BANGKOK/LONDON (Thomson Reuters Foundation) - A ban on foreigners buying homes in New Zealand is not enough to solve the problems of affordable housing and homelessness, analysts and campaigners said, as the country became the latest to impose curbs on non-residents buying property.
New Zealand’s parliament last week passed a law to bar many non-resident foreigners from buying existing homes in a bid to curb house price growth and reduce rates of homelessness.
The ban exempts Australians and may also exclude Singapore.
Foreign ownership has attracted criticism in recent years as New Zealand grapples with a housing crunch that has seen average prices in the largest city, Auckland, almost double in the past decade, and rise more than 60 percent nationwide.
But reaction to the ban was mixed, with some analysts saying it may help boost affordability, while campaigners said it would not solve the more pressing problem of homelessness.
“It will take some price pressure off the top end of the market, which may trickle through to affordability at the lower end. However, it won’t have much effect,” said Timothy Hazledine, professor of economics at the University of Auckland.
“There definitely is an affordability problem, generated simply by the pressure of demand on a finite supply of desirable real estate. Bans on foreign ownership are a tiny step in this direction,” he told the Thomson Reuters Foundation on Wednesday.
The United Nations estimates that globally, at least 150 million people, or about 2 percent of the population, are homeless. More than a fifth of the population lacks adequate housing.
Governments worldwide are under pressure to boost housing affordability and fix a growing problem of urban homelessness.
Canada last year recognized housing as a fundamental right, and committed to creating up to 100,000 affordable housing units and providing financial assistance to some 300,000 low-income households.
India has pledged to provide housing for all citizens by 2022, with an aim to build 20 million urban housing units and 30 million rural homes, although activists say the program does not address the problem of homelessness.
New Zealand has the highest rate of homelessness amongst wealthy nations that are part of the Organisation for Economic Cooperation and Development, with almost 1 percent of its population living without a permanent shelter in 2015.
New Zealand Prime Minister Jacinda Ardern has unveiled an ambitious plan to build social infrastructure, including an extra NZ$634 million ($425 million) for housing to help thousands of residents sleeping in cars and shop entrances.
This is on top of the NZ$2.1 billion previously announced to fund Kiwibuild, a government building program to increase affordable housing supply.
The new law is unlikely to help the homeless, said James Crow at the advocacy group Gimme Shelter Aotearoa.
“Although this law allows a more level playing field for first home buyers, these are unlikely to be the individuals and families sleeping in cars every night,” he said.
“The major issue remains around affordable rental accommodation, as most homeless are renters. Better access to first, emergency shelter and then long-term rental accommodation is a critical next step to resolving (homelessness),” he said.
With at least 55 percent of the world’s population living in urban centers, homelessness is ever more apparent, from Los Angeles to Auckland.
This has fueled resentment against foreign buyers who are accused of pushing up house prices, and often leave their properties vacant for several months of the year.
In London last year, squatters briefly occupied a mansion left empty by its foreign owner in one of the city’s most expensive neighborhoods.
Foreign home buyers in New Zealand made up about 3 percent of property transfers overall, according to official data, which does not capture property bought through trusts.
The majority of buyers were from China and Australia.
The ban will not have “a significant impact” on house prices, said Bindi Norwell, chief executive at the Real Estate Institute of New Zealand, a lobbying body.
“Nor will it help young people into their first homes,” she said in a statement.
Instead, increasing supply, reducing bureaucracy, and easing mortgage restrictions for first time buyers are “more appropriate measures” to boost affordability, she said.
New Zealand is not alone, though: Switzerland has long had limits on foreign ownership of property, while authorities in Vancouver and Toronto have imposed foreign buyers’ taxes to cool house prices ranked as among the least affordable in the world.
While not always feasible, some controls on foreign buyers are needed on residential properties in big cities, said Chris Hamnett, emeritus professor at King’s College London.
“I welcome what the government of New Zealand has done - it is a way of protecting the residents and the housing future of a small country,” he said.