Phil Twyford, New Zealand's Housing Minister, said that first time buyers and families were at the moment "forced out of the housing market" because of these price hikes and shortage of available housing stock.
The country is to introduce new legislation that could well become a test-case for other countries around the world suffering the same residential real estate shortages as New Zealand. From early next year onwards, the country will only permit people who hold a residential visa to buy existing homes. It is hoped that this will force overseas developers and private individuals to build new homes if they want to own residential real estate rather than buy second-hand properties that then sit empty for part or all of the year and is thus not available to New Zealanders in need of a home.
Housing Minister Twyford and Land Information Minister Eugenie Sage explained that "purchases of homes by offshore speculators push first home buyers and families out of the housing market."
Ms Sage added: "It will mean, for practical purposes, that foreign buyers will not be able to buy residential property unless they are either increasing the number of residences and then selling them or converting the land to another use. They will need to be able to show that this will have wider benefits to the country."
New Zealand's new housing legislation is designed to get to grips with surging property prices, which have caused such a housing crisis that homelessness rates are now the highest in the developed world. Some 40,000 people, that's one per cent of New Zealand's population, are currently homeless, living on the streets or in emergency accommodation, according to data published by Yale University in July 2017. It was the single-most debated issue that dominated elections held in October of this year, when Labour Prime Minister Jacinda Ardern was voted in to end nine years of conservative National Party rule that many blamed for the housing crisis.
New Zealand has become an increasingly attractive destination for the world's super-rich and Chinese investors. According to The New Zealand Herald, Twyford said that although the housing market was cooling, "when the cycle returns" the ban on foreign real estate buyers would help to keep price rises in check.
Under new Overseas Investment Act (OIO) screening rules, a residency visa holder would be able to purchase land designated for residential use under certain conditions. Residency visas are given to skilled migrants for example and refugees granted asylum. People who only hold a temporary visa will not be permitted to buy residential land. Resident visa holders who can demonstrate that their purchase will increase New Zealand's housing stock, and those who can demonstrate that they intend to live long-term or permanently in the country, will be permitted to buy residential land. If people falling into either or both of those categories later decide to leave the country, they must sell on the property they built and lived in.
Land Information Minister Eugenie Sage that there were 47,000 residency class visa holders in 2016, but no data was available on how active these residency visa holders were in the real estate market. From early next year onwards, the OIO will assess people's commitment to staying long-term in New Zealand, when they apply for a residency visa.