David Parker in Parliament speaking on the Overseas Investment Amendment Bill. Source: Parliament TV
The estate agent who sold this country's most costly home is afraid of the global message when New Zealand bans foreigners from buying our houses.
"Are we seriously going to become fortress New Zealand and we absolutely want no one else to turn up?" asks Graham Wall, the agent who in 2013 got $39 million for a Paritai Drive mansion, sold to Chinese expat businessman Stone Shi, of the company Oravida.
The Paratai Dr house, sold for the highest sum in New Zealand. Photo/Brett Phibbs
"Whether you're a refugee from Manus Island or a billionaire from Manhattan Island, we say 'you can't buy a house here. We don't want you here'. Who would have thought this outward-looking Government would be so inward looking? It's hard to see how this legislation could free up one affordable house."
Corporates will struggle to attract top executives from overseas, he predicts.
"If a big business hires an American IT manager and he's going to be a good taxpayer and put his kids into private schools, he can't buy a house here. I frankly think they'll put it through and look at it in a year's time and think 'it's too harsh'."
New Zealand residential property will no longer be for sale internationally if the controversial law is passed.
That's the clear message that could be delivered to foreigners seeking to buy into our $1 trillion-plus housing market if the new Government's planned legislation gets through the House in the next few weeks.
Submissions on the Overseas Investment Amendment Bill closed on Tuesday. If it becomes law, it will deliver a strong "go away" to non-residents and non-citizens wanting to buy any of our 1.85 million private dwellings.
Graham Wall who sold New Zealand's most expensive home.
But while real estate agents and lawyers fret about the planned change, one group is delighted.
For 42 years, the Campaign Against Foreign Control of Aotearoa (CAFCA) has been battling to keep New Zealand assets out of foreigners' grasp.
Its outspoken organiser, Christchurch-based Murray Horton, this month expressed sheer delight at the proposed act, although he has reservations.
"The Government deserves praise for tackling aspects of foreign control as a high priority as soon as it got into office," Horton says.
"But that is only as it should be, because it is an extremely important issue and one which has ramifications across a whole raft of other issues. Of course, the Campaign Against Foreign Control of Aotearoa is pleased that it is banning foreign speculators from buying houses. But, really, this is what our American friends would call nickel and dime stuff."
Horton notes that real estate agents say the ban is two years too late, and that foreign property speculators bolted from New Zealand as soon as the law required that they show a minimal connection to this country, by having an IRD number and a local bank account number. That measure was brought in under the previous National-led Government.
"Still, better late than never."
Murray Horton has campaigned for more than 40 years.
He was pleased by last month's Government announcement that it was tightening rules on foreigners hoping to buy farms here.
But he wonders if the Government is aiming at the right target: "Land sales, although they get a lot of attention, only involve tens of millions of dollars. The real guts of any modern economy — the high rollers' lounge of the capitalist casino — is the business sector," Horton says.
"That's where the billion-dollar deals are done. And we've heard nothing from the Government about what, if anything, it plans to do about the transnational corporations that so dominate our economy, apart from the commendable, but comparatively minor, aim of trying to get them to pay their fair share of tax."
Submissions on the planned law are yet to be officially released, but in its submission, the Property Council expresses concern about the Overseas Investment Office being under-funded and under-staffed, and applications taking months to process. "Substantially more resourcing" is needed, its submission says. It wants mandatory time limits on applications, "particularly for residential developments of scale". And those big estates should also get priority over other applicants as well, it says.
The draft legislation had gone too far by restricting not only the sale of houses, but also all residential land to overseas persons, "not just overseas speculators", the council says.
Its members contribute $29.8 billion to the economy in gross domestic product, the submission says, and the bill could have "adverse and unintended consequences which could hinder the Government's wider objective of enabling more houses to be built."
Fletcher Building is at Hobsonville Point, one of its many sites.
Large-scale housing developments require capital, which often includes foreign investment, "crucial given the limitations of New Zealand's small capital market".
Few New Zealand-domiciled companies have the scale or capability to undertake large-scale residential developments, the council says.
Although the council does not specifically name the company, Fletcher Building and its subsidiaries are regular applicants to the OIO, due to Fletcher's many overseas investors.
Fletcher is building residences on various sites — the former Three Kings quarry, at Beachlands in southeast Auckland, Hobsonville Point, Karaka, Kowhai Ridge off the northwestern motorway, Ormiston, where a new town centre is being created, Red Beach near Orewa, Stonefields in the Mt Wellington/St Johns area, Swanson, Waiata Shores and Totara Heights near the Manukau Harbour, Whenuapai and in Christchurch.
Fletcher refused to supply a copy of its submission, saying it "would not step outside the process". Submissions are expected to be released next Wednesday.
Leonie Freeman with former minister Nick Smith. Photo/Jason Oxenham
Leonie Freeman, a housing strategist who has worked in both the private and public sectors, supports the bill, although she has questions about the detail and says the new law is just one measure.
"The law won't solve all the problems. It won't drop house prices and we know that from Australia," she says.
"We've got to put more innovative ideas and products in place, have a certainty of supply from the public sector so businesses can scale up, sort out consenting processes with councils, deal with the construction industry's shortage of capability and capacity, set a vision that everyone gets behind in terms of goals and targets and unblock all the blockages we've got in the process of house building," Freeman says.
"We need to change people's thinking; it's a wider cultural shift. If we want more affordable houses, we have to accept greater density."
National leader Bill English told Radio Live's Duncan Garner on Tuesday that he believed the existing measures had been adequate. How trading partners would react to a more restrictive regime was uncertain, he said, pointing out that the planned regime would be far more restrictive than rules in Australia or Singapore.
National has opposed the bill and the shortening of the consultation process. The Opposition said it was a technical piece of legislation and the public needed time to read and understand the changes so they could make relevant submissions.
The Government wants the bill passed before a possible signing of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which is scheduled to be signed on March 8.
David Parker, the Associate Finance Minister who is in charge of the bill, says this has meant the select committee process had to be shortened. If New Zealand signed up to the trade deal without first passing the legislation, the CPTPP provisions allowing foreign investment could then affect other trade agreements.
Parker said that would effectively take away the right to limit foreign property purchases.
When the bill passed its first reading last month, he lashed out at the previous regime.
"National said we could not do this but we did. They said we had to choose between trade agreements and controlling our housing market and we have shown that was wrong. They were either being incompetent or disingenuous — probably both," Parker said.
"We think it is the birthright of New Zealanders to own our houses as well as our farms. We believe that our homes should be traded on a New Zealand market, not an international one, and to us this applies at all levels of the market. Our best homes and farms should be purchased by our most successful New Zealanders, and our most modest homes should be also be purchased by New Zealanders so that as many New Zealanders as possible have a chance to achieve the Kiwi dream of home ownership."
Has the horse bolted, though? Is the new law too late, given that foreigners no longer appear to be as active in the housing market as they were around 2015?
Market participants say that since National required foreigners to have New Zealand IRD numbers and bank accounts, they have shied away from buying our houses.
In a nod to that point, Parker says the new law will not have a huge impact on prices at this stage of the property cycle.
But it would have a greater impact at other times, for example when overseas buyer interest surges again, he says.
If passed into law, the Overseas Investment Amendment Bill will:
• Ban anyone except NZ and Australian citizens and permanent residents from buying an existing NZ home or residential property without Overseas Investment Office approval
•Cover developed as well as undeveloped residential land, including bare or substantially unimproved land likely to be subdivided for housing
•Include residential land as a new category of "sensitive land" in the Overseas Investment Act 2005
•Encompass apartments, townhouses, flats, homes, residential land and lifestyle blocks of up to 5ha
•Foreigners will be allowed to buy NZ residential and lifestyle properties if: They will be developing the land and adding to the housing supply; or they will convert the land to another use with wider benefits to the country; or they hold an appropriate visa and can show they have committed to live in NZ
•The law will not be retrospective, covering only new deals
•Submissions on the bill closed this week. The finance and expenditure select committee is due to report back by February 20, and the Government intends the bill to get its second and third reading, then pass into law
Other reactions
Lawyers and real estate agents who deal with foreign buyers have expressed differing views on the proposed law.
•Bell Gully's Andrew Petersen and Willy Sussman are unhappy that foreign landlords hunting for places under development will be barred from the market.
"The 'new housing text' will include a requirement for an overseas person buying off-the-plans to on-sell the property once construction has finished. This appears to be an onerous condition that will effectively close down pre-sales to overseas persons who are looking for a rental property investment.
"Our first impression is that the drafting of the bill is complex and it could have wider implications than the Government announcements have suggested to date," they say.
They are also worried about the potential loss of business, saying the act "could impact many of our clients who wish to purchase residential land."
• Russell McVeagh's Ben Paterson, Catherine Marks and Tim Clarke noted that it was a Labour/NZ First coalition agreement that the Government would ban the purchase of existing homes by non-resident foreign buyers.
"The act has been in place now for approximately 12 years and it has become increasingly clear that the act does not neatly respond to a number of real world transactions," they say.
• Jessica Weinberg of Todd & Walker Law say some foreigners might get different treatment: "Singaporeans may be exempt from the new legislation as it breaches an existing trade agreement between New Zealand and Singapore."
•Kensington Swan says: "The changes proposed to the act are far-reaching and result in a complete change to the landscape for investing in residential land in New Zealand. They are likely to make smaller housing developments, which may not have previously required consent under the act, more onerous. Conversely, the inclusion of increased housing supply in the three tests should assist developers of larger scale housing projects."
