Last month the Overseas Investment Amendment Bill was passed after its third reading, which saw 65 votes for and 57 against and became law in a matter of weeks. The bill was introduced to prevent overseas investors from having an effect on the marginal price in the housing market – in the hopes of making it easier for first time buyers in the country to enter the market.
The bill has met a lot of criticism, especially from the National party who believe that the bill won’t fix any problems and could negatively affect the market. But what exactly does the bill prevent, and will it have any effect on the market?
Amendment Bills Origins
The bill was thrown around during the 2017 Election when Labour was promising changes around housing and investment as part of their campaign. When they eventually won the election, the Labour party delivered on their promise of pro-active bills around housing, but some of these bills were met with controversy from not only the opposition party but also those in the market.
The Overseas Investment Amendment Bill is the stand out of these, which has been pitched with an aim to restrict overseas investors buying property in New Zealand, with some amendments, such as the exception for apartment complexes.
Investors are still able to sell some unbuilt units “off the plan” to foreigners if their complex is 20 units or larger. Foreign buyers will be forced to either on sell the apartment at completion or rent it out – they cannot live in the apartment without a residence-class visa.
Why The Government Believe in the Bill
The government has sold this bill as part of their bid to make it easier for local, first-time buyers to enter the housing market, something that has become increasingly difficult over the past few years – especially in Auckland. Associate Finance Minister David Parker praised the bill’s passage as a significant milestone, stating that, “New Zealanders should not be outbid by wealthier foreign buyers. 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 ban will affect Auckland the most, as the highest proportion of home transfers involving overseas residents made up 6.5 per cent.
Why Others Oppose It
Real Estate Institute chief executive Bindi Norwell has been vocal in her stance against the bill, believing the ban won’t really make a difference, “Banning some 3 per cent of the market from purchasing homes in New Zealand is not going to have a significant impact on house prices.
Economists also share this view, they are worried that the ban could greatly depress prices in the property market than some have predicted. While stats NZ revealed that only 3 per cent of sales are to overseas buyers, others dispute these figures suggesting the number could be higher, with ASB senior economist Mark Smith stating that “anything from 11 per cent to 21 per cent of purchases in the March 2018 involved a non-New Zealand citizen.”
So has there been any Change?
Juwai, a global website for Chinese property buyers, said a falloff in Chinese buyers in New Zealand was already evident ahead of the ban. Their Data shows the quarterly measure of Chinese interest in New Zealand housing fell by 31 per cent in the June quarter compared to the previous quarter, as measured by buyer inquiries to its website. But wether or not this decrease will be passed onto those locally looking to buy, remain to be seen.