Some Chinese investors have applauded an upcoming ban in New Zealand on foreign homebuyers, while others think the change may hinder the growth of the local real estate market, industry insiders said.
New Zealand Prime Minister Jacinda Ardern said on Tuesday that a ban on foreigners buying existing homes would take effect in early 2018, according to Reuters. The restriction will not apply to Australians.
The move aims to make it easier for Kiwis to buy their first homes, as foreign buyers have been driving up home prices, Ardern was quoted as saying by the media report.
Chinese investors have been flooding the New Zealand market since 2013, some of them were attracted by favorable conditions such as low interest rates for mortgages and low taxes compared with those in Canada and the U.S., Michael Liu, an agent based in Auckland, told the Global Times on Wednesday.
"In addition, as more and more Chinese students come to study in New Zealand, we've seen a pickup in home transactions," Liu said.
"Some bought apartments at very low prices, with low interest rates on their mortgages. It has become profitable for them to sell the dwellings at much higher prices after several years," said an anonymous investor who has been living in Auckland for years.
It has become a common practice for some Chinese buyers to use leverage to purchase several homes in New Zealand, and such speculative activity has surely sparked opposition in local communities, he said.
It's not entirely clear what percentage Chinese homebuyers account for the New Zealand market.
A report from Land Information New Zealand, a government agency, said only 3 percent of all property transfers in the second quarter involved overseas tax resident buyers, according to a post on its website in August.
Mary Anne Shanahan, a conveyancing lawyer, challenged the official data by saying that the authorities had not correctly interpreted the data and in reality, foreign buyers accounted for as much as 29 percent of the market.
Home prices have been growing rapidly in recent years. The average home price in New Zealand has been on an upward track since 2011, according to the Reserve Bank of New Zealand. In 2015 and 2016, monthly growth rates moved in a range of 5 percent to 15 percent.
The nationwide average price was up 2.1 percent on a year-on-year basis in October, according to the Real Estate Institute of New Zealand.
Though there have been an increasing number of Chinese homebuyers, Australians and Americans represented most of the overseas buyers in New Zealand, said the Chinese investor who wished to remain anonymous.
"It's not fair to blame Chinese for driving up the prices," he noted.
Ardern, who is also the leader of the New Zealand Labour Party, is seeking more support from the public as high prices have made houses unaffordable for local residents. In addition, local banks have been tightening mortgage policies in recent years.
"I've been considering buying an apartment in Auckland since the beginning of 2016, as the mortgage payment is very low, almost equal to my rent," said a Chinese woman surnamed Chen who has been living in New Zealand for six years.
But she may abandon that plan as her bank has come up with measures to limit housing loans, she told the Global Times. "For instance, the bank started to restrict loans to foreign buyers that relied on overseas income and adjust loan-to-value lending ratio since the end of 2016," she said.
The new ban will initially have an impact on people who are not buying homes for living but for speculating, as some have earned lots of money in recent years by "buying low, selling high," the Chinese investor noted.
"This situation has generated an imbalance in supply and demand in the New Zealand housing market," he said.
In the year ended June 2017, there was potentially a shortfall of about 9,000 new homes compared with what was needed to meet increased demand from a larger population in the same period, according to the official data provider Statistics New Zealand.
"The new restriction will help stabilize the New Zealand market, but investors may hold bearish views on the market as the growth of home prices will slow down," said Liu, the agent.