New Zealand has, since October 2018, banned foreigners from buying residential property. The ban was part of a crackdown on offshore speculators who the government under Prime Minister Jacinda Arden says are partly to blame for spiralling house prices and making property unattainable for many young Kiwis.
However, citizens from Singapore and Australia are exempt from the rules as a result of existing trade agreements. Foreigners with New Zealand residency status will also be able to purchase homes. Those foreigners who already own homes in the country won’t be affected, and overseas buyers are still able to make limited investments in large apartment blocks and hotels.
Prices have increased more than 60 per cent in the past decade amid record immigration and a construction shortfall, resulting in home ownership diving to its lowest point since 1951.
New Zealand now classifies residential land as “sensitive”, which means that non-residents or non-citizens cannot purchase existing dwellings without the consent of the Overseas Investment Office.
Foreign buyers will need to show they are either increasing the number of residences and then selling them, for example by building an apartment block where a house once stood, or converting the land to another use. They will need to convince regulators that what they do will have wider benefits to the country.
Statistics indicate about 3 percent of New Zealand homes are being sold to foreigners, but the amount rises to 5 percent in the scenic Queenstown region and 22 percent in central Auckland.
This ban on foreign buyers is damping house prices in Queenstown, a stunning winter playground for the rich that has been a magnet for wealthy overseas investors.
Nestled on the shores of a pristine lake on New Zealand’s South Island, and ringed by majestic mountains, Queenstown’s popularity with buyers from Australia, Asia and the U.S. had seen values double in little more than three years.
Prices in the Queenstown region fell 0.1% in June from a year earlier -- the first annual decline since July 2011 -- and dropped 2.2% the past three months. The number of property transfers involving a foreign buyer fell to 2.7% in the first quarter from 9.7% a year earlier.
Queenstown is still New Zealand’s most expensive real estate market, with a median price of NZ$1.17 million ($790,000) in June.
It is not surprising why Queenstown is hugely popular. With two ski fields on its doorstep, and another two just up the road in fellow resort town Wanaka, it has become a winter playground for those who can afford it. Bungee jumping, thrilling high-speed jet-boat rides and mountain biking trails continue to attract tourists year-round, while a picturesque landscape dotted with vineyards completes the package.
New Zealand’s remoteness is also attracting some international high-net-worth individuals, such as Peter Thiel, an American billionaire entrepreneur, venture capitalist and co-founder of PayPal.
The ban on foreign speculators has also impacted on Auckland, the nation’s most populous city, where prices have dropped 2.7% over the past year.
Though the ban has brought down prices in Queenstown and Auckland, the ban isn’t likely to suppress house prices at a national level amid a shortage of new building, continued immigration and record-low interest rates. Some industry experts had estimated that New Zealand has a shortage of 130,000 houses, which may rise to 150,000 next year. The country, which currently has a population of almost five million people, adds about 50,000 new immigrants a year.