Foreign buyer rules could hurt reputation: committee told

Phil Twyford. Photo / NZME.

NZ ranked top of the world for ease, speed and low cost of registering property titles.

The Government's proposed foreign house buyer law change could damage New Zealand's international reputation for ease of property title registration, a Parliamentary select committee heard yesterday.

Bryce Town, a Morrison Kent lawyer representing the Auckland District Law Society's property law committee, told the Finance and Expenditure Committee that New Zealand ranked top of the world, only behind Georgia, for ease, speed and low cost of registering property titles.

Yet the new regime from October endangered that global good name and could have a big impact on Land Information New Zealand, Town said.

"LINZ is ranked second in the world in the World Bank Ease of Doing Business Survey for ease of registering property. This is likely to be compromised by the new requirements," he said, citing the potential for major disruption to the land transfer system.

The survey examined 170 economies for overall quality of land administration systems based on reliability, transparency, coverage and dispute resolution.

However, the society, real estate agents, accountants and landlords expressed broad support for the changes and Town's submission said "some would say it is long overdue".

Submissions were timely on the Taxation (Land Information and Offshore Persons Information Bill) after the foreign residential property investor issue rose to prominence on Saturday after Labour released leaked data which pointed to foreign buyers from China having a huge effect on Auckland's housing market.

Housing spokesman Phil Twyford has accused the Government of inaction, leaving Aucklanders unable to compete or buy residential properties which are being snapped up by Chinese not living here.

However, before the Budget in May, Prime Minister John Key indicated the Government would gather foreign investor information, announcing new New Zealand bank account and an IRD number requirements.

That will give Land Information New Zealand and IRD the first hard data on the size and scope of foreign property investors, particularly in the heated Auckland market - an issue some people deny is a problem.

Town said it could take 10 working days to get a bank account and 10 working days to get an IRD number which was potentially detrimental to transactions. "In a perfect world, it would be great if it was all there at the beginning but purchasers leave things till the last minute," Town said.

But the lawyers did back the Government over the move which will statistically analyse foreign ownership of residential homes.

Chartered Accountants Australia and New Zealand said benefits outweighed disadvantages.

" ... we do not believe those costs will outweigh the benefits for the community as a whole that will arise from easier and better enforcement of the property taxing rules and the availability of more accurate information about property market activity."

NZ Property Federation president Terry le Grove and executive officer Andrew King were also broadly supportive but sought changes to the Bright Line Test, shortening it from two years to one so that property traders were captured but not longer-term investors.

Committee member Clayton Cosgrove probed the federation's view of offshore residential investors: "Foreign investors are direct competitors to your members?", Cosgrove asked, which King confirmed.