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National Housing Policies: Foreign buyers tax
What sellers in the $2 million-plus property market need to knowBy Gill South 31 October 2023
Depending on negotiations between National, ACT and NZ First, under a National-led Government foreign buyers will be able, once more, to purchase residential properties in Aotearoa New Zealand. These homes must be priced at $2 million or more and, if it goes ahead, the foreign buyers will have to pay a 15% tax on the property purchase price.
The foreign buyer tax would be applied to people who don’t hold a resident class visa in New Zealand. The foreign buyer ban was introduced by the Labour Government in 2018 which was concerned that foreign buyer activity was having an adverse effect on house prices.
Other countries whose property markets attract strong international buyer interest have also used this taxation method. British Columbia in Canada applies a 20% tax on residential property purchases in Vancouver, for instance, and in Australia, New South Wales applies an 8% tax on residential property purchases by foreigners.
The National Party says foreign investment is needed to grow the New Zealand economy, and will lift productivity as well as support business and innovation. For investors and potential migrants, being able to own a home here is a major factor in deciding whether to bring their companies and talent to Aotearoa New Zealand, it says.
The party gives the example of Rachel, a tech entrepreneur from San Francisco, who has an entrepreneur work visa to start a business here and wants to buy a $3 million apartment in Auckland to live in. She would pay $450,000 in tax on this.
National has said that international evidence suggests that foreign buyer taxes are more effective at controlling property price growth than a foreign buyer ban. It expects the tax to deter speculators as the foreign buyer tax would make it highly unprofitable.
Australian and Singaporean citizens wouldn’t be affected by the foreign buyer tax as they’re not currently affected by the foreign buyer ban, National has stressed. It notes that sensitive land tests, which include the likes of iwi land and heritage buildings, would still apply.
Property analytics company, CoreLogic estimates that around 3% of the country’s housing stock is valued at $2 million or more. It believes that the new tax revenue policy could affect property markets which are particularly attractive to overseas buyers, or have a lot of homes in the $2 million plus price range. Queenstown-Lakes, for instance, has around 10% of its properties valued at $2 million plus, while Auckland is another property market with a reasonable proportion of homes worth $2 million or greater – an estimated 6%, according to CoreLogic.