting in Vietnam next week.
In its current form, the TPP would maintain foreigners' access to New Zealand property. The new government, sworn in only last week, faced having to re-open negotiations, which risked scuppering the deal at this late stage. The domestic law change provides Ardern with a work-around.
She wants to introduce the legislation before Christmas and pass the law early next year, before the TPP is ratified. She said it then won't breach any trade agreements expect the Singapore Closer Economic Partnership, which would be worked through with Singapore.
"The proposed change means we can move our focus away from land issues at the negotiating table at Apec," Ardern said.
New Zealand still has concerns about Investor State Dispute Settlement clauses in the TPP, as these confer "greater rights on multi-national companies investing in New Zealand than a New Zealand company has", she said.
"We remain determined to do our utmost to amend the ISDS provisions of TPP," Ardern said. "In addition, Cabinet has today instructed trade negotiation officials to oppose ISDS in any future free trade agreements."