Ban on foreign homebuyers becomes law

Trade Minister David Parker announced a relaxing of the foreign buyers ban in June

Trade Minister David Parker announced a relaxing of the foreign buyers ban in June

"This is a significant milestone and demonstrates this government's commitment to making the dream of home ownership a reality for more New Zealanders", Associate Finance Minister David Parker said.

In June a year ago around 82 per cent of houses in the New Zealand were being bought by residents or citizens, with another 16 per cent of sales to businesses or corporate entities, nearly all of which were wholly owned by New Zealanders.

New screening requirements will start within two months following Royal assent.

The Parliament approved the new restriction Wednesday, fulfilling a promise that helped Prime Minister Jacinda Ardern's Labour party win power a year ago after campaigning against inequality and homelessness.

It said the law was part of its plan to remedy New Zealand's housing shortage and address the declining rate of home ownership.

Foreign buyers will need to show they are either increasing the number of residences and then selling them, for example by building an apartment block where a house once stood, or converting the land to another use, the government has said.

The government has faced down objections from wealthy investors who have warned that the ban may curb broader investment in the economy and hurt New Zealand's reputation in offshore markets.

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She said the bill would never have gone ahead under former Labour prime ministers Helen Clark or David Lange. "Will we get rich selling things to five million New Zealanders or selling things to three billion middle-income consumers?" House prices could stop rising before the end of the year or even begin falling, he predicted.

There are some exceptions to the new rules.

But government data suggests that foreign buyers actually only make up a small part of the country's housing market.

"We simply do not know how it will affect the market", Dominick Stephens, chief economist at the New Zealand division of banking group Westpac, said in a note to clients Wednesday. Prices in the country have been falling since the end of previous year. "The RBNZ would likely react with OCR cuts in such a scenario".

Almost all foreigners have been banned from buying most Kiwi homes in a bid to crack down on overseas speculators.

Nearby Australia has also tried to slow runaway house prices with measures including a similar ban on foreign investors buying existing properties. "Kiwis should not be outbid like this".

Public policy firm Demographia regularly ranks Auckland, New Zealand's biggest city, as one of the world's least affordable places to buy a home.

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