International Property

New Zealand’s upcoming foreign buyer ban set to hurt housing prices, says Westpac

Australians and Singaporeans are exempt from the ban, while foreigners could still make limited investments in new apartments in large developments

PUBLISHED : Monday, 17 September, 2018, 7:04pm
UPDATED : Tuesday, 18 September, 2018, 6:28pm

Auckland and Queenstown house prices will be hurt by the upcoming foreign buyer ban, Westpac says.

But just how great an impact the ban would have when it comes into effect in the next few weeks was hard to tell, said the bank’s chief economist Dominick Stephens.

He said some comparison could be made with Toronto in Canada where authorities imposed a stamp duty on foreign buyers that was so high it effectively worked like a ban.

“Toronto house prices fell around 5 per cent soon afterwards,” he said.

Yet, he also said Auckland and Queenstown prices were unlikely to be hit as hard because New Zealand’s foreign buyer ban had “been watered down” and was “probably weaker than Toronto’s stamp duty”.

This was because the ban included allowances for Australians and Singaporeans to still buy local homes, and for foreigners to buy 60 per cent of the units on offer in major apartment complexes of 20 units or more.

Stephens said this could lead some foreign buyers – now blocked out of the housing market – to instead turn to purchasing new apartments.

The knock-on effect could then be to squeeze some locals out of the market for new apartments.

The impact would be most felt in the North Shore, Central City, Howick and Henderson-Massey districts in Auckland and the Queenstown Lakes District, where foreigners account for more than 5 per cent of sales, Stephens said.

Overall, Westpac expects New Zealand house prices to fall modestly over the coming years, despite a brief “bump” in values around the start of the new year.

“This is because the New Zealand housing market faces a menagerie of negative forces, including tax changes, slowing population growth and the foreign buyer ban,” Stephens said.

It comes as Trade Me, the largest auction website in New Zealand, on Monday reported the average asking price of Kiwi homes fell for the third consecutive month in August as it hit NZ$630,600 (US$413,000), down 0.3 per cent compared to July.

In Auckland, the average asking price in August also fell 0.1 per cent, compared to a month earlier, to NZ$895,050, the lowest since September 2017.

Wellington prices dipped 0.3 per cent from July to August to reach NZ$579,750.

However, compared to a year ago, average asking prices across the country jumped 2.8 per cent, with growth in every district apart from the Bay of Plenty, where prices fell 0.3 per cent.