New Zealand bans foreign home buyers

New Zealand’s Prime Minister-elect Jacinda Arden has announced her accession to power with a radical housing proposal aimed at bringing down soaring property prices.

What is she proposing?

Less than a week after she succeeded in forming a coalition government, Arden’s Labour party has said it will ban all foreign non-residents from purchasing existing homes in the country. She had previously labelled capitalism as a “blatant failure” when it came to providing homes for the poor.

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Foreign ownership and a housing shortage in New Zealand’s larger cities “were prominent issues in the lead-up to the September election, which brought an end to nine years of rule by the conservative National Party”, says news.com.au.

Why?

“The country is facing a housing affordability crisis which has left home ownership out of reach for many”, says the BBC, while low interest rates, limited housing stock and immigration have driven up prices in recent years.

Chinese investors are part of a wave of offshore investors who, critics claim, have put unsustainable pressure on infrastructure and house prices.

A recent survey by property consultants Knight Frank found annual house price growth in New Zealand was 10.4%. Prices in the capital, Wellington, rose 18.1% in the year to June 2017, with the median price for a residential property in the country’s biggest city, Auckland, now standing at £443,554, higher than the average house price in London.

Will it work?

The move to tackle soaring property prices was agreed during lengthy negotiations between the Labour Party leader and New Zealand First’s populist powerbroker Winston Peters to form a new government that also includes the Green Party, meaning it has a good chance of becoming law.

In terms of freeing up housing and driving down house prices, the ban is just a small part of a compressive shake up of New Zealand’s housing market.

As well as the ban on foreign ownership, the coalition is also promising to deliver innovative home ownership models within the state and a broader community housing programme.

According to The New Zealand Herald the Labour-NZF power-sharing agreement will also strengthen the Overseas Investment Act, set-up a comprehensive register of foreign-owned land and housing and establish a new Housing Commission.

In its manifesto, Labour focused on building more affordable houses for first-home buyers as well as increasing the number of state houses built for families in need. Its KiwiBuild initiative promised 100,000 affordable houses for first-home buyers within a decade.

Could it happen in the UK?

The problem of foreign investors snapping homes in the UK was highlighted recently by research for Sadiq Khan, the Mayor of London.

It showed investors from Hong Kong, Singapore and China are buying thousands of homes suitable for first time buyers, using them as buy-to-let investments and often holding them in offshore tax havens.

This has driven up prices in the capital to almost twice the national average and “triggered calls for the mayor and London boroughs to block foreign buyers until Londoners have had an opportunity to buy”, The Guardian reported.

The HomeOwners Alliance, which represents current and would-be homeowners, said the trend was “alarming” and “unfair” to first-time buyers. But Khan also stressed that “international investment plays a vital role in providing developers with the certainty and finance they need to increase the supply of homes and infrastructure for Londoners”.

Citing another report published in The Express showing foreign buyers are starting to invest in the Midlands and North of England, Dan Craw, of the campaign group Generation Rent, said: “The tax system should penalise owners of empty homes in high demand areas.”

Daniel Valentine, of the Bow Group think-tank, called on the government “to limit the scale of foreign ownership” to stop overseas investors inflating prices across the entire market.

Shadow housing secretary John Healey has said a Labour government would give local people “first dibs” on new homes ahead of overseas buyers but stopped short of proposing a ban on all foreign property ownership.