IMF Blasts New Zealand's "Discriminatory" Ban On Home Sales To Foreigners

Amid reports that 40,000 kiwis were living on the streets or in emergency shelters thanks to an acute housing crisis in the nation of nearly 5 million, New Zealand's Labour-led government knew it needed to take drastic action to cool the country's white hot housing market - or at least convince the public that it was doing something.

So late last year, lawmakers proposed a bill that would limit home purchases to people who carry residential visas. It is called the Overseas Investment Act.

As we've pointed out, home prices in New Zealand have risen dramatically since the financial crisis. Over the past ten years, New Zealand home prices have risen by roughly 60% due to a combination of factors, including limited supply, low interest rates fueling a boom in borrowing, and - of course - foreign speculation.

Housing

And on Sunday, the chorus of critics against the measure - which hasn't been passed into law - gained another voice: That of the International Monetary Fund. In its annual report on the New Zealand economy, the IMF said the measure would be "unlikely to have a significant impact on housing affordability," and that the rest of the government's "ambitious policy agenda" would likely be more than enough to help make homes more affordable.

The government has initiated an ambitious policy agenda to restore housing affordability, which appropriately focuses on strengthening supply and lowering tax distortions . The agenda includes several work streams.

The KiwiBuild program aims to increase housing supply at affordable price points. The Urban Growth Agenda aims to address regulatory, planning and other policies that reduce development capacity for growth, along with the under-funding of local infrastructure development and maintenance. The government has already announced the extension of the bright-line test on sale of residential property from within two years of purchase to within five years and also proposes to limit negative gearing from rental properties. A Tax Working Group is considering possible additional reform, including a broader capital gains tax on real estate investment and land tax reform, although its mandate is narrow on the latter. These reforms are complementary, and the success of the housing policy agenda will depend on well-coordinated progress on all fronts.

A ban of residential real estate purchases by nonresidents is unlikely to have a significant impact on housing affordability. The proposed ban in the draft amendment to the Overseas Investment Act is a capital flow management measure (CFM) under the IMF’s Institutional View on capital flows. The measure is unlikely to be temporary or targeted, and foreign buyers seem to have played a minor role in New Zealand’s residential real estate markets recently. The broad housing policy agenda above, if fully implemented, would address most of the potential problems associated with foreign buyers on a less discriminatory basis.

Should the measure become law, foreigners would be allowed to build new developments, but only as long as they have plans to sell the property as soon as its finished.

However, it would include an exception for people who can convince New Zealand's Overseas Investment Office that they intend to live in the country long term (a group that might soon include a handful of US-based billionaires). Australian citizens are also exempt from the rule.

Ironically, reports about the rule led to a surge in home sales as foreigners scrambled to buy ahead of the ban.

Housing

Local critics of the law, including the Real Estate Institute of New Zealand, agree with the IMF that the measure is unnecessary because foreigners just aren't that big of a factor in the country's housing market: The organization estimates that less than 4% of home buyers are foreigners, per the Independent.

As we've previously pointed out, it's probable that banning foreign speculators will cool off the country's property market. But the problem that the government is missing is that it risks triggering a real-estate crash. And when housing prices crash, people feel poorer, so they spend less, a pattern that threatens to afflict the broader economy. In its report, the IMF applauded New Zealand's "solid economic expansion in recent years" and noted that "household debt-related vulnerabilities are expected to decrease..."

Comments

WernerHeisenberg chumbawamba Sun, 04/22/2018 - 23:03 Permalink

A small step forward has been made.  But one can essentially buy a NZ resident (investor) visa and then buy as many houses as one likes while living anywhere.  The same investment properties are rolled over to give many people residency on the one investment.  So, the ban is not real.  IMO, NZ Citizenship should be the requirement, as the bar for citizenship is a little bit higher, "residents" are supposed to have to actually live here for a couple of years to get citizenship.

Note, almost all of the Pacific Islands, Thailand, and Mexico require citizenship to buy real estate, and the IMF doesn't complain about that.  Even in Cambodia, one has to buy a passport before you can buy land.  NZ is like an aging party girl, the good time had by all and dying of AIDS.

In reply to by chumbawamba

philipat cheka Mon, 04/23/2018 - 00:22 Permalink

I live in Indonesia which, since independence from the Dutch in 1945 has enshrined in its Constitution and Basic Agrarian Law that foreigners cannot buy landed property in Indonesia. I'm guessing that 350 years under Dutch rape and pillage made them conclude "never again"!! Foreigners are free to Lease property for up to 80 years and, in places like Bali, that can still be a very profitable investment. But the land remains Indonesian.

As a result, you can still buy a small Apartment right in the centre of Jakarta, a major world Mega-City (Population over 20 Million in the Greater Jakarta Metropolitan area) and the capital of SE Asia's largest economy, for under $200K. So I would contend that the policy demonstrably has kept prices within the range of affordability for Indonesians, unlike in London (Slightly different because Freehold purchases are rare), New York, Sydney, Vancouver etc where the local population has been essentially "priced out".

So the new policy by NZ makes perfect sense and they should tell the IMF to fuck off and mind its own business. Who is the IMF to tell any Sovereign that it must sell its land to foreigners? Any Sovereign State is perfectly entitled to establish its own Laws and Regulations as it sees fit and best for its own people.

In reply to by cheka

Al Gophilia philipat Mon, 04/23/2018 - 08:22 Permalink

It's the money, you dopey, sheep chasing, bastards. It's the fucking money. It's a global destruction of the value of our labour. 

The first Kiwi dollar counterfeited (legally printed) could buy all of NZ. It was legal tender, you've gotta use it 'cos nobody else will or can in their own country, right? The second one printed, could only buy 1/2 of NZ. The 3 billionth could only buy a 1/3,000,000,000 plot of NZ. Your money supply as of Feb 2018 was $213.5 USD billion. https://www.ceicdata.com/en/indicator/new-zealand/money-supply-m2

That equals NZ $297 billion.That's a 1/297,000,000,000 part of NZ. If your dollar can only buy that much of your tiny country, how much of a fucking house are you going to be able to buy. They keep printing, you get poorer.

 

In reply to by philipat

rtb61 WernerHeisenberg Mon, 04/23/2018 - 06:37 Permalink

But the rich and greedy, fearful of the conflicts and mass migration they are generating, want a place to hide whilst the chaos they generated plays out. They need investments whilst they are at it, so Ne Zealanders need to shut the fuck up, sell their houses cheap and start paying rent.

It is a simple as that. Australia is also desirable but it is a harder push, home ownership a big thing culturally, New Zealanders were seen as an easier target.

The New Zealand government needs to tell the IMF to go fuck itself in the most harshest terms possible.

In reply to by WernerHeisenberg

Breathial chumbawamba Mon, 04/23/2018 - 11:33 Permalink

It'd be great if we did the same... not only with houses, but industries.  China wants to invest? Fine, you can buy, but <=49% stake in any company.  Want to buy real estate? Fine, if you're a US CITIZEN.

Want to buy real property, but you're in the country illegally?  GTFOOH, get in line, get citizenship, and THEN come back.  Oh, and verify that all buyers have valid American citizenship and have renounced whatever sh!thole country's citizenship from whence they came.

In reply to by chumbawamba

Endgame Napoleon MozartIII Sun, 04/22/2018 - 22:59 Permalink

Apartment rent is the problem linked to homelessness, not homeownership, although homeownership is the only thing that politicians will focus on since it mostly affects the womb-productive and their campaign donors in the real estate industry. 

Case in point: Idaho, with its per capita income of  $17,841.

https://en.m.wikipedia.org/wiki/List_of_Idaho_locations_by_per_capita_i…

How do single, childless citizens, making anywhere in the vicinity of $17k, with no access to spousal income, child support that covers rent or pay for sex and reproduction from government that covers rent, groceries and electricity, with monthly cash assistance and an up to $6,431 refundable EITC child tax credit thrown on top, afford rent prices like the following: 

https://boise.craigslist.org/d/apts-housing-for-rent/search/apa

In reply to by MozartIII

Decoherence css1971 Mon, 04/23/2018 - 08:17 Permalink

Correct!  Foreigners with cash are never the problem in any country.  The NZ government allows banks to give a loan to any Kiwi with a pulse, and lousy income.  But a foreigner putting 50% -75% down cannot get a loan.  They would rather give the loan to a Kiwi that will default.  Problems are always created by loose money policies.  Some win and many get left in the dust.  The same thing happens in every country, but duplicitous politicians have to spin the story in their homeland and blame everyone except who is truly at fault.     

In reply to by css1971

Decoherence philipat Mon, 04/23/2018 - 10:48 Permalink

Let me ask you something.  Did the 96% of Kiwis that took the cheap money from the banks; bought low / sold high sell the country out?  If only 4% of this boom is attributed to foreign ownership, who bought the homes?  Are you stating Kiwis are the highest bidders and sellers destroying the country?  I'm not hearing any complaints from the Kiwis that have been making bank.  Foreigners can't obtain loans in New Zealand.  You might want to redo the math in your head.  Are you honestly suggesting that foreigners used illegal / legal cash to buy up the lion's share of real estate in New Zealand?  That's simply delusional thinking.  Don't subscribe to the easiest answer put in front of your face.  New Zealand has the same problem every advanced economy has - bankers throwing cheap money at people.  Duplicitous politicians are put in power to trick the masses into believing the problem lies elsewhere and use base tactics to get elected.  Currency devaluation is the tool of choice for all governments, because it's the most insidious form of taxation there is.   

It's the same problem in the U.S.  We're blaming China for all our problems too, but why did our manufacturing companies start looking at China in the 70s to begin with?  Couldn't possibly be because we abandoned the gold standard.  Our companies just didn't wake up one morning and decide they didn't want to make money in the States anymore.  They moved their money into a country with a weaker currency moving up vs. a stronger currency moving down.  Protectionism, communism, socialism, capitalism, or any other ISM is simply religion for dumbass peasants.  Wake up people and don't take the bait.  Your politicians aren't going to solve your problems.  They are put in power to keep the dumbass peasants from figuring out what is really holding them back.    

 

In reply to by philipat

Decoherence MozartIII Mon, 04/23/2018 - 08:06 Permalink

Anyone can buy property in the U.S.  There are no restrictions on foreigners buying existing residential properties, if they have cash to pay for them.  Anyone can buy land and build in NZ (as long as it's not an existing property), they just can't get a loan to do it unless they are Kiwi.  The article doesn't make this clear.  The same applies in the U.S.  If you can't show proof of income in the U.S., proper visa, etc. you cannot obtain a loan in the U.S. to buy real estate.  So far all that New Zealand has done is declare that foreigners can't buy existing residential real estate.  That's it.  If they start forcing foreigners to sell the properties they build, that would be something new.  But I think it's highly unlikely this will pass.  If a foreigner has the money to pay cash for land, build, and rent it out they're paying taxes, hiring workers to build the properties and property management to handle the rental.  The NZ government can't make money off of homeless Kiwis addicted to meth.  They can make a lot of money of foreigners with cash paying taxes and creating jobs.  This is nothing but placating Kiwis to make them feel like they are solving a problem.  Typical duplicitous politicians hard at work.  

In reply to by MozartIII

Endgame Napoleon gregga777 Sun, 04/22/2018 - 23:06 Permalink

In the USA, we would have less homelesnsss if big legal / illegal immigrant families, often with several womb-productive females per household, were not getting paid by the US government to have sex and reproduce. They are able to crowd out citizens in the rental market when they have US-born kids in a single earner per family, as long as they stay under the earned-income limits for welfare. When so many immigrants compete for the limited affordable housing, splitting expenses in multi-family units, it drives rent prices up on the remaining units for citizens whose major household bills are not paid by government due to sex and reproduction. 

In reply to by gregga777

Reality_checkers Sun, 04/22/2018 - 22:45 Permalink

I know Hillary, Obama, the Jews, BLM, pedophiles, assfuggers, and the deep state are responsible for this, and I trust ZHers will tell us how exactly. 

That darn Hillary! 

Twee Surgeon Sun, 04/22/2018 - 22:52 Permalink

What did the IMF have to say about Mexico and their Long standing policy that only Mexican Citizens can buy property along the coast and pretty much anywhere else in Mexico ? You can Rent and Lease if you go through a barrage of Lawyers and Government clip-board holders but you never Own shit.

The same rule should apply to Mexicans in the USA until the Mexican racist policies are fucking overthrown. All Mexicans do not own their US homes under the coming US Real Estate ownership act of 2018 for fraudulent immigrants. Sneak into Mexico and see if you can buy a house or work, like a billion Mexicans do every decade in the USA. It's time to get real with these fuckers.

The Equalization of Prejudice act BF 101. Fuck the free ride for Border Burglars act BF ou812 and many others. Fuck them if they refuse to compete, let them pick Tijuana trash can terror shows until they understand who the people that are doing things right are.

HRH of Aquitaine 2.0 Twee Surgeon Sun, 04/22/2018 - 22:54 Permalink

As far as I know: crickets. Good points, by the way! Mexico offshores their poor to the US. It is insane that we give them welfare, medical care, and citizenship to the brats they drop after crossing the border. If the parent is illegal in the US, that makes the kid a citizen of the country in which their parent is from and not a citizen of the U.S. End the interpretation of the 14th Amendment which grants birthright citizenship. Now. The US can't afford this level of insanity.

Good luck if you get sick in Mexico! It's all the rage to hold some stupid American, hostage, until their medical bill is paid. In cash.

In reply to by Twee Surgeon

DoctorFix HRH of Aquitaine 2.0 Sun, 04/22/2018 - 23:34 Permalink

Agreed.  Anchor babies be damned.  If you're illegal, or any other nationality, and just so happen to plop your pregnant ass in the States all I can say is "Tough shit Ms. No-hable.  You and your spawn get nothing!"  And your folks have to cough up the fare to send your ass back.  Pronto!  Once you get all weepy eyed for them they'll take you to the cleaners and rape you silly.

In reply to by HRH of Aquitaine 2.0