The head of one of New Zealand’s leading real estate agencies has called on the Government to rethink the foreign buyer ban.
Mark Harris, managing director of New Zealand Sotheby’s International Realty, believes the Coalition’s refusal to revisit the ban has cost the country and argued that agents’ phones would be running hot if overseas investment was easier.
Another luxury real estate agent told OneRoof that allowing foreigners to buy New Zealand property could reinvigorate the upper end of the housing market.
Caleb Paterson, of Paterson Luxury, said a shortage of buyers in Auckland’s lifestyle belt had forced some of his wealthy clients to drop prices by as much as $1 million.
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The agents’ statements follow recent “murmurings” in the industry and political circles that National’s pledge to let wealthy foreign buyers into the market could be back on the agenda.
As part of its coalition agreement with New Zealand First, National agreed to ditch its pre-election promise to overturn the foreign buyer ban, introduced by Labour in 2018.
National had pitched the policy as a tax-raising initiative, arguing it could bring in $740m a year with a 15% tax on all foreign purchases of New Zealand property of $2m-plus.
However, talk of the Government revisiting the tax has resurfaced in recent months, following comments made by the Deputy Prime Minister and New Zealand First leader, Winston Peters, in March that he was open to relaxing the foreign buyer ban for ultra-expensive homes if there were economic benefits.
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Harris said the contents of the Government’s Budget last month had prompted him to go public.
“If I was to sum up the Budget in terms of its impact on the property sector, it would probably be ‘nothing to see here’,” Harris wrote in an open letter released last week.
“There was very little in the announcement that hadn’t already been introduced. It’s what wasn’t there that was more interesting to us. There were many murmurings that the foreign buyer tax first proposed by National could be back on the agenda, albeit with an increase to the threshold from the initial $2 million, but unfortunately, that wasn’t the case.
“With some of the Government’s promises yet to be met, we believe they are leaving money on the table that could pay for some of them.
“Part of the revenue could potentially be put towards, for example, funding social housing in the southern lakes, which we are in desperate need of. In other markets, smart incentives exist for developers who commit to adding a certain amount of social housing to their buildings. Why could we not create a similar win-win for foreign buyers and the country as a whole?”
New Zealand Sotheby's International Realty managing director Mark Harris felt the Budget was underwhelming for the property sector. Photo / Supplied
Harris argued that upping the tax threshold to purchases of $5m-plus would still attract the necessary funds but leave the lower end of the market untouched.
“There were around 800 sales over $5 million in New Zealand [last year]. We don’t believe there is any way sales at this level would affect property prices at the lower end.”
The Government has previously indicated it does not plan to revisit the foreign buyer ban. In the lead-up to the Budget, OneRoof asked Housing Minister Chris Bishop if National or the Coalition Government was considering making any changes to the foreign buyer ban.
A spokesperson for Bishop said both National and the Government were not considering any changes.
Harris’s agency specialises in high-end residential properties and NZ Sotheby’s agents regularly broker deals of $5m and above. Much of their enquiry comes from overseas buyers, but under the current rules only Australians and Singaporeans can buy without approval from the Overseas Investment Office.
He said that the current ways foreigners can get into New Zealand and buy property were “insanely difficult and you need a laser-like focus to gain residency”.
Harris told OneRoof that international buyers struggled to meet the 183-day minimum residency requirement. “Last year, we had several high net worth clients decide against investing when they discovered they had to become tax-paying New Zealand residents to be able to buy a home here so that they could then also invest in the local region economically.
An interview New Zealand First leader Winston Peters gave earlier this year had raised expectations the foreign buyer ban might be revisited. Photo / Getty Images
“They are buying here as a holiday home; they want to spend time here but not be forced to be here.”
He said one of his clients had to re-start his day count when he was called overseas on business after 150 days in New Zealand. “I just can’t understand the logic of arguing against it [reversing the ban]. It doesn’t make sense to me. It feels to me like it must be some philosophical or theoretical blockage.”
In the immediate aftermath of National’s decision to keep the foreign buyer ban, the response from many in the real estate industry was scathing.
One told OneRoof it was “a chance to step up and we’ve blown it”. Another said: “It’s a shame that optically we’re going to be seen as closed again.”
The disappointment hasn’t abated. Paterson, who sells luxury homes on Auckland’s lifestyle fringe, told OneRoof he was worried about wealthy people leaving the country for Australia.
He said four out of the last seven big sales he had brokered involved vendors leaving New Zealand for Australia. “A lot of my market is still hung up on that foreign buyer policy,” he said.
“During [the election campaign], I had a lot of buyer interest from Asia, America and Europe.”
Auckland luxury agent Caleb Paterson: "A lot of my market is still hung up on that foreign buyer policy." Photo / Supplied
One of the luxury properties Paterson is selling. It is on the market for $4.5m. Photo / Supplied
He called on the Government to reassess the investor visa rules, citing examples of clients who gave up “and went and invested in other countries”.
“I’ve spoken to three agents in that luxury space in Auckland and they all told me there’s next to no inquiry. It’s pretty dead out there.”
Paterson said that buyer shortage had led to some of his vendors discounting prices, one by $1m. He said a property on Lennon Access Road, Stillwater, had dropped its price from $5.5m to $4.5m in the six months it had been on the market.
Another luxury house, with a CV of $4.325m has been on the market since March, is looking for buyers with budgets of $5m.
Harris said he was confident a foreign buyer tax would happen eventually, albeit with some changes to the original plan.
“We expect that our phones will run hot when it does. We still have very high and increasing amounts of overseas traffic to our website and we hear from foreign buyers every week who want to invest in this country, so New Zealand remains a very appealing place in the international consciousness.
“At the very high end, there is still plenty of demand, but not much supply,” he said, adding that one of his agents had recently sold a Wanaka property for more than $10m to a local buyer.
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