Why New Zealand is relaxing its property rules for rich foreigners
The main driver is a desire to attract foreign capital to help revive the country’s lacklustre economy
IN APRIL, New Zealand’s government found itself in a bind. It had just relaunched its golden visa programme, offering wealthy foreigners residency in exchange for a minimum NZ$5 million (S$3.78 million) investment. But there was a major hitch: existing laws prevented those investors from buying a home to live in – undercutting one of the main draws of relocating.
After months of negotiations, the three parties in New Zealand’s coalition government announced on Sep 1 that they would loosen the restrictions. Here’s what you need to know.
What are the new rules for foreign property buyers?
The new rules allow holders of New Zealand’s so-called golden visa – called the Active Investor Plus visa – to buy, or build, a house in New Zealand provided it costs at least NZ$5 million.
To obtain a visa in the first place, foreigners must invest their money in one of two ways. One option is through the Balanced category, which requires a minimum investment of NZ$10 million for at least five years. That money can be invested in bonds, equities and property developments. Investors are required to spend 105 days in New Zealand over the five-year period, although the time commitment can be reduced with a larger investment.
The second option is through the Growth category, which requires a minimum investment of NZ$5 million in higher-risk assets such as businesses or managed funds, over a three-year period. Investors are required to spend at least 21 days over the three years in the country.
The change to the property rules won’t take effect until the end of the year, when reforms to the Overseas Investment Act are passed into law. The purchase of a house does not count toward the investment total.
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What restrictions have been in place?
For the past seven years, only New Zealand citizens, permanent residents, and nationals from Australia and Singapore – countries with which New Zealand has trade agreements – have been free to buy homes.
The restrictions were introduced by then-prime minister Jacinda Ardern in 2018 amid concerns that offshore buyers were fuelling a housing crisis and pushing up prices for locals. Pressure on Ardern to act was heightened by a passport-for-sale scandal involving US billionaire and PayPal co-founder Peter Thiel, who was granted citizenship by the government in 2011 despite not meeting the usual requirements.
Why is the government now relaxing the rules?
The main driver is a desire to attract foreign capital to help revive New Zealand’s economy, which has been lacklustre since the height of the Covid pandemic. The country’s unemployment rate is 5.2 per cent, the highest level since 2020, and consumer confidence fell to a 10-month low in August.
House prices are at their lowest in two years, having decreased for five straight months. Despite several rate cuts by the central bank, which have pushed home-loan interest rates to their lowest level in more than three years, demand remains subdued.
Efforts to ease the foreign buyer restrictions have been underway for the past two years but have been repeatedly stalled by political wrangling. Prime Minister Christopher Luxon’s National Party first campaigned in 2023 – in the lead-up to that year’s election – with a promise to overturn the ban and allow foreigners to buy houses worth more than NZ$2 million, subject to a 15 per cent tax.
That proposal was abandoned following coalition negotiations with the New Zealand First party. Its leader, Winston Peters, told Bloomberg News in March 2024 that he was open to letting foreigners buy expensive homes if they also invested in the country. Still, it was 18 months before the coalition reached a compromise.
How will the new rules affect the housing market?
There are about 7,000 houses in New Zealand valued at more than NZ$5 million – just 0.4 per cent of the nation’s housing stock, according to property consultancy Cotality. Of those, around 4,500 are in Auckland, the country’s largest city, and about 1,250 are in the South Island ski-resort town of Queenstown.
Only around 350 of those trophy properties are typically put up for sale each year, meaning the pool of homes available to foreign buyers will remain limited.
The impact on affordability for ordinary New Zealanders will be negligible, according to Kelvin Davidson, chief property economist at Cotality.
“There will be parts of the country – say Queenstown, say Remuera and Herne Bay in Auckland – the expensive areas where you would imagine foreign buyers could play a little bit more of a role,” Davidson said. “But a NZ$5 million house is not what most people are thinking about.”
What’s the state of New Zealand’s luxury housing market?
The New Zealand property market is in a weak spot – and the luxury segment is no exception. Despite an aggressive series of interest rate cuts by the central bank, the market has yet to regain momentum, held back by a glut of homes for sale and buyers cautious about taking on new debt.
New Zealand’s current house price record was set at NZ$45.5 million when Chantecler, a four-bedroom French-style mansion on a 19-hectare estate in Queenstown, sold off-market in September 2023, according to property website OneRoof.
Is New Zealand an appealing market for foreigners?
The sparsely populated country began gaining popularity in the mid-2000s among Silicon Valley elites such as Thiel, who sought remote, expansive homes in the event of a doomsday scenario.
Other notable foreigners who have bought in New Zealand include legendary investor Julian Robertson and movie director James Cameron, who in 2012 bought two adjacent rural properties for NZ$20 million.
Current global geopolitical tensions are now, once again, helping to attract wealthy people looking for a haven at the bottom of the world. As at Aug 31, Immigration New Zealand had received 308 applications – covering 1,000 people in total – for the Active Investor Plus visa. That represents a potential minimum investment of NZ$1.9 billion. Around 40 per cent of applicants are from the United States.
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