John Armstrong: Shearer sets agenda with foreign sales ban

National has been caught off guard by Labour's policy. Photo / Sarah Ivey

Labour's plan to bar foreigners from buying existing homes may turn out to be riddled with more holes than a block of Swiss cheese in terms of likely effectiveness.

The policy may be condemned as unworthy of a party which has always scrupulously avoided playing the race card.

Whichever way you look at it, however, promising such a ban is still darned good politics.

In one swoop, David Shearer has got people talking about what he wants to talk about - instead of endlessly debating whether he can cling on as Labour's leader.

When Labour's opponents shout "xenophobia" or "racism", Shearer only needs to say Labour is merely copying what Australia is doing to curb soaring house prices.

Crucially, the policy is very much in tune with public opinion, judging from a 3News Reid Research poll taken back in February which found two-thirds of respondents favouring restrictions on foreigners buying property.

National has been caught off guard. The policy is a textbook example of how one party can outflank the other and make major incursions into the latter's territory.

Labour needs to do much more of that - and more often.

The Prime Minister has dismissed the policy as an indication of Shearer's "desperation" to save his leadership by harvesting anti-Asian sentiment.

National might do better attacking the policy as unlikely to have much impact on Auckland house prices.

For starters, because New Zealanders have entry rights, they are exempt from Australia's ban. Australians would likewise have to be exempt from any ban on this side of the Tasman. Yet - depending on which survey you believe - Australians were party to between 14 and 22 per cent of New Zealand house sales to foreigners.

Moreover, foreigners can get around Australia's ban, either by building a new house on vacant land or by demolishing an existing house and constructing townhouses on the site. Labour's scheme would have the same exemptions. However, the party is still pondering whether to replicate another exemption in the Australian model - foreigners being allowed to buy units, townhouses or apartments in new housing developments or subdivisions.

Such exemptions risk pent-up demand simply shifting from old homes to new houses, fuelling price rises in that sector of the housing market.

National has sought to downplay the impact of sales to foreigners, pointing out that only around 5 per cent of house sales go to non-resident foreigners. But that is 5 per cent not being secured by New Zealand citizens or residents.

Labour's ban may not have much impact on house prices. But in an atmosphere where evidence-deficient anecdotes suggesting New Zealanders are missing out to wealthy China-based bidders are treated as fact, the policy's real potency lies in it satisfying a desire for scapegoats to be found to blame for the state of the Auckland housing market.

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