Foreign buyers out, rent to buy in

As you may know, Labour leader, Jacinda Arden is now the Prime Minister of NZ.

New Zealand First and Labour agreed to ban foreigners from buying existing homes, strengthen the Overseas Investment Act and set-up a comprehensive register of foreign-owned land and housing.

Compared this to Canada: Foreigners who buy homes in Toronto and its surrounding area face an additional 15% tax.

And compared to Australia: foreigners can only buy new houses. Foreign non-residents will normally be allowed to purchase new dwellings in Australia without being subject to any conditions. There is no limit on the number of new dwellings a foreign non-resident may purchase, but approval is generally required prior to each acquisition.

Australia’s policy on housing recognises that new houses create construction jobs which have flow on effects to other sectors of the economy. That’ s why they allow foreigners to buy new housing.

If New Zealand bans foreign buyers outright, what does it mean for existing home owners? Will prices fall?

Prices will probably stay on hold for the next six or 12 months.

At first, it looks like it will fall. But in reality, regardless of whether Labour passes their foreign ban policy or not, we are already coming to the end of the housing boom. It has been ten years since 2006/2007. But one thing for sure is that demand for housing will still continue to be unmet. See…

Labour has promised to build 100,000 affordable houses for first-home buyers within a decade. That means over the next ten years, we need at least another 100,000 homes. If this demand is not met with supply, current houses will continue to increase in price: a simple law of economics. In shortages crisis, the price increases until demand balances with supply.

Average house prices in the  major cities doubles every 10 years. So if you already own house in the inner city suburbs, you’ve got nothing to worry about. Just be a happy property owner and in 5 or ten years time, your property’s value would appreciate (if history repeats itself).

 

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