Labour will make residential property ‘sensitive’ which will be a de facto ban on foreign buyers.
Anyone who was not either a citizen or resident of New Zealand would not be allowed to purchase existing homes.
“The Government will introduce an amendment to the Overseas Investment Act to classify housing as ‘sensitive’ and introduce a residency test,” Ardern said in her first post-cabinet press conference. . .
Ardern expected the legislation would be introduced by Christmas and passed in the new year.
“This does not impact our Korean FTA, nor will it impact the TPP – if we pass it before it takes effect,” Trade Minister David Parker said.
“Our underlying ethos here has been that if you have the right to live here long-term you have the right to buy here.”
The ban needed to passed fast because if New Zealand signed up to the Trans-Pacific Partnership (TPP) without passing the legislation the TPP provisions allowing foreign investment would then effect other trade agreements under “most favoured nation clauses,” effectively taking away the right to do this for good, Parker said. . .
National’s Finance spokesman Steven Joyce describes the proposal as half-cooked:
“The first and strangest thing about Labour’s announcement is that it isn’t an actual ban. Putting houses through a sensitive land purchase criteria is definitely bureaucratic but does not constitute a ban on such sales,” Mr Joyce says.
“There are also all sorts of definitional questions. Is an apartment on the fourth floor of a building ‘sensitive land’? Is a two hectare property with two houses on it that’s being sold for development able to be sold to an international investor?
“This proposal would also be a massive compliance cost for house buyers of all types. For example, will somebody with a foreign sounding name have to prove their citizenship to the real estate agent?
“The whole announcement was very strange,” Mr Joyce says. “There has been no paperwork released and the Prime Minister indicated many of the detailed decisions remain to be made.
“This smacks very much as a ‘bright idea’ with absolutely no detail or evidence base behind it. The Prime Minister even spoke as if the Auckland property market was still rapidly appreciating whereas in actual fact it’s been flat to falling for the last year.
“Finally, if the idea gets over all the hurdles, would it actually work in terms of satisfying the concerns of our trading partners? It appears on the face of it that it would treat investors from other countries less favourably than New Zealand investors.
“This is a policy that’s designed to solve a political problem. Evidence in both Australia and here in New Zealand is that overseas buyers don’t have a significant impact on the housing market.”
Eric Crampton writes on the issue at Offsetting Behaviour and asks whether those on work-to-residence visas will be able to buy houses under this policy.
Even if they can, migrants on work visas will be caught by the ban. That will be many of the skilled people we need for jobs that we can’t find New Zealanders willing and able to do.
Liam Hehir also questions whether the proposal would be effective:
. . . Figures released earlier this year showed that home buyers without citizenship or residency accounted for about two percent of transferees. So while it might be effective as a ban, I wouldn’t be holding my breath about it doing much more than the scratching of a populist itch.
This will be popular but will it achieve its aim of making it easier for New Zealanders to buy houses?
Popular policy isn’t always good policy and only time will tell if this will help make housing more affordable without compromising any free trade agreements and deterring skilled migrants from coming here.