Foreign buyer ban gets smoother edges, but critics still see stymied development
By Nikki Mandow
June 18 (BusinessDesk) - Amendments to the government’s foreign buyer ban, if introduced, would give overseas investors more leeway to put money into New Zealand housing developments.
But opposition party critics said the changes don’t go far enough, and the restrictions inherent in the new legislation will still aggravate housing shortages.
The finance and expenditure select committee looking at the Overseas Investment Amendment Bill has recommended some significant changes to the hastily-introduced legislation after it came under fire in more than 200 submissions.
The bill, a cornerstone government initiative, is designed to stop foreign speculators buying houses and therefore make more homes available for New Zealanders.
But more than 90 percent of submitters to the parliamentary select committee argued the legislation would do the opposite to what is intended. By blocking foreign investment, it would actually make it impossible for major housing projects to go ahead.
And this would stymie the government’s ambitious house building commitments.
The select committee report, released today, recommends:
- allowing pre-selling up to 60 percent of units in big housing projects to foreigners, without them having to on-sell once construction is finished, as long as the investors don’t live in the properties.
- Waiving the requirement to on-sell immediately for investors in big developments intended to be rented out or sold under a rent-to-buy model.
- Allowing all resident visa holders, not just those with permanent residents visas, to buy land without Overseas Investment Office consent.
- Putting the burden of proof on purchasers, not lawyers, to make sure they meet the residency criteria.
- Allowing foreigners to invest in major hotel developments as long as they lease the rooms they buy back to the hotel.
In a minority report, National and ACT party members of the select committee said the changes don’t alter the fact the bill is “a case study in bad lawmaking”.
“Opposition members ... oppose the bill on the basis that it will negatively affect the development of new housing in New Zealand at a time when we need to grow our housing stock, and will hamper the ability of New Zealand businesses to access foreign capital", they said
“In addition, the bill will impose significant cost and delay on parts of the housing sector ... without clear benefit.”
The opposition MPs also criticised "the arbitrary way exemptions and amendments have been introduced". For example, telecommunications, gas and electricity lines companies - who often have more than 25 percent foreign ownership - have got an exemption, but retirement village developers don't.
And provisions stopping foreigners living in apartments they bought off the plans would be “unworkable or unenforceable”, they said
“Officials have confirmed these changes will still allow such units to be overseas owned and overseas occupied.”
Pre-selling apartments is often used by developers to finance large projects. However building industry players argued international investors wouldn’t put money into projects if they had to on-sell straight away, rather than being able to hold off until the market was strong.
Commentator and economist Shamubeel Eaqub believes the legislation is solving a problem that likely doesn’t exist. He said there is no evidence it is foreign buyers that are driving up housing costs and taking homes from New Zealanders. Instead, the problem is around a severe shortage of supply.
But select committee chair Michael Wood points to recent Statistics NZ figures to back up the need to curb foreign ownership. The June figures showed more than 7.3 percent of property transactions in greater Auckland involved foreigners and in the central city, the figure was almost 19 percent. Overall in New Zealand, it was only 3 percent.
Given the bill wasn't going away, Eaqub welcomed the recommendation to allow foreign investment into rental development. Without overseas money, many big projects just couldn’t go ahead, he said.
A good supply of rental properties was almost more critical for low-income families than increasing the houses available to buy, Eaqub said, because the government’s definition of “affordable” - $650,000 or less - was way beyond what people could spend.
“These changes give us an opening to try to market [rental, shared equity and rent-to-buy projects] around the world,” Eaqub said. “When one of my colleagues went to Australia recently, there was a lot of interest.”
Meanwhile, lawyers will also welcome one significant change in the select committee report. In the original wording, property lawyers and conveyancers could be fined $20,000 if they sold residential land to a foreigner. Now the onus is on the person buying the property to give the conveyancer a statement saying they meet the criteria.