Rich Americans ready to swoop in if New Zealand relaxes home-buying ban
[WELLINGTON] Wealthy Americans eyeing New Zealand as a haven are hoping the government will soon relax a ban on house sales to foreigners, according to advisers.
Since New Zealand overhauled its golden visa programme last month, there has been a surge of interest from would-be US investors, but the inability to buy a house in the country remains an obstacle, said Marcus Beveridge, managing director at Queen City Law in Auckland who specialises in foreign investment.
'A sensible way forward would be that anyone who successfully obtains a residence visa under the government golden visa scheme is eligible to buy a family home here,' Beveridge said. Telling investors they cannot buy a house 'really sticks in the craw', he said.
Immigration Minister Erica Stanford said last month that talks about changing the policy were happening 'at a leader-to-leader level' in the coalition government. There is speculation it could announce a relaxation of the ban in the budget on Thursday (May 22), though politicians have not given any indication that such a step is imminent.
Prime Minister Christopher Luxon told reporters yesterday that lifting the ban 'is not the be-all and end-all of attracting investment'.
New Zealand, which suffered a sharp recession last year, wants to attract more foreign capital to spark economic growth and fund new infrastructure. Its remote location in the South Pacific makes it a desirable destination for the rich seeking a haven in a picturesque and politically stable country.
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One of the government's moves to attract foreign investment was a reworking of the golden visa, which gives residency to foreigners if they invest a certain amount of money.
The revamp scrapped the English-language requirement, reduced the time investors must spend in the country, lowered investment thresholds and simplified eligibility categories.
In the six weeks since the changes were introduced, 104 visa applications covering 346 individuals have been submitted, according to government data – almost as many as were received in the previous two-and-a-half years under the old settings.
The applications represent a minimum NZ$620 million (S$475 million) in investment. Strikingly, more than half come from the US.
Jim Rohrstaff, a partner at luxury real estate broker Legacy Partners in Auckland, said there is a 'tremendous amount of pent up demand' from well-off Americans to buy homes in New Zealand.
'Not only because of the things that are going on politically in the world, which are quite divisive, but I think Americans have always been fascinated by New Zealand,' said Rohrstaff, a dual American-New Zealand citizen. 'It's a beautiful place. It's a long way from everything.'
The ban on house sales to foreigners was imposed in 2018 by then-Prime Minister Jacinda Ardern amid concern about unaffordable housing and following a passport-for-sale scandal involving PayPal co-founder Peter Thiel.
Only citizens and tax residents of New Zealand, and Australians and Singaporeans – due to pre-existing trade agreements – are allowed to buy property.
The ruling National Party campaigned on loosening the ban ahead of the 2023 election, proposing to allow foreigners to purchase homes worth NZ$2 million or more. However, coalition partner New Zealand First blocked the policy during government formation talks.
Since then, New Zealand First leader Winston Peters has said he's open to allowing foreigners to buy expensive houses if they also invest in the country.
Rohrstaff, who develops exclusive golf courses, said he has been in contact with numerous wealthy and influential Americans who would love to spend more time in New Zealand, but not in a hotel room.
'They are staying in some of the beautiful luxury lodges around the country,' he said. 'But there is an expiration date to that visit.'
Beveridge said he believes a lifting of the ban is inevitable, even it doesn't happen in this week's budget.
Mark Harris, managing director and founder of New Zealand Sotheby's International Realty, said the revamped golden visa was attracting applications, but the fact that people still had to become tax residents in New Zealand in order to buy a house was problematic. Under New Zealand law, being a tax resident means an individual needs to have spent 183 days in the country in any 12-month period.
'We are seeing a lot more inquiries and web traffic, particularly from the US, but unfortunately a lot of clients in the high-net-worth category just aren't able to spend six months at one time,' he said. 'It's still a road block to them buying a home to enjoy.' BLOOMBERG
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Sign Up Sign Up The provision amounts to 'weaponization of US capital markets into law' that 'challenges the open nature of US capital markets by explicitly using taxation on foreign holdings of US assets as leverage to further US economic goals,' George Saravelos, head of FX research at Deutsche Bank AG, wrote in a report on Thursday. 'We see this legislation as creating the scope for the US administration to transform a trade war into a capital war if it so wishes, a development that is highly relevant in the context of today's court decision constraining President Trump on trade policy.' Section 899 takes aim at countries including Canada, the UK, France and Australia that impose 'digital services taxes' on large technology companies such as Meta Platforms Inc. The clause also targets countries using provisions in a multi-country deal for minimum corporate taxes. The measure would boost the federal income tax rate on passive US income earned by investors and institutions based in the targeted countries, first by five percentage points, then rising by another five points each year to a maximum of 20 points above the statutory rate. 'Troubling' for bonds, dollar Morgan Stanley's strategists included the provision in frequently asked questions related to the tax-and-spending bill and concluded that Section 899 would weaken the dollar and European stocks with US exposure. Gilles Moec, the chief economist at AXA Group, said it could add to the pressure on long-term interest rates, which this month touched multi-year highs. Others see it dragging on the US currency. 'It's indeed sounds troubling,' said Rogier Quaedvlieg, senior US economist at ABN Amro Bank NV. 'By limiting new foreign demand, that would of course put pressure on the dollar.'' The risks related to the section 899 provision are seen by some as even more pressing after the US court order on Wednesday that blocked many of Trump's tariffs on imports. Tariffs are considered a key source of revenue to fund Trump's tax cuts, a signature part of his 'big, beautiful bill.' Without them, the question is where the administration will find the money to fund them. The intent of the measure appears similar in spirit to some ideas put forth in November by Miran while he was still working at hedge fund Hudson Bay Capital. Miran, now chairman of the White House Council of Economic Advisers, raised the possibility of imposing 'user fees' on foreign investors in Treasuries as one option to help push down the dollar and address global trade imbalances. 'The clause is clearly endorsed by the administration and designed to give Trump a negotiation tool for pressuring countries to drop digital services taxes and global minimum corporate income taxes, which he sees as unfairly targeting US multinational companies,' wrote Economist Will Denyer and Tan Kai Xian at Gavekal Research. 'The problem is that before Trump has a chance to use the new tool, its very existence may unsettle bond markets.' What strategists say 'With tariff revenue more uncertain and less likely to offset tax cuts in the GOP budget bill, traders need to be prepared for tax changes on foreign holders, ultimately reducing demand for American financial assets.' – Michael Ball, Markets Live macro strategist For now, the market reaction to Section 899 appears muted, at best. Still, US assets as a whole have been underperformers this year as Trump's policies put a dent in the narrative of the 'America exceptionalism.' 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'We believe the president's viewpoint is that there is such immense foreign appetite to invest in the US that it is not at risk of being thrown off course,' according to Charles Myers, a former Wall Street executive who runs advisory firm Signum, and Lew Lukens, a partner at the firm. To Pepperstone's Brown, the reason markets haven't reacted yet is because investors hadn't fully grasped the significance of the clause. But they're starting to now. 'It's only as the dust has settled that people are thinking that maybe there are some things lurking under the surface of the bill we should pay a little bit more attention to,' said Brown. 'And I think this section 899, this is probably one of them.' BLOOMBERG
