[WELLINGTON] New Zealand will loosen its ban on foreigners buying houses, opening the door for wealthy investors to purchase luxury properties as part of a push to revive its sluggish economy.
The coalition government on Monday (Sep 1) said that it will allow holders of so-called golden visas to buy houses worth at least NZ$5 million (S$3 million), carving out an exemption to restrictions that have largely kept overseas buyers out of the market since 2018. The change will not take effect until the end of the year, when reforms to the Overseas Investment Act are passed into law, a spokesperson for Prime Minister Christopher Luxon said.
"Globally, New Zealand has a deserved reputation as a great place to live and we want to grow our economy," Luxon said. "By opening our door just a little to allow significant investors to own a home, we will help attract more of those who want to contribute to the community and country."
The move underscores Luxon's bid to lure more foreign capital to the South Pacific nation and comes five months after the relaunch of New Zealand's golden visa. Designed to attract high-net-worth individuals, the Active Investor Plus visa offers residency in exchange for a significant investment.
There were 308 applications for the visa covering 1,000 people as at Aug 31, amounting to a potential total minimum investment of NZ$1.9 billion, data from Immigration New Zealand shows. Around 40 per cent of applicants are from the US.
At the moment, participants in the visa programme are largely banned from buying property in the country.
Only New Zealand citizens, residents, and nationals from Australia and Singapore have been free to buy homes for the past seven years, following a clampdown by then-Prime Minister Jacinda Ardern amid fears that offshore buyers were fuelling a housing crisis. Adding to the pressure was a passport-for-sale scandal involving PayPal co-founder Peter Thiel.
There are about 7,000 houses in New Zealand valued at more than NZ$5 million, just 0.4 per cent of the nation's housing stock, according to property consultancy Cotality. Around 4,500 are in Auckland, the nation's largest city, and about 1,250 are in the South Island ski-resort town of Queenstown.
However, only around 350 of those trophy properties are typically put up for sale each year, meaning the pool of homes available to foreign buyers will be small.
When Ardern first announced the foreign buyer ban in 2017, she said that it was to reduce property speculation and make it easier for first-time buyers to enter the market.
"We are determined to make it easier for Kiwis to buy their first home, so we are stopping foreign speculators buying houses and driving up prices. Kiwis should not be outbid like this," she said at the time.
Still, data showed foreigners accounted for only 2 to 3.5 per cent of sales before the ban.
"This change navigates a path between those who do not want foreign ownership opened up, and the desire to attract high-net-worth investors by deepening their connection to our country to help grow the economy," Luxon said of Monday's announcement.
The impact on affordability for ordinary New Zealanders will be negligible, said Cotality chief property economist Kelvin Davidson.
"There might be some people out there who are worried about what this is going to do to local house prices. Well, it probably won't do much," Davidson said. "For the wider housing market, there's much bigger restraints in the form of the weak labour market at the moment." BLOOMBERG