WELLINGTON (Reuters) - New Zealand’s proposal to ban foreigners from buying existing homes will not cause house prices to collapse, Trade Minister David Parker said on Wednesday, but it has to be fast tracked to beat restrictions in the Trans-Pacific Partnership (TPP) deal.
The Labour government has said it will get the new crackdown into law in early 2018, in a move that will precede the trade deal and brings it in line with countries such as Australia.
The TPP is set to remove New Zealand’s ability to bar overseas investment in its residential property market.
Parker told Radio New Zealand in an interview that the ban was unlikely to dent New Zealand’s house prices, which have soared 50 percent in the past decade, though growth has eased off recently.
“It’s not going to collapse house prices and it’s true that this was more of a problem two years ago,” Parker said.
“If you don’t do it now, you can never do it. Because if TPP is entered into, New Zealand will have lost the policy space to protect the New Zealand housing market for New Zealanders,” he added.
The move underscores the stark change under Labour compared with the previous National government which had touted New Zealand’s small economy as open to investment.
New Prime Minister Jacinda Ardern has promised that Labour will be a more interventionist government, which she says is necessary to combat growing inequality.
There is little reliable data on the proportion of New Zealand homes owned by foreigners.
Government figures suggested only around 3 percent of house sales involved non-residents. Labour has criticised those numbers, saying they do not include many categories of ownership, such as through trusts.
Real estate industry members echoed Parker’s comments that any dramatic impact from the new rules was unlikely and questioned the need for them.
“There is little data or evidence that clearly links the role foreign buyers have in allegedly increasing house prices...so from our perspective, we would just like some clarification on what the ban is trying to achieve,” said Bindi Norwell, chief executive of the Real Estate Institute of New Zealand in an emailed statement.
The new residential investment clampdown will bring New Zealand in line with similar hot housing markets around the world, causing home prices in cities such as Vancouver and Sydney to skyrocket.
The planned ban would not apply to Australians, given New Zealanders are exempt from home ownership restrictions in neighbouring Australia, where many New Zealanders live.
Editing by Jacqueline Wong