Steep decline in property sales to foreign buyers

Monday, 29 July 2019

Rules restricting non-residents from buying New Zealand homes have had a significant impact, economists say.

Nationally, buyers without New Zealand citizenship or a resident visa were 0.5 per cent of home transfers in the June 2019 quarter, down from 2.8 per cent a year earlier.

Their activity is concentrated in some parts of the market.

In central Auckland, 75 homes sold to overseas buyers, about 8 per cent of all transactions.

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But even still, property statistics manager Melissa McKenzie said that was a drop of 70 per cent compared to the same time a year ago.

'It's not surprising to still see some home transfers to overseas people in central Auckland, which is dominated by apartment buildings. They may have bought apartments off the plans before restrictions on overseas home buyers took effect. These only show up in our statistics once the apartment is built.

'The Overseas Investment Act also allows Australians and Singaporeans to purchase residential property in New Zealand, and other overseas people to purchase in some new developments.'

Mark Smith, an economist at ASB, said it showed the new rules had had a significant impact.

He said the removal of one type of buyer had contributed to the softness seen in the Auckland market.

The fact there were more overseas sellers than buyers was a significant shift, he said.

The decline in Queenstown was more modest, with 18 purchases compared to 27 in 2018, but even there overseas sellers outnumbered buyers.

He said the legislation seemed to be well-balanced, still allowing for foreign support of new building supply.

Gareth Kiernan, chief forecaster at Infometrics, said the legislation seemed to be working as well as it could.

'It's interesting that the corporate numbers have not moved much, which suggests that the 'hiding' of overseas buyers behind companies or trusts was not that common prior to the legislation. So perhaps the ownership numbers that we had previously seen from LINZ weren't too bad an indicator of the proportion of foreign buyers.'