Treasury warning for government over foreign home buyers policy

Uh oh, Treasury is warning government of “unintended consequences” from their ban on overseas people buying houses:

Treasury has warned the Government that its rush to ban overseas people from buying existing New Zealand homes may have “sub-optimal” or “unintended consequences”.

And it further questions the benefit to the general public, saying that there is “low ” certainty of evidence that it would ease pressure on the housing market or see an increase in the number of new homes.

In its regulatory impact statement prepared for Cabinet last week, Treasury noted how quickly the policy had been developed. The Overseas Investment Amendment Bill, which would enact the ban, was introduced to Parliament on Thursday.

“The main risks stem from the very tight timeframes under which this analysis has been prepared. As a result, there are a number of implementation risks,” the statement says.

Some of the design choices may be sub-optimal or have unintended consequences. The Overseas Investment Office (OIO) will only have limited time to operationalise the policy (recruiting and training staff, designing application forms and systems, and upgrading IT systems).”

It added that there was limited time to educate real estate agents, conveyancers and the general public, and a risk that extra resourcing for the OIO might not be enough.

One of those unintended consequences is that house sales not yet settled are now affected and are tipping over, and I am reliably informed that John Key’s house is one of those.

It estimated the costs to be $3 million in the first year, rising to $10.2m in subsequent years, to deal with the 4700 requests a year from overseas people to buy land. It added that this estimate was very uncertain.

The Government is yet to announce how much extra funding it will give the OIO.

It will be much higher than that. These things always are.

Significant noncompliance has been an issue with the office, and the bill would add enforcement measures, including a requirement by conveyancers to “certify, to the best of their knowledge”, that the purchase complies with the new rules.

Failure to do so could see a fine up to $20,000.

Whoopy…on a $2million house so what if you get fined $20k.

The bill also provides for civil liability for people who are ‘involved’ in breaking the new rules.

Treasury said that there could be an effect on the housing market, but the supporting evidence was of “low” certainty.

“We expect less upward pressure on house prices during periods when the housing market is out of equilibrium, and foreign capital would otherwise flow into New Zealand seeking to buy houses.

“Other potential benefits could include an increase in the stock of new residential property. However the nature of these benefits is unclear.”

The bill would change the Overseas Investment Act so that only citizens and permanent residents will be able to buy property without being screened by the OIO.

It is part of the Government’s 100-day programme, and a rushed select committee process with public consultation will take place early next year.

Rushed law is bad law. I bet in six months time they are going to use urgency to fix all their screw ups in the mad rush to pass laws before Christmas.

Trade Minister David Parker has said he does not expect a huge impact on housing prices, but the principle that buying New Zealand homes was a privilege was an important one.

Idiot. I bet he asked Phil ‘FIGJAM’ Twyford if everything was going to work out ok. Mark my words, it will come to tears.


-NZ Herald


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