According to a recent article in the New York Times, home prices in New Zealand have risen more than +65% in the last decade, according to the Real Estate Institute of New Zealand. In Auckland, the country’s largest city, median home prices have almost doubled. As startling in January 2017, Statistics New Zealand, the country’s official data agency, reported that only 63.2% of local New Zealanders were living in their own homes, the lowest owner-occupied rate for the country since 1951.

During the fall of 2018, New Zealand’s Prime Minister, Jacinda Ardern, designated all existing residential land via the Overseas Investment Act as “sensitive,” effectively banning foreigners from buying existing homes in the country. This relatively new designated amendment does not, however, apply to trusts, corporations, Australians (the largest share of foreign buyers in New Zealand) and Singapore nationals.

New Zealand is certainly not the only country attempting to slow the growth in housing prices and to make housing more affordable to its locals. Denmark and Switzerland have banned foreign buyers. Four years ago, Australia required foreign buyers to get approval from its Foreign Investment Review Board as a primary residence. Ontario Canada in 2017 imposed a nonresidential tax of 1.5%. British Columbia Canada imposed a nonresidential tax of 2.0% in 2018. Great Britain is currently considering a nonresidential tax of 12% on top of its 3% tax on second homes and rental properties.

Are New Zealand’s efforts to improve affordability seen as effective or xenophobic? The “reviews” are mixed.

Bindi Norwell, the chief executive of the Real Estate Institute, believes that the growth in housing demand (and therefore the rise in housing prices) comes from both locals and foreigners alike. “You’ve got more people wanting to move here, less people leaving and so we’ve had a very strong migration over the last few years…”

Pene Miller, a sales associate with New Zealand Sotheby’s International Realty, said, “The perception is that prices are forced up by nonresident buyers but, in reality, they only make up approximately 3% of the market.”

Miller also points out that the loopholes concerning corporations, trusts, Australians and Chinese within the Overseas Investment Act mean that the luxury market is affected most by skyrocketing prices. “The midlevel market, which has a shortage of homes, is not nearly as affected.”

Data emphasizes that these latest efforts to help improve affordability and slow down the market have already been felt in New Zealand’s housing market. December 2018 saw a -12.9% drop in sales volume, a drop not seen in seven years. In January 2019, sales volume dropped just -2.5% y/y. but in Auckland, the median home price fell -24% to $800,000, the lowest median home price since February 2016. Elsewhere in the country, however, prices increased +10.1% to a median home price of $473,300.