New Zealand plans to introduce a new legislation to ban foreign ownership of housing property
As part of its efforts to bring housing within reach for its people, New Zealand plans to introduce a new legislation which will ban foreigners from buying homes in the country. The country has been facing a housing crisis as New Zealanders struggle to own a home in the country. This has proved to be a more serious scenario as it is affecting the first-time buyers and families.
This crisis has been attributed to the influx of foreigners in the housing property segment which has forced the locals out of the housing market. While citizens in the country struggle to have their own floor and ceiling, overseas investors continue to own more housing properties in the country. This has triggered reactions within the country and political parties have already reacted to it in a big way. Banning foreign ownership of houses was on the election manifesto of the country’s Labour Prime Minister, Jacinda Ardern, during the recently concluded elections which led her to power which ended nine years of government by the conservative National Party.
Now, Housing Minister Phil Twyford has echoed the same thing by saying that first time buyers and families are currently being ‘forced out of the housing market’. This step of banning foreign ownership of houses because of a lack of housing for the country’s citizens could prove to be a trendsetter for other countries that are facing a shortage of housing due to similar reasons. The New Zealand government plans to allow only those who hold a residential visa to buy existing homes.
It means overseas developers and individuals will have to build new homes if they want to purchase residential property. Phil Twyford and Land Information Minister Eugenie Sage said that the ban will come into effect early next year. The magnitude of the housing crisis in the country has reached high levels, making New Zealand the country with highest level of homelessness rates among the developed countries.
The Land Information Minister said that this will mean, for practical purposes, that foreign buyers will not be able to buy residential property unless they are either increasing the number of residences and then selling them or converting the land to another use. They will need to be able to show that this will have wider benefits to the country.
Property prices in the country rose 57 per cent over the past decade as it was flooded by the super-rich and Chinese property investors. This rise in price has affected the country’s people adversely and around 40,000 people in New Zealand, or one per cent of the population, are living on the streets or in emergency accommodation, according to a Yale University study. However, those who will be able to prove that their purchase will increase housing supply, will be exempted from the rules. Such investors may include those who increase the number of residences within a property for selling it later. There will also be exceptions for those who can convince the Overseas Investment Office that they intend to live in New Zealand long-term and they will sell their property if they leave the country later. The only country whose citizens have been exempted from the new rules are Australians as the latter has similar exemptions for New Zealand property buyers.
The talk of the new legislation has led to a rise in property sales as foreigners look to buy before the new regime comes into effect.
However, the Real Estate Institute of New Zealand (REINZ) has questioned the step as it says only 3.8 per cent of buyers are from overseas. The chief executive of REINZ, Bindi Norwell said that given international buyers are such a small part of the market, it is interested to understand what impact the Government believes the foreign buyer ban will actually have.
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