Ban on foreign investors
New Zealand has banned foreign investors from buying property with the country’s parliament passing a bill in August which bans foreigners from buying into most parts of its residential property market.
The Overseas Investment Amendment Bill prevents overseas investors from purchasing existing properties in New Zealand in a bid to ease expensive housing prices across the country. However, foreign investors will still be able to buy into new apartment complexes and certain other parts of the housing market.
House prices across the country have almost doubled in the past decade. According to central bank data, prices are up more than 5 per cent so far this year. Home ownership rates among New Zealanders have also been falling in recent years.
Despite the new bill, government data actually suggests that foreign buyers only make up a small part of the country’s housing market. According to the latest official statistics, purchasers who don’t hold New Zealand citizenship or residency make up less than 3 per cent of total transactions. As a result, it’s difficult to tell at this stage how much of a difference the law will make to the housing market.
The new bill does not apply to Australian and Singaporean buyers because of existing arrangements between the countries and it still needs to receive royal assent, which is a formality, before it comes into force.
Housing market in Auckland
New Zealand economists believe Auckland’s housing market could follow similar trends to major Australian cities and see prices start to slip. This is a result of what’s happening across the ditch in Australia’s property market.
Recent economic data suggests a steady property market might only be just around the corner with levels of construction in Auckland preventing the existing housing shortfall from getting any worse.
The risk of property values seeing meaningful falls remains low. At this stage, the only real foreseeable risks are problems in the construction sector. This includes rapid cost increases which could limit supply growth to less than what the city needs and continue to underpin the values of existing housing.