Partner Simon Berry says that “we can draw lessons from Canada, where the Government has taken the responsible step of committing funds and resource to investigating the impact of foreign investors on the housing market.”
As a response to burgeoning house prices in Vancouver and Toronto, 90% of which have surpassed C$1 million (The Guardian), British Columbia’s provincial government has imposed an additional 15% tax on foreign purchasers of Vancouver homes. The tax has had an immediate impact in reducing sales to foreign investors.
“We absolutely agree with media reports and widespread experts that ‘limiting demand instead of simply increasing supply’ is a powerful way to create a fairer housing market.”
Berry says media reports suggest the additional tax has resulted in Vancouver’s property market contracting with a reduction in both sales and property prices. He says the same may occur here but, either way, the effect is likely to be short term.
“The current level of demand would appear to be insatiable. In these circumstances, merely increasing supply rather than addressing demand overlooks the basics of Economics 101. This could even make matters worse.
Thus far the Government has only attempted to address supply through the creation of Special Housing Areas via the Housing Accords and Special Housing Areas Act. And that legislation has just been extended for another three years.”
Berry Simons has acted on many of the applications that have already progressed within the 154 SHAs approved to date in Auckland.
“But the question must be asked, who are the houses in these SHAs being sold to? If a significant number are being sold to foreign investors, as seems to clearly be the case, we end up no further ahead.”
Berry Simons strongly believes that if the Government is seriously committed to addressing the Auckland, and spreading, housing crisis, it must consider imposing restrictions on foreign investors to assist dampening demand.