If you’re a billionaire looking to ride out the coming apocalypse, New Zealand has an obvious appeal. Its geographical isolation, political stability and abundant supply of fresh water — as well as its natural beauty — makes it the perfect place to prepare for societal collapse. As a result, the Guardian reported earlier this year, the country “has come to be seen as a bolt-hole of choice for Silicon Valley’s tech elite.”
For the average New Zealand resident, though, a doomsday bunker is out of the question. So is a regular house. In Auckland, New Zealand’s largest city, home prices have nearly doubled since 2007, according to Bloomberg. With more people priced out of buying homes, rents have gone up and homelessness rates have soared. Across the country, homeownership rates recently hit their lowest levels since 1951.
On Wednesday, New Zealand passed a law that will prevent most foreigners from buying homes in the country, in the hope of addressing the ongoing affordability crisis. The ban had been one of the campaign promises championed by Prime Minister Jacinda Ardern and the center-left Labour Party, who ran on a platform of reducing income inequality, combating homelessness and cutting back on immigration.
“If you’ve got the right to live in New Zealand permanently, you’ve got the right to buy here,” David Parker, New Zealand’s associate minister of finance, said in a speech before Parliament on Wednesday. “But otherwise, it’s not a right, it’s a privilege. We believe it’s the birthright of New Zealanders to buy homes in New Zealand, in a market that is shaped by New Zealand buyers, not by international price pressures.”
The law will not affect foreigners who already own houses in New Zealand. It also does not apply to citizens or permanent residents of Australia and Singapore, due to trade agreements in place with those countries, Al Jazeera reports. Government statistics show that New Zealand’s largest share of overseas buyers maintain tax residency in China, with Australia coming in second.
Opposition lawmakers have categorized the policy as xenophobic. In a floor speech before Parliament, Judith Collins, a member of the center-right National Party, described it as an attempt to “try and cynically blame foreigners, particularly those with Chinese-sounding names, for a government that has no other policy in which to actually improve and increase house ownership in New Zealand.”
Her reference to “Chinese-sounding names” alluded to a controversial claim made by Labour Party officials in 2015. After acquiring several months’ worth of sales data that had been leaked from a real estate firm, the party had counted up the number of Chinese last names and announced that nearly 40 percent of homes in Auckland had been purchased by Chinese buyers. Critics decried the move as racist.
In voting to approve the ban, liberal lawmakers rejected the advice of the International Monetary Fund. Calling the proposal “discriminatory,” the IMF noted in an April report that foreign buyers make up a relatively small portion of the country’s housing market, and questioned whether rejecting overseas investments would be an effective way of tackling the crisis.
According to the Associated Press, foreigners make up about 3 percent of home buyers in New Zealand. In central Auckland, however, the percentage rises to 22 percent. Those statistics may not reflect the full scope of foreign investment: As Reuters notes, they don’t include instances where properties were purchased through a trust.
On Thursday morning, Parker acknowledged in a radio interview that he couldn’t predict how much of an impact the ban would have on housing prices.
“You know it will have a price effect; you just can’t quantify how much the price effect will be,” he told New Zealand’s “The AM Show,” according to Newshub. “But there’s an important point of principle here: When you’ve got wealth accumulating into this top fraction around the world, and it’s worse overseas than it is in New Zealand — it’s bad enough here — you don’t want that sort of coming to influence your own local housing market.”
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