While the nationwide impact is likely to be small, effects of the restrictions will be felt more in regions with more foreign buyers, like Auckland CBD.
Prices could fall in central Auckland if domestic buyers do not fill the gap. In other regions, house prices may not be affected at all. However, there has so far been no discernible impact on house prices in central Auckland as a result of the proposed restrictions.
ANZ Research expects a one-off adjustment in the price level until a new 'equilibrium' is reached, implying a temporary moderating effect on house price inflation.
Cause and effect
With the estimated impact on house prices small, the policy is likely to have a negligible impact on housing affordability. However, as with any new policy, it’s important to be wary of unintended negative consequences.
It will be important for the restrictions to be implemented smoothly, so restrictions do not impinge on business operations or reduce the desirability of NZ as an investment destination.
Another unintended consequence could be an increase in rents.
The foreign-buyer restriction, combined with other proposed policies, may make capital gains look less assured or investment look more risky. Investors may seek to offset this by charging higher rents.