New Zealand Bans Foreigners Buying Houses -- Except Australians

Less than three percent of NZ house sales are to foreigners.

The New Zealand government has passed legislation barring almost all foreigners from purchasing homes in the country, despite overseas buyers making up only a tiny percentage of property sales.

The Overseas Investment Amendment Bill, aimed at ensuring that "investments made by overseas persons in New Zealand will have genuine benefits for the country", passed the nation's parliament on Wednesday.

It effectively bans most foreigners from purchasing homes in New Zealand, but the laws do not extend to Australians -- who make up the second-highest number of overseas buyers -- thanks to trade deals between the two countries.

Housing affordability has been a major concern in NZ, as in Australia, and Prime Minister Jacinda Ardern had made the foreign buying ban one of her election promises. Trade minister David Parker said the reform was about "ensuring that the prices of New Zealand homes are set on the domestic rather than international market."

NZ Prime Minister Jacinda Ardern (Photo by Mark Tantrum/Getty Images)

"We believe it’s the birth right for New Zealanders to buy homes in New Zealand in a market that is shaped by New Zealand buyers, not by international price pressures," added trade minister David Parker

In January, the annual Demographia International Housing Affordability Survey found New Zealand had the second most unaffordable major housing market in the world, ahead of Australia at number three and behind only Hong Kong. Median house prices in Auckland were found to be nearly nine times the median income.

But despite the law change restricting foreign ownership, figures from the government's own statistics agency, Stats NZ, found just 2.8 percent of home transfers in the June 2018 quarter were to people without New Zealand citizenship or residency.

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The bill has been criticised, with NZ's National Party claiming it was demonising overseas buyers.

"It is a bill to try and cynically blame foreigners - particularly those with Chinese-sounding names - for a government that has no other policy in which to actually improve and increase house ownership in New Zealand," said National Party housing spokesperson Judith Collins.

The International Monetary Fund said the idea more likely to just discourage foreign investment rather than address housing affordability, while ANZ forecast the policy would have little effect.

"ANZ Research expects the new policy to reduce house price inflation – although probably not by much," economists said in a published analysis.

"With the estimated impact on house prices small, the policy is likely to have a negligible impact on housing affordability."