The new government in New Zealand has vowed to introduce legislation to ban foreign property buyers from purchasing existing homes.
Having been sworn in as the new Prime Minister, Jacinda Ardern has told a workers’ conference that a bill to ‘ban overseas speculators’ would be introduced before Christmas.
Over the past five years, house prices in New Zealand have risen by 56 percent as values were driven up by low interest rates, limited housing supply and high levels of immigration.
Disquiet over foreign investment has been strong amid high levels of activity from Chinese purchasers.
Momentum behind the push to ban foreign investors was helped along by a coalition deal with NZ First leader and now deputy prime minister Winston Peters, who campaigned on a promise to make it more difficult for overseas entities to purchase land and businesses in New Zealand.
Under rules designed to prevent foreign residents from absorbing existing housing stock, non-residents in Australia are generally limited to purchasing new housing stock and are barred from owning existing stock except where they plan to use the property as a residence whilst in Australia.
In New Zealand, no such restrictions apply and foreigners can purchase any property on the proviso that they apply to the Overseas Investment Office before purchasing property which is worth more than $10 million, comes with more than five hectares of land or consists of coastal land which is larger than 21,527 square feet.
Apart from overseas purchasers, local investors face an anxious wait to learn how the new government will impact them.
In the lead-up to the election, Labour had foreshadowed policies which would prevent investors from offsetting losses on property investment against other income (negative gearing) and extend a ‘bright-line’ test which would see capital gains tax applied to investment properties which are sold within five years of purchase.