Late last year, New Zealand’s government announced a plan to ban foreigners from buying existing homes to cool its red-hot housing market. The move appears to have spurred a spree of home buying in pockets of the island nation instead.
The Labour party came to power on promises to make houses more affordable and restrict access to to foreign buyers snapping up properties for investment purposes. The prime minister, Labour’s Jacinda Ardern, said the ban would come into effect early this year. It hasn’t arrived yet, as discussions of changes to the law wind their way through parliament.
New data shows that across New Zealand just over 3% of home buyers were foreigners in the first quarter of 2018. But in some of New Zealand’s priciest areas, namely the suburbs around Auckland, there has been a big jump in foreign buyers at the start of this year.
Across Auckland, 7.3% of buyers weren’t New Zealand residents or citizens, up from 4.1% a year earlier. In the harbor suburb of Waitemata, one in 20 home buyers came from overseas, double the proportion from a year earlier. Auckland areas Henderson-Massey and Kaipatiki also saw the share of foreign buyers double. In Queenstown—the most expensive place to buy a home outside of Auckland—10% of buyers weren’t New Zealand citizens or residents in the first quarter of the year.
Of all property transfers, the largest share of foreign buyers come from China, followed by Australia.
New Zealand’s trade minister David Parker said the data vindicated the government’s proposed ban. Auckland and Queenstown are the two regions where people face the biggest hurdles to home ownership, he stressed.
Since foreign buyers are concentrated in a few areas, it’s unclear how effective the ban will be, but house prices in New Zealand do appear to be decelerating somewhat. In May, the annual pace of growth was 6.9% nationwide, down from 7.3% the previous month.
In Auckland, the average house price was NZ$1,245,086 ($875,188), compared with an average of NZ$677,996 across New Zealand. These are the priciest areas:
Melissa McKenzie, property statistics manager at StatsNZ, said the consultation about changes to the Overseas Investment Act might explain the increase in overseas buyers, who are getting their purchases in before it becomes harder for them to buy residential property and land in the country. The figures might undercount foreign purchases, because about 10% of buyers are corporations but StatsNZ doesn’t provide information on where these firms are domiciled or who owns them.