NZ Labour moves to block foreign home buyers


Jacobi says the intent of the ISDS is not give foreign companies greater rights than New Zealand companies but the same rights, and vice versa overseas, given judicial systems in some countries often discriminate against foreign companies.

New Zealand First leader Winston Peters, left, and Prime Minister-designate Jacinda Ardern sign the coalition agreement last week.

Nevertheless, Labour's reforms are a huge improvement on the former National Government's do-nothing approach, which used New Zealand's FTAs as a convenient excuse to not change New Zealand's foreign ownership regulations. John Ballingall, deputy chief executive of the New Zealand Institute of Economic Research, said "even if we can technically make that change, I can't imagine that that would be welcomed by the other TPP members as a sign of good faith and commitment to the agreement".

House prices have surged in recent years, driving the average value in the nation's biggest city, Auckland, to more than NZ$1 million (S$939,490) and putting property out of reach for many younger Kiwis. "Kiwis should not be outbid like this".

Residential housing will come within the definition of sensitive land which requires permission, if bought by foreigners, and which won't be granted under new criteria.

However, there is some debate on how foreigners are actually affecting the home market in New Zealand. It is the fourth least affordable housing market in the world, after Hong Kong, Sydney, and Vancouver.

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Prices have risen by more than 50% nationally over the past ten years.

On Tuesday, the Labour-led Government announced it would end foreign buying of existing houses by classifying them all as "sensitive" under the Overseas Investment Act.

The restrictions were being fast-tracked so that Labour would not have to renegotiate foreign investment provisions in the Trans Pacific Partnership (TPP) deal, after a long series of talks to revive the agreement since the United States pulled out in January. The domestic law change on foreigners buying homes provides Ms Ardern with a work-around. Nevertheless, New Zealand's government had to try something, as it's now the fourth most expensive property market in the world according to Demographia, an organization that's involved in urban public policy and demographic analysis.

The legislation is expected to be introduced by Christmas and passed in the new year.

"The proposed change means we can move our focus away from land issues at the negotiating table at APEC", Ms Ardern said.