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New Zealand: New efforts to curb skyrocketing house prices
New Zealand has the world’s most frenetic property market, with prices in Auckland, New Zealand’s largest city, now outstripping London. In 2017, New Zealand house prices were the most unaffordable in the world and prices in Auckland have risen by 75% over the last four years alone. Home ownership is also low. The share of owner occupied dwellings has fallen from 74% of all private dwellings in 1991 to 63% in 2018. The last five years have also witnessed a rise in homelessness.
At the same time, New Zealand has recently become known as a get-away for the foreign super-rich who see it as an escape from crowds and social unrest. Most of the foreign buyers come from China and Australia, followed by the US and UK.
Despite the official statistics which indicate that only about 3% of New Zealand homes are being sold to foreigners, the government argues that foreigners are driving up prices. Therefore, in September 2018, a ban on foreigners buying existing homes in the country was passed in parliament. All nationalities are subject to the bill except buyers from Singapore and Australia, thanks to existing free-trade agreements with these countries. The ban applies to existing homes and foreign buyers can still purchase up to 60% of units in new block housing developments and hotels.
Nearby Australia has also tried to slow runaway house prices with measures including a similar ban on foreign investors buying existing properties. Prices in the country have been falling since the end of last year. However, according to the New Zealand government opposition, the foreign buyer’s ban was “xenophobic”, unnecessary and unlikely to improve housing affordability. The critics warn that it may actually result in stifling the economy.