Ban on foreign home buyers
The Government will end foreign buying of existing houses by classifying them all as ‘‘sensitive’’ under the Overseas Investment Act, Prime Minister Jacinda Ardern says.
This ‘‘clean solution’’ would effectively ban foreign speculators without affecting the Trans-Pacific Partnership (TPP) or most free trade agreements, Ardern said.
Anyone who was not either a citizen or resident of New Zealand would not be allowed to purchase existing homes.
‘‘The Government will introduce an amendment to the Overseas Investment Act to classify housing as ‘sensitive’ and introduce a residency test,’’ Ardern said in her first post-cabinet press conference yesterday.
‘‘We stand strongly in the view that housing is a right.’’
Ardern expected the legislation would be introduced by Christmas and passed in the new year.
‘‘This does not impact our [South] Korean FTA, nor will it impact the TPP – if we pass it before it takes effect,’’ Trade Minister David Parker said. ‘‘Our underlying ethos here has been that if you have the right to live here long-term you have the right to buy here.’’
The ban needed to be passed fast because if New Zealand signed up to the TPP without passing the legislation, the TPP provisions allowing foreign investment would then affect other trade agreements under ‘‘most favoured nation clauses’’, effectively taking away the right to do this for good, Parker said.
‘‘If this is not done before TPP concludes – if it does – then we effectively lose the right to control this forever,’’ Parker said.
‘‘This is the time it needs to be implemented.’’
Foreigners would still be able to buy land and develop housing on it for on-sale. Australians would have a special carve-out to still be able to buy homes – as Kiwis do in Australia.
The law was not retrospective, so would not apply to those who had already bought houses.
Ardern said it could pose challenges for one existing free trade agreement with Singapore, but not the Korean free trade agreement, as was previously assumed.
National’s finance spokesman Steven Joyce said the amendment wasn’t actually a ban and raised many questions.
‘‘The first and strangest thing about Labour’s announcement is that it isn’t an actual ban. Putting houses through a sensitive land purchase criteria is definitely bureaucratic but does not constitute a ban on such sales.’’
The current criteria for sensitive land sales requires the buyer be a resident, citizen, or get a special ministerial sign-off.
‘‘There are also all sorts of definitional questions. Is an apartment on the fourth floor of a building ‘sensitive land’? Is a two hectare property with two houses on it that’s being sold for development able to be sold to an international investor?’’ Joyce said.
‘‘Finally, if the idea gets over all the hurdles, would it actually work in terms of satisfying the concerns of our trading partners? It appears on the face of it that it would treat investors from other countries less favourably than New Zealand investors.’’
Ardern and Parker both indicated National had misled them on whether the South Korean free trade agreement would allow a stamp duty, another way in which they could effectively ban foreign buyers.
‘‘The former minister for trade in August said there was nothing in the TPP to stop future governments introducing discriminatory tax settings,’’ Ardern said.
‘‘What he failed to recognise is that a stamp duty would breach the Korean free trade agreement. It was not a plausible solution for us. In fact it was a poor solution from a government that chose to ignore New Zealand’s best interests when they were negotiating – particularly TPP.’’
Parker said advice to the select committee considering the South Korea free trade deal had been ‘‘opaque’’ in saying foreign house buyers could not be banned.
Ardern said she would not characterise it as officials failing to give free and frank advice, but rather it was because National ministers had not asked for the advice.
Joyce rejected claims the previous government had misled the public.
‘‘If you look at a very straightforward reading of the agreement between New Zealand and South Korea, there is a requirement that the parties have to give each other’s investors the same benefit as domestic investors into their market.’’
‘‘Putting houses through a sensitive land purchase criteria ... does not constitute a ban on such sales.’’
Steven Joyce,
National’s finance spokesman