Calls increase in New Zealand to follow Oz crackdown on foreign property buyers

Earlier this week prime minister Kevin Rudd confirmed that new rules will be brought in for foreign buyers which will mean they have to sell any property they own if they leave the country as a direct result of concerns that ordinary Australians cannot afford to buy a home.
 
He said the government is prepared to introduce penalties to enforce the changes. Temporary residents will require approval from the Foreign Investment Review Board to buy property, and will have to sell when leaving the country. The rules will also apply to those on student visas.
 
The removal of restrictions in late 2008 made it easier for foreigners to buy property without government approval but surging real estate prices, up 12% in the last 12 months, are thought to be being fuelled by overseas buyers, especially Chinese investors.
 
‘We want to make sure that foreign speculators are not going to force up prices for Australians seeking to buy their own home, buy their first home, and we think this is the right course of action,’ said Rudd.
 
There will be compliance, monitoring and enforcement measures including civil penalties. These include compulsory sales of property purchased in breach of the new investment regime.
 
But no everyone believes that wealthy foreign buyers are to blame. Overseas purchasers accounted for about 0.62% of transactions by real estate agency LJ Hooker in 2009, according to the firm’s business analyst David Maher.
 
‘Claims that overseas buyers are pricing people out of the market are ridiculous. There’d have to be a mammoth increase in the level of overseas investment to have any real effect on affordability in the Australian market. The numbers don’t show that,’ he explained.
 
Now it is being claimed that growing demand for Auckland homes from overseas buyers is shutting New Zealanders out of the market. Calls for a similar move to that in Australia are being led by Russel Norman, co leader of the Green party.
 
He is backed by North Shore real estate agent Matty Ma who says strong demand from mainland China based buyers is set to accelerate further, especially if they can’t buy in Australia.
 
‘The danger to New Zealand is that if Australia tightens rules on foreign investment in housing, investors may head to New Zealand which has an open door foreign investment policy’, said Norman.
 
Most of the demand was coming from a young generation of buyers who have completed their studies in New Zealand and are choosing to settle there, according to Ma.
They were receiving financial support from their families back home to buy homes, often in new subdivisions in areas such as Albany.