The New Zealand government, lead by Prime Minister Jacinda Ardern, has passed a bill banning wealthy foreigners from buying houses in the country in an attempt to counter rising house prices. New Zealand has faced a housing crisis as the percentage of homeowners in the country has been fallen, with a consequential rise in homelessness. The government sees foreign ownership of homes as part of the problem and by banning home ownership for non-resident foreigners, excluding those from Australia and Singapore, they attempt to create an opportunity for locals to buy their own property.
The move can be seen as positive in the midst of the affordability crisis as it provides an opportunity for residents to buy their own homes at affordable prices. Proponents have argued that, if managed correctly, it could allow for more young people to move onto the property ladder and reduce the level of homelessness in the country. The significance of this can be seen in places like Auckland, where it was reported that over 33,000 ‘ghost homes’ had emerged partly due to the purchase of properties by foreign investors that were deliberately left empty and sold on for a profit.
The government sees foreign ownership of homes as part of the problem
Nevertheless, the new policy is expected to have little impact on the situation – only 3% of houses sold in the 2018 March quarter were bought by foreign investors, with the remaining houses being bought by the local population. This leads to important questions being asked of the policy, including its effectiveness: why is the focus on foreign ownership when it only accounts for 3% of total purchases?
One issue which hasn’t been considered is the number of homes being built. In 2017, Labour housing spokesman Phil Twyford claimed that: “when compared to population data this release [housing statistics released by the government] confirms a housing shortfall of over 30,000 homes… barely half of what was needed to keep up with population growth.” This highlights the failure to build new houses to keep up with population growth, proving a more significant issue that has contributed to the affordability crisis, with the government nonetheless ignoring this issue.
Other critics of the policy have claimed that it is discriminatory in nature and an ineffective solution that looks to scapegoat foreigners as the cause of a very serious issue. Chinese investors have been the biggest investor in the New Zealand market followed by Australia, yet non-resident Chinese investors have been banned whilst Australians are able to continue buying houses. Critics have argued that this is because of the influence of government coalition partners New Zealand First who oppose migration from Asia, suggesting that the policy has political motives.
Why is the focus on foreign ownership when it only accounts for 3% of total purchases?
There is no guarantee that preventing foreign ownership will lead to a reduction in homelessness or provide an opportunity for local people to buy their own homes. The vacuum created in the 3% of the market will most likely be filled by New Zealand’s own market investors; there is a lack of evidence that foreign owners are more likely to leave houses empty compared to New Zealand’s own. This will not change the situation for those in need of homes, demonstrating the limited effectiveness of the policy.
Similarly in Britain, there is very little evidence to suggest that foreign owners leave their homes empty more than British owners, but there are reportedly 11,000 homes that have been empty for over a decade, whilst 200,000 homes have been empty for six months. It is clear that the focus should be on filling empty homes, particularly given the number of homeless people has risen to almost 5000 people – half of the number of homes that have been empty for at least ten years.