Foreign buying ban welcome

The housing crisis has many causes and fixing it will not be easy. One contributor to the price bubble and to the shortage of houses, however, has been foreign buying. The new Government’s decision to ban foreigners from buying existing homes is therefore a reasonable policy.

There is no objection in principle, and the ban is not xenophobic. The duty of any government is to ensure that its citizens are reasonably housed. If foreign buying makes it more difficult to do this, foreign buying needs to be discouraged.

The government doesn’t have a duty to house foreigners who have made no commitment to New Zealand. China, for instance, makes it difficult for foreigners to acquire a house in that country.

It allows foreigners to buy a house (or more strictly lease one, since that is the default method for anyone acquiring residential property) only if they live in China and pay tax. And a couple can buy only one such property. The ban in New Zealand applies only to existing properties, not to foreigners who build. Once again, the targeting is rational because it is aimed at the housing supply problem and not every foreigner who wants a house.

Foreigners who commit to New Zealand by becoming permanent residents or citizens will be able to buy an existing house. That is as it should be and once again disproves the accusation of xenophobia. The effect of the ban is unclear. An international boom in foreign property-buying seems to have peaked now, and the slackening of demand has added to a wider slowdown in property prices.

The boom has prompted concern in many countries, including Britain and Australia. Australia has increased stamp duties for foreign buyers; London’s mayor, Sadiq Khan, recently attacked the habit of foreign buyers buying up expensive properties in London and leaving them empty.

Trade Minister David Parker says the effect of the ban will be marginal because the housing market has cooled. Two years ago, when foreign buying was more intense, the effect on prices and supply would have been larger. But the restriction on foreign buying should be a permanent thing, and not just a temporary measure. The ban is imposed by classifying all residential property as ‘‘sensitive’’ under the foreign investment legislation, a move which has drawn Opposition criticism that it is not a ‘‘ban’’ at all. This is trivial. The effect will be of a ban.

Some say the law will be easy to circumvent. Conveyancing lawyers, as servants of the court, must obey the law. Penalties should be very tough to discourage law-breaking. The ban is being launched before the important Apec meeting this month over the TPP11 trade deal. Its intention is not to endanger New Zealand’s ability to sign the pact. Certainly the country should not have to choose between protecting its citizens’ housing rights and the benefits of the trade deal.

Finally, the ban is standing Labour policy and if the Government had not acted on it it would be breaking an election promise.