Foreign buyers should be restricted from buying existing houses in New Zealand, says BNZ chief economist Tony Alexander.
He says New Zealand should look at following Australia’s lead, where foreigners can only build new houses. This reduces competition for second-hand homes but also improves the country’s housing supply.
Alexander says: “In the context of a housing shortage in New Zealand that would seem like a good idea.”
He said such a restriction would be more effective than introducing loan-to-value restrictions, as the Reserve Bank is considering.
But he acknowledged house prices were a tricky issue for the Government to navigate. It is under pressure from the opposition parties over housing unaffordability, but it risks alienating homeowners if it reduces the value of property.
“There are a lot more people who want house prices to rise than there are wanting them to fall. Or to put it another way, governments probably don’t want to go into an election having taken measures which make people feel poorer.”
He said proposals to free up land would not bring down house prices. In regions outside Auckland there is no shortage of land, but yet prices still rise.
Construction costs are often fingered as partly to blame for rising house prices.
But Alexander said construction costs were rising because of increasing building standards and regulations. “There is no magic wand which one can wave to make prices of 4 by 2 or gib go lower. In fact construction costs will only rise in the next few years due to labour shortages across the construction field.”