Foreign buyer ban to impact Kiwi house prices and squeeze more Kiwis out of apartment market - Westpac economist

The Government's upcoming foreign buyer ban will "clearly" impact Auckland and Queenstown house prices and may squeeze locals out of the apartment market, a Westpac economist says.

Your playlist will load after this ad

Phil Twyford says the new legislation will not affect genuine migrants, and is designed to dampen speculation when the housing market picks up again. Source: Breakfast

The bank's chief economist Dominick Stephens told the NZ Herald today that the market may react in a similar way to Toronto, Canada, when a stamp duty on foreign buyers was introduced.

"Toronto house prices fell around 5 per cent soon afterward," Mr Stephens said.

However, he believes that prices in Auckland and Queenstown are unlikely to fall as much as those in Toronto due to the "watered down" nature of New Zealand's foreign buyer ban.

The main reason for this is that the ban still allows Singaporeans and Australians to buy Kiwi homes and other nationalities can buy 60 per cent of apartments available in complexes with 20 units or more.

Mr Stephens told the NZ Herald this may lead to more foreign buyers in the apartment market, effectively squeezing Kiwis out.

Your playlist will load after this ad

We discuss how changes to foreign buyers legislation will impact homebuyers. Source: 1 NEWS

The economist says the areas that would feel most impact from the ban will be the North Shore, Central City, Howick and Henderson, Massey districts in Auckland and the Queenstown Lakes District.

"These are the places in which foreign buyers account for more than 5 per cent of sales at present."

In terms of the overall market, Westpac thinks house prices will decline at a modest rate in New Zealand over the next few years.

"This is because the New Zealand housing market faces a menagerie of negative forces, including tax changes, slowing population growth and the foreign buyer ban," Mr Stephens said.