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Increase in sales leading up to deadline for New Zealand foreign home buyer ban

By Ellie Stevenson

There has been much talk of New Zealand banning foreigners from buying property, and the effects it will have on the real estate market.

WILLIAMS MEDIA spoke to industry leaders to find out their thoughts first hand.

At a glance:

  • From 22 October 2018, to purchase a home in New Zealand you will have to complete a purchaser’s statement
  • You will not need consent if you are a New Zealander, Australian or Singaporean
  • You will not need consent if you have a Permanent Resident visa or have a New Zealand Resident visa and live in New Zealand
  • Outside of these categories you will require government consent or will be unable to buy residential property
  • The goal is to clamp down on house price growth and reduce high rates of homelessness

According to the Real Estate Institute of New Zealand (REINZ), from 22 October 2018 everyone who wants to purchase a home in New Zealand will have to complete a purchaser’s statement to ensure they have the right to buy.

You will not need consent if you are a New Zealander, Australian or Singaporean, if you have a Permanent Resident visa or have a New Zealand Resident visa and live in New Zealand.

Anyone outside of these categories will either require government consent to purchase property or will be unable to buy residential property in New Zealand.

The goal is to clamp down on house price growth and reduce high rates of homelessness.

The REINZ told WILLIAMS MEDIA the latest statistics show that the percentage of foreign buyers in New Zealand fell from 3.3 per cent for the March 2018 quarter down to 2.8 per cent for the June 2018 quarter.

Additionally, the two regions of concern – Auckland and Queenstown Lakes – also saw falls from 7.3 per cent to 6.5 per cent and 9.7 per cent to 5.2 per cent respectively.

Bindi Norwell, chief executive of REINZ said “It is REINZ’s view that 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 or affordability, nor will it help young people into their first homes”.

“Increasing the level of supply, speeding up the consenting process, creating consistency at Councils around New Zealand and reducing loan to value restrictions for first time buyers are all more appropriate measures that will help with affordability ahead of banning offshore investors,” said Ms Norwell.

“Now the Bill has received Royal Assent, REINZ is currently working with the Overseas Investment Office to help ensure the industry understands the requirements to comply with the Act.”

Related reading: One of New Zealand’s finest homes for sale

Bas Smith, principal of Ray White Queenstown told WILLIAMS MEDIA the company has sold about 20 – 25 per cent of property to foreigners in the last year, including Australians and Singaporeans who are exempt from the new rules.

“The key issue to consider here is the foreign buyers would take up over 60 per cent + of the ‘significant’ sales space  in the region,” said Bas Smith.

“These are the sales that are focused on because they set a record price or achieve a sale for a well known plot of land or home and carry some form of celebrity status.

“The general market learns of these sales and that forms a perception of the ceiling of the regions values and also backs up its desirability to the wealthy and global property investors. That in turn creates headlines and encourages the market.”

Mr Smith said Ray White Queenstown have traditionally been very attractive to high net worth US citizens, Europeans and of late Chinese and Indians.

“I have noticed quite a rush to purchase from new clients who are learning about the imminent ban, and existing clients that had been sitting on the fence.

“There has been an increase in sales leading up to the deadline.

Related reading: Parnell, New Zealand taking off as two apartments sold at record prices

“I think there will be a slowing in the market at the middle to top end while we adjust to this, and then our unique position in the world, stable government, and desirable lifestyle will continue to push values upwards.”

Approximately 90 per cent of New Zealand Sotheby’s International Realty sales are to New Zealanders, and of the remaining 10 per cent, roughly half are Australian or Singaporean.

Mark Harris, managing director of New Zealand Sotheby’s International Realty said he doesn’t think the effect of the ban will be too significant.

“I think certain segments will be more affected than others, for example the high end $15+ million market and some of the investment apartment stock in Auckland.

“Having said that all foreigners will still be able to purchase apartments in complexes of more than 20 units and use them for 30 days of the year if it is managed, or not use it if it’s not managed.

“New Zealand Sotheby’s International Realty agrees with the sentiment behind the decision – that we need to increase opportunities for first home buyers and make it easier for New Zealand families to own a home – but we don’t think this rule change will help it.”

Mr Harris said it’s overly complicated and will be very hard and costly to administer.

“If anything we prefer the simplicity of a stamp duty being applied to foreign purchasers as per Singapore and Vancouver and Australia.

“But the real issue is reducing the cost of building and development regulation so supply can increase. The cost of land is not the issue.”

The Real Estate Conversation – 27th September 2018

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