Let’s get real about investment into NZ
Nick Horton argues that, instead of banning most foreigners from buying residential or lifestyle zoned property, we should be creating a limited number of opportunities to buy a luxury holiday home here and raising much-needed capital for the country in the process
When a company suffers an unavoidable obstacle and has to borrow vast amounts of capital to survive it immediately looks for investors to help weather the storm and survive to fight another day.
The same can be said for a small country like New Zealand that faces an unavoidable obstacle and has to borrow vast amounts of money to survive – it needs to look for new capital to support its team of five million through the storm, particularly the hardest hit who lose their homes.
The country can create capital from within, such as Capital Gains Tax (gasp), or Stamp Duty (gulp) or it can seek new capital from other economies.
We have recently created legislation to ban most foreigners from buying residential or lifestyle zoned property in New Zealand and we have strong overseas investment criteria banning foreigners from buying anything deemed sensitive land, so how do we find a solution that doesn’t get tied up in red tape for so long that we miss the crucial time the capital is required.
One idea is that central government in New Zealand create a new special property zoning which for the purpose of this article we will call the Recovery Zone.
Owners can apply for this zoning for their property but would need to comply with certain criteria – such as a capital value of more than $3m (or an estimated $3m after building), not being considered ‘iconic’, not a food producing property etc. Essentially setting rules ensuring only appropriate properties can get the special zoning.
Being accepted into the Recovery Zone comes with a $200k sale transaction fee (each time sold to an international buyer) and a $20k per annum overseas ownership levy on top of normal council rates.
New Zealand residents who purchase properties in the zone don’t pay the transaction fee or overseas ownership levy keeping a free market for kiwis to buy any property in New Zealand and giving them a $200k advantage when purchasing property within the zone. Not being in the ‘Residential’ or ‘Lifestyle’ zone the Recovery Zone would not be caught by the recent Overseas Investment Amendment Bill, similar to how commercially zoned property in New Zealand can be purchased by overseas people.
The Government could initially allocate 5,000 positions available in the Recovery Zone which would create a $1b fund with an annual income of $100 million.
What are the risks? ...We are not handing out passports or selling visas, all we are doing is creating a user pays vehicle for a limited number of property owners to experience the New Zealand lifestyle
$100m p/a could finance a $3b loan, add that to the $1b fund that’s $4b to build housing with. At say $100k per bedroom average in a housing development that equals 40,000 beds – not sure how many we need but that amount has got to help our affordable housing efforts, or government could use the funds to pay off some debt.
The great thing about the foreigners I have met who want to have a vacation home in New Zealand is that they all want to contribute and be part of the team – even if it means sitting on the bench and paying for the oranges!
All the international ‘New Zealand Ambassadors’ I have dealt with are good people who love our country, and the kicker is they all spend money, building houses, paying gardeners, eating in restaurants – and usually supporting local charity so they can feel like they are contributing to the communities they are connected to.
So, what are the risks of a capital raise like this? The investor can’t take the property with them…. If they change their mind the next cab off the rank pops $200k in the till and takes their position… We are not handing out passports or selling visas, all we are doing is creating a user pays vehicle for a limited number of property owners to experience the New Zealand lifestyle before moving on and offering the opportunity to someone else.
Let’s take a commercial view on this and utilise the most low impact, high return resource we have as a country and create a housing support network that is available for any New Zealander who needs a warm bed at night.
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