The luxury housing market is gearing up for National to lift the foreign buyer ban for properties over $2 million, but Christopher Luxon faces staunch opposition from NZ First
Just upstairs from the Mayor's Office, the 18th floor of Auckland's Civic Administration Building was once the venue where the mayor would host visiting Apec leaders at America's Cup challenges. It has 360 degree views out to the Waitakere ranges in the west, and over Hauraki Gulf to the east.
The last mayor to use it was Christine Fletcher; she has fond memories and is "devastated" to see it sold off.
But the entire building has now been refurbished and turned into apartments. The 18th floor is being marketed by Bayleys for about $15 million as a luxury penthouse, and the estate agency is hopeful the return of foreign buyers will provide them strong interest. The same is true of the $30m penthouse being marketed at Seascape, Auckland's tallest residential tower.
"I recognise that we do need more investment, and we do need to create a little more prosperity in the inner city," Fletcher acknowledges. "I think it'll bring about an attractiveness to the city that is lost at the moment."
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The cornerstone of Christopher Luxon's housing and tax package is the $740m a year he expects (very optimistically) to bring in from taxing foreign buyers 15 percent on top of the purchase price of high-end residential properties. To do that, he would lift the Labour Government's ban on foreign buyers of residential real estate sold for more than $2m.
But Newsroom can reveal he has a battle on his hands: the New Zealand First party is set to use the tax and property package as a bargaining chip in negotiations for it to support a National-led government.
"We said it was both inflationary and it represented a further obstacle to Kiwis achieving their home-owning dream." – Shane Jones, NZ First
Back-channel talks have begun between the two parties. Senior National MP Todd McClay, who has a good relationship with Peters and his deputy Shane Jones, has emerged as the broker. He met with Luxon, Nicola Willis and their strategy team at Luxon’s Remuera home yesterday, and has floated offers to NZ First, like electing Peters Speaker (rebuffed) or appointing him foreign affairs minister outside Cabinet (still on the table).
New Zealand First believes Luxon will need the support of its eight MPs to get his flagship tax and property package through Parliament. With National likely to lose one or two MPs when special votes are counted, the National-Act nexus won’t be able to maintain its slim majority of 61 MPs in a 121-seat Parliament beyond November 3, when the Electoral Commission reports.
On the campaign trail, Peters has strongly opposed lifting the foreign ownership ban – and neither does he think tax cuts are appropriate when the economy is struggling.
"We would expect some house price increases as we enter 2024." – Suzie Wigglesworth, Bayleys
New Zealand First and other critics fear that bringing back foreign buyers will reinvigorate demand for housing even in the mid-market, as local buyers priced out of luxury properties by foreign buyers turn their attention to those they can still afford.
This morning, the ASB’s latest Housing Confidence Survey shows sharply fewer New Zealanders expect house prices to keep falling in the coming months – especially in Auckland. "It’s not surprising to see Aucklanders more bullish on price prospects than Kiwis elsewhere," says economist Nathaniel Keall. "Auckland housing market activity has recovered a little bit more swiftly than elsewhere in Godzone."
Suzie Wigglesworth, the national projects director for Bayleys, says there's a great deal of overseas interest in the penthouse at "The Cab", as it's now branded, and similar high-end properties. She cites expressions of interest from Hong Kong, Malaysia and Singapore, but that's expected to widen as the new government progresses its plans to lift the foreign buyer ban.
Will opening up the high-end market impact on prices further down the market? "I think it will be regionalised," she says. "Obviously Auckland is an outlier in terms of its median house price, compared to the rest of the country.
"What we are expecting to happen is that things will start to be back on track in terms of a normal cycle for the housing market. So we would expect some house price increases as we enter 2024."
National is hoping its tax and property package doesn't drive up house prices and inflation – but it's committed, regardless. Finance spokesperson Nicola Willis has pledged she'll resign if she doesn't deliver tax relief. So the credibility and reputation of a National-led government depends on delivering this package.
It's about more than just moving the income tax brackets to manage down the tax paid by workers. It would also restore interest deductability for landlords, and roll back the 10-year bright line test on residential properties (an effective capital gains tax) to just two years.
But it's the foreign homebuyers' tax, which would help pay for the tax cuts, that is especially anathema to New Zealand First.
One source close to Peters says if you're going to go into negotiations with NZ First, "you'd better read their policy". Another says Willis' resignation threat won't be lost on Peters.
New Zealand First deputy leader Shane Jones says the party campaigned against the risks associated with opening up the property market to foreign buyers. "We said it was both inflationary and it represented a further obstacle to Kiwis achieving their home-owning dream."
New Zealand First also wants to exempt the construction of cottages from Building Act regulation, and rein in Kāinga Ora spending that it says was driving construction costs inflation.
"These are the issues that loomed large in our manifesto."
Jones points out that in speeches he and Peters made on the campaign trail, "the foreign buyers' tax is a particularly treacherous area of the Tory tax policy".
