Times are changing in New Zealand. The new Labour Party led coalition government recently an nounced a legislative amendment that will stop almost all non-citizens from buying property in the country. House prices are a problem in the country and Prime Minister Jacinda Adern and her government see the Foreign Investment Amendment Bill as a viable complement to KiwiBuild, the house building programme. Will the bill be a success, and would such an amendment be possible in the UK?
Firstly, it’s important to know why this rather radical bill has been proposed. New Zealand’s generation rent is an even bigger problem than in the UK, with rich foreign investors often commissioning houses in order to rent them out to Kiwis as a long-term investment. Mrs Adern has made no secret of her opposition to this behaviour and hopes her bill will increase the number of Kiwi homeowners. Politically this is a masterstroke. With the Labour Party’s ratings already at a 15-year high, this policy targeted at helping regular families at the expense of non-voting foreigners will surely boost the popularity of the party even further.
However, there are questions over the economic viability of the scheme, with many millionaire foreign homeowners making the point that their contribution to the economy through entrepreneurship and job creation outweighs the downsides of their inhabiting the country. They also claim that the million dollar mansions they reside in hardly represent a possibility for the average Kiwi family, and so should be treated as a separate market, exempt from the bill. But not all immigrants are wealthy tycoons, and a proportion of family homes are inhabited by foreigners. There are also critics who say that trying to dampen demand is only likely to be a short-term solution, saying that energy should instead be put into growing KiwiBuild from 100 000 new homes to 500 000. The government has faced many lobbyists accusing them of anything from economic incompetence to downright xenophobia. The latter may be overly dramatic but only time will tell if the former has any truth to it.
With many of the same problems occurring in the UK, particularly in London, we have to ask whether something similar would be a good idea in our own economy. There is a lack of affordable housing available for young families, particularly in the metropolitan hubs, but it is unlikely that a foreign home-ownership ban would solve this. Following the Brexit vote, we are already seeing the beginning of an exodus of foreign home owners, due to the uncertainty over the future. Those that do stay, particularly in London, are not living in houses that would be viable for the average Brit anyway. In addition to this, the political dynamic in New Zealand is very different. While Adern enjoys record popularity and a strong mandate and perhaps even experiment, Theresa May grapples with an unruly cabinet and a country standing on the precipice of the single biggest constitutional change in generations. Therefore, the last thing that Mrs May would want to do is mess with the housing market, one of the most stable markets over the last few years.
Although it may not be suited to everyone, this bill is intriguing. Economists and political analysts around the globe will no doubt be eagerly anticipating the results of this untested change.