The farcical case for banning you from selling your home to a foreigner

Dr Bryce Wilkinson
Insights Newsletter
16 February, 2018

New Zealand exports about 95 percent of its dairy production. The receipts make it a major overseas earner.

Imagine a proposed ban on the export of dairy products.  “This would”, the misguided advocates might earnestly explain, “benefit New Zealand consumers by making dairy products more affordable (cheaper) in New Zealand”.

You do not need a degree in economics to spot the flaw in this argument. That benefit would be entirely at the expense of New Zealand producers. New Zealanders would lose overall from lost sales revenues at a higher price to overseas consumers.

No competent assessment of the mooted ban would ignore the forgone benefits of selling at a higher price on world markets. The proposal is so manifestly foolish that to the best of our knowledge no one has ever proposed it.

Well, more accurately, no one has proposed it in that specific context.

Yet, this argument is built into the existing Overseas Investment Act. When declining applications from overseas persons to purchase assets from a New Zealander the Overseas Investment Office is not instructed to count as a cost the lost value to the New Zealand seller. (See our 2014 report Open for Business: Removing the Barriers to Foreign Investment.)

Unhappily, the argument reappears in the official material accompanying the government’s Overseas Investment Amendment Bill. This Bill proposes to ban all New Zealanders from selling their homes at the best price they can get when the buyer is a non-Australian overseas person.

The Treasury’s supporting Regulatory Impact Statement uncritically assesses that the New Zealand public will benefit from the Bill through lower house prices whereas regulated overseas persons (which excludes Australians) will be the ones that incur the costs. This assessment fails to recognise the loss to the thwarted New Zealand seller.

Other measures in the Bill will make New Zealand’s already extraordinarily costly and intrusive screening regime even more so.

None of the official material we have seen even purports to demonstrate that the ban represents an efficient and effective response to a real housing affordability problem. It is as if no one in charge cares. Populist prejudice rules.

Parliament should be demanding that parliamentary and public debate over such major Bills are informed by a professional non-partisan assessment of its net benefits for New Zealanders.

Read our submission to the Finance and Expenditure Committee on the Overseas Investment Amendment Bill.

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