National lays out the welcome mat for wealthy foreign home buyers

In return for access to the upper end of our property market, they'll be taxed 15% on housing purchases. But how much will NZ really make from the end of the foreign buyers ban?

Mōrena and welcome to The Bulletin for Friday, September 1, by Catherine McGregor. Presented in partnership with Z Energy.

In today’s edition: Parliament adjourns with a tetchy, unruly final debate; Bernard Hickey talks to musician and public transport advocate Anthonie Tonnon; and the government introduces a Grocery Code of Conduct aimed at reining in the supermarkets. But first, can National’s foreign buyer tax really rake in $740m a year?

National leader Christopher Luxon and the infamous Crisco/Dotcom mansion (Photos: Getty Images)

A plan to attract cashed-up foreign home buyers

It’s rare that The Bulletin covers topic three days running, but National’s tax plan is meaty enough – and controversial enough – to warrant it. Yesterday the media focus turned to a specific policy within the plan: axing the foreign buyers ban on homes over $2 million and requiring non-NZ purchasers to pay a 15% tax on those homes. According to CoreLogic, there are currently around 50,000 New Zealand homes valued at $2m or more, making up around 3%​ of New Zealand’s 1.7 million properties. That’s 3% nationally; the story is quite different in more expensive markets like Auckland and Queenstown where, respectively, around 15% and 11% of homes would be available to foreign buyers, Stuff’s Geraden Cann reports. The foreign buyers ban, introduced by the Labour government in 2018, prohibits the sale of existing homes to non-NZ residents. Reversing the ban and bringing the bright line test down to only two years could make New Zealand very attractive to foreigners looking to “park wealth” somewhere, says CoreLogic’s Nick Goodall, “even with the 15% tax on the purchase”.

Do National’s numbers add up?

Ah yes, the 15% tax. National says it expects it to bring in $740m each year, which would require $4.9b worth of annual sales to foreign buyers. That figure has left some experts scratching their heads. As Ben Leahy notes in the NZ Herald, $4.9b represents around half of all homes sold for more than $2m last year. National hasn’t released details on how it came up with $740m a year, though leader Christopher Luxon says the party is “rock solid on our numbers”. Still, given that only 3% of all house sales across New Zealand typically involved foreign buyers prior to the ban, it’s challenging to see how the numbers work. Ironically enough, in 2018 Amy Adams, National’s finance spokesperson at the time, cited the low number of foreign buyers as a reason why the ban was unnecessary. Another spanner in the works could be the text of our tax treaties with nations including China, reports Glen McConnell for Stuff. “Non-discrimination” articles in these treaties prevent non-residents from being taxed in a way that is “more burdensome” than for New Zealand residents. For the 15% tax to go into effect these treaties would need to be renegotiated or otherwise resolved, says tax lawyer Brendan Brown.

The debate over whether foreign buyers help or hurt the economy

Then there’s the question of what the return of foreign buyers would do to house prices and the wider economy. Luxury real estate agent Ollie Wall tells Leahy that wealthy foreigners bring more investment to NZ – “You give people a taste of this country ... they see what it’s all about and then they spend more time and more money here” – but Infometrics economist Brad Olsen says he hasn’t seen any evidence that foreign buyers bring large investments with them. What has been studied is the effect of foreign buyer bans and taxes on the wider property market. In formulating the policy, National referenced the work of US researchers who found that foreign buyer taxes passed in big Canadian and Australian cities had “significantly negative and persistent effects” on house prices, Cann writes. “New Zealand’s ban on foreign buyers, for existing housing, had no statistically significant effect on house price growth.”

Landlords welcome investor-friendly tax policies

There were two other big property-focused pledges in National’s tax plan: bringing the bright line test down to just two years, and reinstating mortgage interest deductibility for landlords. Both policies should make property investment more attractive, which National believes will be good news for renters. Others, like University of Auckland property lecturer Michael Rehm, say the policies will help reinflate a property bubble that has only recently floated back down to earth. Property investors are welcoming the potential return of the tax breaks after a tough couple of years in the market, but Renters United’s Geordie Rogers tells Morning Report people relying on interest deductibility to survive should not be in the business in the first place.

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An adjournment debate in the style of an ‘end-of-term classroom’

Yesterday’s adjournment debate – the last sitting of parliament prior to the election – had a tetchy, last-day-of-school air, writes Toby Manhire in The Spinoff. There was some score settling and point scoring, particularly from parliament’s most reliable sparring partners, Nicola Willis and Grant Robertson, whose positions may well be reversed when they next go head-to-head. In The Post (paywalled), Luke Malpass writes that the debate “was the first time in months that Chris Hipkins and his front bench appeared confident, relaxed and back to something close to full energy” while Luxon gave a speech with “some quite funny lines… poorly delivered”. The debate was interrupted by a group of Greenpeace protesters who rose in the public gallery, hollered “too many cows”, and unfurled banners demanding a “climate election”. Writes Manhire, “The bright pink drapes – and this is not the most important thing, I’ll give you that – really set off the salmon tone of Waititi’s blazer across the hall.” And for those keeping count at home, the number of “Up the Wahs” entered into Hansard has now reached six, which is almost definitely at least five too many.

Rawiri Waititi’s summery, Barbie-inspired fit at yesterday’s adjournment debate.

Youth Wings season two is almost here

Meet our future leaders as they hit the campaign trail around Aotearoa and prepare to square off in the most important political debate of their young careers. Youth Wings season two begins September 5, made with the support of NZ On Air.

Reconnecting the regions with better public transit

In this week’s episode of When the Facts Change, Bernard Hickey welcomes public transport advocate and award-winning singer-songwriter Anthonie Tonnon for a conversation about the need for better bus and train connections within and between our provincial cities.

It’s nearly time for the return of everyone’s favourite election voting tool, Policy. Many generous supporters have already given to the team's fundraising campaign that was set up to ensure it can launch but they need a final push to get over the finish line. Since 2017, tens of thousands of Spinoff readers have used the Policy tool to compare candidates and parties each election. Policy is as vital as ever, so please consider donating here today.

Click and Collect

• The popular conservative Substack writer ‘Thomas Cranmer’ has been revealed to be the pseudonym of Philip Crump, a former Russell McVeagh lawyer who lives in London. (BusinessDesk, paywalled)

• Major supermarket chains will be fined for treating small suppliers unfairly under the new Grocery Code of Conduct, introduced by the government this morning.

• Workers at The Warehouse in Palmerston North and WestCity mall in West Auckland will go on strike tomorrow afternoon after rejecting a “disgusting” pay offer (NZ Herald, paywalled).

• Dunedin’s Larnach Castle has been labelled an overpriced “tourist trap” by USA Today, in a story based on Google reviews.

• France is calling for the EU to establish minimum flight ticket prices to reduce air travel and curb emissions.

Right now on The Spinoff

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Sporting snippets

• The Tall Blacks go down 108-100 to Mexico in their first qualification game at the men's basketball world cup in Manilla.

Got some feedback about The Bulletin, or anything in the news? Get in touch with me at thebulletin@thespinoff.co.nz.

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