New Zealand follows through with ban on foreigners buying established properties

New Zealand’s newly elected Prime Minister Jacinda Ardern’s has followed through on her campaign promise to address the home affordability crisis by announcing a ban on foreigners buying established property.

The policy mirrors similar rules in Australia making established property off-limits to foreign buyers, but with the same exemption to the ban offered to Australians as we offer Kiwis.

“We are determined to make it easier for Kiwis to buy their first home, so we are stopping foreign speculators buying houses and driving up prices. Kiwis should not be outbid like this,” ​Ms Ardern said on Tuesday.

New Zealand’s Prime Minister Jacinda Ardern has moved to ban foreigners buying established property. Photo: Mark Coote

The amendment to New Zealand’s Overseas Investment Act to classify housing as “sensitive” is expected to be passed by Christmas to take effect by early next year.

Ms Ardern is expected to arrive in Australia on a flying visit this Sunday to meet with Prime Minister Malcolm Turnbull.

Foreign ownership and the housing shortage were major issues during the September 23 election campaign, which ended nine years of power by the conservative National Party.

New Zealand First leader Winston Peters played a kingmaker role in the new coalition government headed by Ms Ardern. Photo: AP

The Labour coalition formed government a month after the election thanks to the support of kingmaker Winston Peters, leader of the New Zealand First Party. The new coalition also includes the Green Party.

Property values in New Zealand have soared 10.4 per cent in the past five years, according to the most recent September figures from the Real Estate Institute of New Zealand. Like Australia, the most bullish growth has been in the major cities, rising 12 per cent in Auckland and 8.1 per cent in Wellington.

A Demographia survey this year ranked Auckland the fourth least affordable housing market among 92 major cities worldwide. The survey showed it took 10 times the median household income to afford the city’s median house price of $NZ830,810 ($746,225).

Topping the least affordable list was Hong Kong, Sydney and Vancouver.

However, property analysts have said they do not think the new policy will have any serious impact on New Zealand’s affordability crisis, citing the lack of impact Australia’s own foreign buyer limits have had in curtailing foreign buyer appetites.

“Foreign buyers get a lot of press and blame for rising property prices worldwide, but they are just one piece of the puzzle,” said Sophie Chick, head of research at Savills. “If you look at Sydney we have seen extraordinary growth where values have doubled in the past 10 years, and that has been in large part due to the low interest rates and an imbalance between supply and demand, and that’s despite restrictions on foreign buyers being in place for a long time.

“The ban [on foreign buyers] could have a small impact on the New Zealand market, but it won’t fundamentally change it.”

New Zealand news website Stuff.co.nz reported the country’s Trade Minister David Parker as saying the change to house prices as a result of the ban would be marginal.

Foreign capital flowing into New Zealand and pushing up house prices was more of a problem two years ago, he said. If the ban wasn’t done now, “you can never do it”, he reportedly said in reference to the need to get the change through before the Trans-Pacific Partnership (TPP) trade deal came into effect.