Ever since the inauguration of Donald Trump there has been major concern within the business community about new conflicts around the world and the potential re-engineering of society. While this may seem a little “overblown” if you look towards New Zealand you will see some of the world’s richest business people acquiring homes in preparation for a potential apocalypse.
Exceptions to the rule
Before we look at the New Zealand property market it is worth noting that the ban on foreign investors acquiring homes in New Zealand does not apply to those from Australia, Singapore or foreigners with New Zealand residency. It would appear the main reason that New Zealand is a place of choice for billionaires around the world is the:
• Ability to be self-reliant
• Large areas of land available for purchase – creating private boltholes
• Laws, which are based on the English system
There are serious concerns that hundreds, if not thousands, of billionaires based in Silicon Valley have already put in place their plans for a potential apocalypse and breakdown of society. While many will mock this development, these are multibillionaires who are prepared to put their money where their mouths are. The fact that following the results of the 2016 US election there was a 2500% increase in traffic to New Zealand’s immigration website perhaps says everything?
Homeownership in New Zealand
The percentage of New Zealanders owning their own home has fallen to a 66 year low at 63.2% with official data also confirming that 33% of New Zealanders now live in a rented property. If you look back to 1991, homeownership stood at 73.8% and the rental property figure was 23% – so we have seen a significant change over the last three decades.
When you consider that New Zealand house prices have increased by 30% over the last five years it is safe to say that the government needed to take action. As we have seen in the UK, when first-time buyers are priced out of the housing market they are forced into private rental which feeds demand for New Zealand homes from landlords. This in turn pushes prices further and further out of the reach of future first-time buyers, increasing dependence on private rental properties, leading to a vicious circle.
Is this the answer?
There has been much controversy over the last few months as billionaires from around the world have converged on New Zealand as a so-called “safe haven”. Many have been granted New Zealand residency in exchange for investing large amount of money into New Zealand businesses. Whether these actions will be curbed under new restrictions remains to be seen because at the end of the day money does talk. However, it was interesting to see that both Australia and Singapore were exempt from the foreign investors ban on New Zealand homes – could this be a way round the ban?
Creating a self-fulfilling prophecy
As news continues to break regarding the number of billionaires who have invested in New Zealand homes as a hedge against the potential “apocalypse” this in itself creates a self-fulfilling prophecy. When a number of experts highlighted New Zealand as a potential safe haven, many years ago, they were often ridiculed but that is all changing. Will a ban on foreign investment in New Zealand homes hit overseas investment in New Zealand companies? Will house prices fall to levels which are more affordable for first-time buyers? How will existing homeowners feel about a softening market with many having paid top price for their home?