Considerable focus has been directed to the impact on property prices of too many foreign buyers. This concern went into overdrive when it was announced that New Zealand would follow in Australia’s example and put heavy restrictions on foreign buyers. Just how serious are they and what impact is it likely to have on the market there? We discuss that with Bindi Norwell from The Institute in New Zealand.
Listen to the interview now:
Kevin: Well there’s certainly a lot of interest always on foreign investment. No matter which country you live in it seems to be a hot topic in terms of whether or not it actually drives up prices. I was interested to note recently, we’ve reported about it in the show about the changes in legislation in New Zealand in the market there endeavouring to restrict foreign buyer activity. Joining me to talk about this the CEO for the Real Estate Institute of New Zealand, Bindi Norwell. Bindi, thank you very much for your time.
Bindi Norwell: Thank you. Good to be here.
Kevin: Yeah, could you just briefly tell us or outline for us the bounds of the new legislation that’s been introduced into the market there with regard to foreign investment in residential property?
Bindi Norwell: Sure so at a higher level, it means that anyone that’s a foreigner at the moment will not be able to purchase a property in New Zealand unless they’re a resident or paying tax in the country and it will be implemented from the 22nd of October this year. Anyone going forward will not be able to purchase a property.
Kevin: So very similar in a lot of ways to what’s happened in Australia. Was the Institute or any other industry body consulted by the government there prior to these restrictions coming in?
Bindi Norwell: Absolutely I mean they went through significant consultation with the industry. I think it went through three readings and we submitted on the consultation. I guess what we thought that it’s probably not going to have very much impact on affordability in New Zealand because the amount of properties that are bought by foreign buyers is so low. It’s around 2.8% across the country. We thought that actually it’s probably not the right thing to do for New Zealand but they have implemented it now. When they did go out to consultation, they got feedback on a number of issues and it’s good to see that they listened to that consultation.
Bindi Norwell: Originally, foreign investors wouldn’t be able to purchase new built and so they thought that this might impede the housing markets in New Zealand. They changed that strategy and so foreign buyers can actually purchase new builds and new developments going forward.
Kevin: Yeah, it seems to be wherever it’s introduced they always tout it as helping out to make properties more affordable. It’s really just a political stance almost appealing to voters saying well we are doing something about affordability when in a fact what you just pointed out there is it has very little effect on affordability.
Bindi Norwell: That’s right and I said it’s such a low amount of properties that are bought from foreign buyers and this huge amount of work that goes into this legislation and actually going forward now trying to identify foreign buyers as well. I think that yeah, I mean it definitely has an impact on the amount of work but not really an impact on affordability.
Kevin: Is the investment predominantly in Auckland? I mean that’s what we hear out of New Zealand is that all the focus seems to be on Auckland. Is that the case with foreign buyers?
Bindi Norwell: A significant portion of houses that are bought of that 2.8% are in Auckland but they’re also in places like Queenstown that’s very appealing to foreign buyers as well. I guess it is spread across the country but primarily in Auckland and places like Queenstown.
Kevin: You’re the peak body in New Zealand. What are you hearing amongst your colleagues industry professionals about the likely impact of these restrictions?
Bindi Norwell: Well I think that people are feeling like it’s not going to have significant impact on affordability. I think the industry at the moment, the real estate industry is trying to now prepare for the implications of it and really understanding how do we actually in a practical level make sure that we’re complying with the law. I guess this is for the key focus now of the industry. We know now this is in place so now we’ve got to help prepare the industry to try, and to comply with that new legislation.
Kevin: Who will be held responsibility if the declarations aren’t done correctly? I mean are the real estate agents going to be the ones who will need to be the policemen on this?
Bindi Norwell: Well I mean I guess it’s quite complex. At the end of the day, it’s up to the individual that is actually going to purchase the property to demonstrate and specify where they’re from that they’re a foreign buyer or they’re from New Zealand tax or New Zealand resident. The onus is really up to the individual to prove it and the legal entity that they’re working will have to go through a level of due diligence. So far, I guess real estate agents will have a role to play as well to make sure they know who they’re dealing with but the actual legislation really hits on the individual person and the legal ingenue.
Kevin: It’s simply a matter of a declaration form that needs to be signed by the buyer to say that they’re not a foreign buyer. Is that correct and in the absence of that in Australia there are special penalties in the absence of the form being presented it’s assumed that they are a foreign buyer. Is that right?
Bindi Norwell: Yes so everyone that’s going to purchase a house will need to fill out a declaration that’s the way we understand. We met with the OIO this week actually to talk about this process. The people will need to fill in that declaration. They’ll need to sign it and obviously prove it with their legal professions as well when they get to the actual sale transaction so yes everyone will do that part of the process.
Kevin: Yeah Bindi great insight there. Thank you so much. I understand you’ve come out of a meeting. We appreciate you giving us your time today. Thank you very much.
Bindi Norwell: No problem. Thanks. Okay.
Real Estate Talk – the only place where you hear all Australasia’s leading property experts.
Kevin Tuner worked in radio as General Manager of various east coast radio stations. He started in real estate in 1988 and was ranked in the Top 10 Salespeople in the state until he was appointed as State CEO 1992.
He operated a number of real estate offices as business owner and was General Manager of several real estate offices in Christchurch.
He now hosts a real estate show on Radio 4BC and a weekly podcast at www.realestatetalk.com.au. He is the host of a daily 7 to 10 minute podcast show for real estate professionals at www.reuncut.com.au.
To hear more podcasts by Kevin Turner, click here
Disclaimer: while due care is taken, the viewpoints expressed by interviewees and/or contributors do not necessarily reflect the opinions of Your Investment Property.