New Zealand banned most foreigners from buying homes 12 months ago
New Zealand banned most foreigners from buying homes as it wanted to tackle runaway housing prices. Why did the NZ government implement a foreign buyer ban?
22% of foreign buyers in Auckland, and fast increasing property prices
According to CNBC, “statistics indicate about 3 percent of New Zealand homes are being sold to foreigners, but the amount rises to 5 percent in the scenic Queenstown region and 22 percent in central Auckland“.
Therefore, foreign buyers in New Zealand were seen as a problem.
So, a year ago the government said there was no doubt that foreigners were driving up prices. Therefore, making it illegal for overseas buyers to acquire properties in New Zealand was seen as a magic bullet to slow property prices down.
Did that work?
Banning foreign buyers did not solve the problem with house prices
Property prices kept increasing fast
First, property prices kept increasing fast. Indeed, “median house prices across New Zealand increased by 6.6% in September to a record high of NZ$597,000, up from NZ$560,000 in September 2018 (…) property values increase 3.7% annually“.
Thanks to the data collected by the Real Estate Institute of New Zealand (REINZ), we can see that the measure didn’t work. So, the local press is now concluding that “Foreign buyer ban no magic bullet for house prices” (Stuff.co.nz).
However property prices in Auckland stopped increasing in the end of 2016… which is way before the foreign buyers ban. So again, no proof suggests that the foreign buyer ban helped contain real estate prices.
Foreigners can still buy properties in NZ… via companies (but it’s complicated)
New Zealand did not completely ban companies from buying properties. So, “while relatively few overseas people are now buying property in New Zealand compared with a year ago, nearly 3700 homes were transferred to only corporate entities in the latest quarter, for which we don’t know the citizenship or visa status of the owners (…) This 3700 of homes to corporate buyers were 10 per cent of transactions” (Stuff.co.nz).
However, companies registered outside New Zealand and that are at least 25 per cent foreign owned are treated as “overseas persons” (Stuff.co.nz). So they need an approval from the Overseas Investment Office.
How many foreigners are buying New Zealand homes?
As explained by the New Zealand government, “it depends how you define foreigner”.
Indeed, in the June 2019 quarter, New Zealand registered home sales as follow:
- 81 percent were to at least one NZ citizen
- 11 percent were to corporate entities only (which could have NZ or overseas owners)
- 7.9 percent were to at least one NZ-resident-visa holder (someone who can live and work in New Zealand for as long as they like)
- 0.5 percent were to no NZ citizens or resident visa holders.
Australians and Singaporeans but also foreigners with NZ residency status may still buy homes
Did you know that Australians, Singaporeans, but also foreigners with NZ residency status can still buy property in New Zealand?
We showed in 2016 that foreign buyers are not all Chinese. Even if the press covered mostly Chinese buyers, they only represented 25% of international home buyers in New Zealand:
- 25% Australian buyers
- 25% Chinese buyers
- 50% of other nationalities; UK, USA, Singapore, Hong Kong
So, if the NZ government wanted to ban foreign buyers to cool down property prices, it’s hard to understand why so many exceptions exist. Was this an anti-Chinese measure? A way to cool down this NZ$ 1.5 billion market?
While the doubt exist, other real estate agents and property markets such as Dubai (among others) are enjoying the opportunity, welcoming Chinese buyers with open arms.
Bonus: evolution of property prices in Auckland from 2009 to 2019
