Wellington - New Zealand will loosen its ban on foreigners buying houses, opening the door for wealthy investors to purchase luxury properties as part of a push to revive its sluggish economy.

The coalition government on Sept 1 said it will allow holders of so-called golden visas to buy houses worth at least NZ$5 million (S$3.8 million), carving out an exemption to restrictions that have largely kept overseas buyers out of the market since 2018. The change will not take effect until the end of 2025, when reforms to the Overseas Investment Act are passed into law.

“Globally, New Zealand has a deserved reputation as a great place to live and we want to grow our economy,” Prime Minister Christopher Luxon said in a statement. “By opening our door just a little to allow significant investors to own a home, we will help attract more of those who want to contribute to the community and country.”

The move underscores Mr Luxon’s bid to lure more foreign capital to the South Pacific nation and comes five months after the relaunch of New Zealand’s golden visa. Designed to attract high-net-worth individuals, the Active Investor Plus visa offers residency in exchange for significant investment.

“If you are a major international investor, New Zealand is just one of 195 countries all competing for your money and your ideas,” Mr Luxon told reporters at a press conference. “The competition is fierce and the solution is actually competing harder. The Active Investor Plus visa, coupled with the ability now to purchase a NZ$5 million home, is doing exactly that.”

There have been 308 applications for the visa, covering 1,000 people, as at Aug 31, amounting to a potential total minimum investment of NZ$1.9 billion, data from Immigration New Zealand shows. Around 40 per cent of applicants are from the United States. 

At the moment, participants in the visa programme are largely banned from buying property in the country.

Only New Zealand citizens, residents, and nationals from Australia and Singapore have been free to buy homes for the past seven years, following a clampdown by then Prime Minister Jacinda Ardern amid fears that offshore buyers were fuelling a housing crisis. Adding to the pressure was a passport-for-sale scandal involving PayPal co-founder Peter Thiel.

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. Around 4,500 are in Auckland, the nation’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 be small.

The change should be enough to make New Zealand one of the more desirable locations for wealthy investor migrants, said Mr Stuart Nash, a former government minister who now runs an advisory firm for high-net-worth people looking to relocate to the nation.

“Those who may have considered New Zealand in the past, but discounted investing here because of the inability to purchase property, are now back in the game,” Mr Nash said.

“This change navigates a path between those who do not want foreign ownership opened up, and the desire to attract high-net-worth investors by deepening their connection to our country to help grow the economy,” Mr Luxon said.

The impact on affordability for ordinary New Zealanders will be negligible, said Cotality chief property economist Kelvin Davidson.

“There might be some people out there who are worried about what this is going to do to local house prices. Well, it probably won’t do much,” Mr Davidson said. “For the wider housing market, there’s much bigger restraints in the form of the weak labour market at the moment.”

Since retreating from their pandemic surge, New Zealand house prices have stagnated. They fell for a fourth straight month in July. BLOOMBERG

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