The selling of New Zealand – feature article

THE $ELLING OF NZ
[Jun/Jul 2014 issue]

How the National Government is directly responsible for higher interest rates

Finance minister Bill English regularly lectures New Zealanders on their spending on real estate and says we need to tone it down to keep interest rates low. However, it’s not ordinary New Zealanders but overseas investors enticed by National that are stoking house price inflation and mortgage interest rates. IAN WISHART investigates

New Zealand’s booming housing market and resultant pressure on mortgage interest rates is the direct result of a government policy designed to entice foreign migrants, an Investigate inquiry has discovered.

In 2011, National changed the immigration rules to allow foreigners to gain New Zealand residency if they invested $1.5 million in the country for a minimum of four years. Significantly, the rule change allowed that investment to be made in residential property, for the first time ever.

The “Investor 2” category stipulates that the $1.5 million cannot be invested in your own house, which meant wealthy foreigners wanting to live in New Zealand simply had to pony up with enough cash to buy a residential property portfolio. The only stipulation is that “the residential property must be in the form of new developments,” says a briefing paper for prospective migrants on the Erskine & Owen website.

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With $1.5 million you’d need to purchase at least two, possibly three properties in Auckland, or even more if you were investing down country. In short, that means every investor migrant is probably in the gun to purchase four properties (including their own home), significantly ramping up the pressure on the New Zealand property market.

“Prior to July 2011, property was not accepted by Immigration New Zealand as an acceptable investment for the purpose of migrating to New Zealand,” says the Erskine & Owen briefing.

Not only are the investor migrants required by law to purchase multiple properties per migrant, but New Zealand banks and financial institutions are falling over themselves to offer the mortgage lending facilities they need. ANZ bank, for instance, has a dedicated unit devoted to migrants, and is a partner on the New Zealand Association for Migration and Investment (NZAMI) website:

“ANZ offers migrant banking services through its dedicated International Banking Services team which includes a specialist Asian Banking team, staffed with Asian language speakers. These specialist teams understand the needs of new residents and can work with migrants in the language they are most comfortable with. Of particular advantage for new residents is that the bank can set up and manage new accounts until they arrive in New Zealand.”

One mortgage broker spoken to by Investigate says the official figures suggesting only two percent of residential properties are being sold to foreigners are wrong:

“It’s nowhere near that low. The reason the government’s official figures seem low is because they are only capturing foreigners who buy in their own names.”

Asked what he meant, the broker explained:

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