New Zealand’s parliament today passed a law that places tight restrictions on foreigners buying residential property in the country. Prime minister Jacinda Ardern has long campaigned for a change in legislation to halt the flow of foreign buyers of investment properties in the country, a trend she believes is responsible for driving house prices up to unprecedented levels. The move raises the question of whether there might not be a case for the UK to one day follow suite.
Average house prices in New Zealand have risen by 60% over the past decade while the UK has seen a 50% increase over the same period. A shortage of affordable housing and rocketing rents have contributed to a housing crisis that Ardern’s government is determined to alleviate. 20% of homes in Auckland and 10% in the Queenstown Lakes area, two of the most expensive areas in the country, went to foreign buyers, presumed as investment properties, over a recent three-month period.
In prime London that trend is significantly more pronounced, with recent years seeing around half of all homes being acquired by foreigners. In many cases they are bought as investment properties but often not even rented out and held as a store of capital, sitting empty or only occasionally being occupied by the owners. With London suffering a shortage of housing this raises legitimate concern.
The new legislation will mean that foreign buyers, other than those from Australia and Singapore who are exempt under trade agreements between the countries, would have to gain special dispensation from New Zealand’s Overseas Investment Office. Doing so will entail demonstrating that their purchase of residential property in the country will have wider benefit to New Zealand. The move seems to be widely supported by New Zealanders, with an opinion poll carried out last year by Massey University showing that 72% of respondents were in favour of tighter controls on foreign real estate ownership.
As might have been expected, the property industry strongly opposed the new law. The lobby argued that prices have already dropped back from their peak, could be further undermined, foreign buyers account for only 3% of the total market and are concentrated in new developments in specific areas. This, argues Dave Platter of Chinese online real estate portal Juwai.com, as quoted in the Financial Times, makes clear “foreign investment leads to the creation of new dwellings. That’s vital in a market with a housing shortage, like Aukland”.
Whether there is any chance that the UK would consider a similar move is doubtful, despite many of the same complaints around foreign buyers pushing prices up to an extent which is locking local buyers out of the market.
While concentrated in London, foreign buyers, currently dominated by those from China and other parts of Asia, are also said to be acquiring swathes of new built luxury apartments in cities further north such as Liverpool, Manchester and Birmingham. Within this context, the example New Zealand has set can be expected to open a debate on another island nation 11,500 miles away.