Michael Wood, the MP who chairs Parliament’s finance and expenditure committee, wants to see more overseas investment directed into productive assets, which he sees as a secondary benefit to restricting foreign purchases of residential property.
That committee received several hundred written submissions on the Overseas Investment Amendment Bill and heard dozens of oral presentations since February. It is scheduled to report back to parliament by June 21. The bill’s primary goal is to make housing more affordable for New Zealanders by restricting foreign buyers, whose presence in the market has driven up prices.
Limiting access to an asset class typically sees that money go elsewhere, and Wood told BusinessDesk he wants to see that investment flow into the construction of medium and high density property and also into commercial ventures hungry for capital to drive high-skill jobs with bigger pay packets.
Wood said well-calibrated legislation could drive investment in desperately needed new builds, particularly in medium-high density housing.
“The overall question of ensuring that the bill upholds its purpose of ensuring that the New Zealand housing market is shaped by New Zealanders rather than off-shore investors, while also ensuring that we have appropriate flows of offshore capital to support new build has been one of the main issues considered by the select committee,” he said.
A number of submitters raised questions on whether investment would flow into residential construction, although they didn’t canvas diversion into other investment areas, he said.
CBRE research analyst Richard Carr said the ban on foreign house buyers could funnel investment into smaller industrial properties outside the country's major centres.
“They’d prefer to buy commercial property rather than going through the hoops of buying a nice house in Auckland,” Carr said.
He predicts a small industrial unit or a small retail unit in smaller towns and cities could be a more viable investment destination for foreign investors looking to spend about $2 million.
Bayleys’ international sales and investment sales director Chris Bayley said the proposed changes to New Zealand’s property investment criteria hasn’t had a noticeable impact on foreign investment in smaller commercial and industrial stock. While he expects changes in buyer behaviour, he’s reluctant to predict the direction.
“Any Overseas Investment Act legislative changes on property investment in New Zealand will, of course, change the goal posts for international investors,” he said.
Until the proposed investment legislation changes are implemented, it is difficult to gauge the impact and whether investors will change the make-up of their portfolios," Bayley said. “Some investors will adapt to those changing goal posts and modify their business models and operations accordingly, while others may find the process too onerous for their liking and decide to invest in other opportunities.”