This year, New Zealand took a giant leap into unknown territory. The decision to ban foreign buyers from purchasing houses in New Zealand came as a result of steadily increasing home prices in NZ. Have a chat with any local Kiwi, and the topic of home prices will likely come up in conversation. The conversation is happening all over New Zealand, as young, first time home owners struggle to find and secure new houses to buy, or families looking to upgrade can’t find anything within their price range.
So, why did this happen?
There are quite a few different answers to the cause of the housing shortage in NZ, depending on who you ask. Many people believe that increased foreign investment caused available houses to shrink, and therefore prices to skyrocket. This cause is also one of the primary reasons for the new ban, as the thought is that more homes will be available to Kiwi buyers, and will eventually even out with the Kiwi market rather than the international one.
Other thoughts are poor planning and growth forecasting. Auckland, specifically, has grown faster and more intensely than city planners were prepared for, creating a severe housing crisis in a very short time. Even commercial property real estate was hit as many city planners failed to see Auckland becoming a hub for global companies.
What does it mean for you as a…
As the name suggests, the ban on foreign buyers in New Zealand pretty much means you won’t be able to purchase a home anymore. There are some caveats, however. If you already have property in NZ, you won’t be losing it or losing your ability to sell it in the future.
Also, if you already have residency status in New Zealand, you are not banned from purchasing. This means if you’ve gone through the process or are going through it to become a NZ resident, you’ll still have buying rights. If you’re from Australia or Singapore, you’ll keep your rights to purchase in New Zealand as well. You will still need to gain permission via a screening from the Overseas Investment Office before the purchase.
Another caveat is that you are still able to purchase specific types of apartments, like large apartment blocks and hotels. This means that investment property and management is still a great option for foreign buyers. The building must be at least 20 dwellings, and will need to be screened by the government. If you’re thinking of purchasing property like this, make sure to get property investment advice first to ensure the property qualifies.
There are plenty of economists out there who disagree with this ban. Some reasonings is that the data shows that only 3% of purchasers don’t hold NZ residency, which makes it seem as though there isn’t a problem at all with foreign buyers. This would mean that the ban will not actually help Kiwis purchase affordable housing, as there was very little being purchased by foreigners in the first place. Regardless of the positives and negatives of the ban, the idea is that property will be easier to purchase for Kiwis in the future.
While it’s much too early to tell if the ban will be successful, what we do know is that the housing market was starting to slip prior to the ban. This is technically a good thing for the buyers who want to quickly purchase on the slip prices, and for first time home buyers. First time home buyers can also cash in on the Kiwisaver first-home withdrawal, which can help with a downpayment in this market. For current property owners, however, a slip could mean a drastic loss in equity, and less movement in the market as owners will stay put.
On the positive side, the ban may help first time home buyers the most, as they previously were having difficulty even entering the market. Competition for open home and auction sales was creating a market where new home buyers were purchasing without ever even seeing the home or being able to get a building inspection before buying a house. Again, this ban will hopefully create some breathing room for those who are attending home auctions every Sunday without any luck.
Buying property as a Kiwi, post the ban, will still require some steep competition as there was an increase in foreigner buying prior to the ban being official. Panic buying, on both sides, was prevalent for several months, but will soon calm down as the ban settles in. Even those residing in New Zealand, but without permanent residency, were snapping up homes as quickly as possible to make sure they didn’t lose out later on, or lose their chance at buying at all.
What does the future look like?
At this point, and without being an expert, we can only guess what the future will hold for New Zealand property prices. What we do know is that any big change will take some time, and a Kiwi buyer may need to be patient for a few more years while the market changes. There are plans in place to start building significantly more homes than have previously been built, which will help flood the market with more available properties.
When you’re out on the market looking to purchase a home, you will now only be outbid by other Kiwis, which for some New Zealand residents is a beautiful thing. Regardless of your thoughts, be smart when investing or buying a home, use a property lawyer or a housing solicitor for the process, and stay up to date with the latest homes for sale to ensure the best sale for you.