Ban won’t cut house prices
Hamilton has seen a flurry of interest from overseas property buyers ahead of Labour’s plan to restrict them.
However, realtors say the numbers are small and Labour is unlikely to achieve what it intends with the Overseas Investment Amendment Bill, which is to dampen demand in the existing residential housing market.
Lugtons managing director Simon Lugton said his company had noted a foreign buyer increase.
‘‘A couple of my salespeople mentioned to me they are dealing with people that are looking to buy before that deadline. In the Waikato, I can’t see it having a huge change [for New Zealand buyers]. It is only one factor of many.’’
Lugton said the effects of the bill would be felt more in areas like Auckland, rather than the Waikato, but he does expect a minor shift.
‘‘We had a boom period in 2015 and 2016, where our sales volumes were on average 30 per cent higher than they are now. That sales volume has normalised now and obviously the foreign buyers were a big part of that exceptional market, but at the moment it’s probably not huge numbers.
‘‘It will have a little bit of an effect,’’ he said.
The Overseas Investment Amendment Bill, if passed in the next few weeks, will end foreign buying of existing houses by classifying all such property as ‘‘sensitive’’ under the Overseas Investment Act.
The bill would effectively ban foreign speculators, but if passed in a timely manner would not affect the Comprehensive Progressive TransPacific Partnership or other free-trade agreements.
Anyone who was not either a citizen or resident of New Zealand would not be allowed to purchase existing homes. Foreigners would still be able to buy land and develop housing on it for sale. Australians are to be exempted, since Kiwis can buy property in Australia. The law would not be retrospective, so would not apply to those who had already bought houses.
Lodge managing director Jeremy O’Rourke doesn’t think Labour’s goal – falling house prices – will be achieved. He said the problem was supply and demand, not foreign ownership.
‘‘It doesn’t affect a big enough portion of the market for it to actually slow the market, so it doesn’t affect house price growth,’’ he said.
‘‘We still have got really strong demand in Hamilton.
‘‘We’ve got confidence, we’ve got job growth in Hamilton. The economic factors in the city determine that we are a growth city and that’s going to always put pressure on prices if we can’t get enough suppliers of homes.
‘‘That’s the biggest problem behind price growth – that there’s more demand chasing houses than can be supplied at the moment. And it [the bill] is not doing anything to address that, because it’s such a small part of the market that they are addressing.
‘‘It won’t do anything to dampen demand and dampen prices.’’
O’Rourke’s views are supported by a study released by Massey University yesterday, which said the minor dip in prices experienced last year was not expected to continue.
‘‘I don’t think we have experienced a surge in buyers wanting to buy before the deadline, but we have certainly seen an increase in buyers and I think that’s largely due to the election last year.
‘‘The market was going along quite nicely, all of a sudden it became election time and that was a distraction in the market and there was a little bit of uncertainty and we saw a dip.
‘‘Once there was certainty around the Government, we saw buyers return and we saw the confidence return to the market.’’
The Massey University Home Affordability Report, which covers the period from September to November
2017, shows median house prices increased in all the regions over the past
12 months and, in the most recent quarter, prices grew in every region except Central Otago Lakes.
It found the dip in prices before the election was a ‘‘blip’’ in an otherwise upward trend.
Hamilton City Council growth spokesman Kelvyn Eglinton agreed.
‘‘It will have a negligible impact on our forecast as overseas buyers of property are a minor aspect of our market.’’
But Hamilton Labour list MP Jamie Strange said the bill is part of a number of initiatives the Government plans to roll out to help first-home buyers.
Strange believes the bill will help drive down demand while Labour negotiates deals with local companies to increase supply.
Labour, under its KiwiBuild initiative, pledged to build 100,000 new homes for first-home buyers. In Hamilton, Strange hopes to keep the cost at $450,000 to $500,000 when the new builds are ready.
‘‘This is about putting Kiwis first and creating opportunities for New Zealanders,’’ Strange said.
‘‘The key thing that the Labour Government wants to do on housing is to make housing more affordable and so in Hamilton, the average price is about
$550,000, so we are looking to address the demand and the supply side. The supply side is around KiwiBuild, but the demand side – this bill is part of that. We believe that offshore buyers are having an impact and that if we can remove them from purchasing existing Hamilton houses, then it will create more opportunity for Hamiltonians.’’
Strange said that 42 per cent of Hamiltonians rent and the Government wants to do more to get renters into their own homes.
But Hamilton East MP David Bennett said National’s work had already addressed the issue when it introduced legislation requiring foreign buyers to have an IRD number and New Zealand bank account.
Bennett said the bill will have little to no effect on house prices.
‘‘What could have been done had been done, and really this is just a bit of a publicity stunt to say, oh, we’ve stopped foreign buyers coming in and that will keep house prices level or down. The foreign buyer ban will have negligible effect on the future of house prices.’’
The ban needs to be passed before New Zealand signs up to the CPTPP in March.
‘‘This is about putting Kiwis first and creating opportunities for New Zealanders.’’
Jamie Strange
Hamilton Labour list MP
‘‘This is just a bit of a publicity stunt to say, oh, we’ve stopped foreign buyers coming in and that will keep house prices level or down. The foreign buyer ban will have negligible effect on the future of house prices.’’
David Bennett Hamilton East MP