Today’s data from Statistics NZ doesn’t show any clear effect from October 22nd’s so-called foreign buyer ban in the residential property market. However, because they measure final transfers rather than the earlier agreement, the three-week window in October to push through agreements has probably artificially raised the figures for Q4 as a whole. In other words, we won’t be able to detect any genuine influence from the ban in these figures until the next release (for Q1 2019) on 2nd May.

CoreLogic Senior Analyst Kelvin Davidson comments:

“The figures showed that in Q4 2018, there were 885 purchases by people without citizenship or a residency visa, equating to 2.3% of the total. In the same quarter a year ago, there were 1,038 purchases, equating to 2.9% of the total. The most purchases in Q4 were in Waitemata, at 159, down from 189 a year ago.

Clearly, these figures have dropped year-on-year, but the foreign buyer ban hasn’t perhaps had the ‘big bang’ impact that might have been expected. However, there was always a strong possibility that the reporting from this Stats NZ data series wouldn’t be able to show much effect in Q4. First, note that this series is based on settled transfers, not sales agreements (which occur much earlier in the sale process). Second, the data covers a full three-month period, which had a three-week window at the start when the ban didn’t apply. Therefore, the ability for foreign buyers to rush through agreements from 1st to 21st October, but just settle at a later date, may well have held up the figures for Q4 as a whole.

In fact, there probably has been a greater effect from the ban. As shown by other, timelier sales figures, there was a spike in overall activity in October with a commensurate drop-off towards the end of 2018. In other words, some activity appeared to move forward to the start of October to ‘beat the ban’.

So where to next? The Stats NZ data for Q1 (due on 2nd May) will be of huge interest, as the technicality of agreement/settlement should have disappeared and we’ll have ‘clean’ figures to look at. If the ban has been effective (and effectively enforced), the foreign activity in the market should fall away pretty sharply – albeit probably not to zero (because for example Australia and Singapore are exempt, while foreign buyers can still purchase and hold apartments in large-scale developments).

We’ll also be looking closely at our own Buyer Classification series (January figures due Monday) to see any effects, perhaps evidenced by a drop-off in the cash multiple property owner segment. Granted, this segment is much wider than just foreign buyers. But they will be a part of it, with that cash/equity generated overseas and put into NZ.

Overall, although the Stats NZ figures on foreign buying activity across NZ as a whole suggest that it’s never been an overwhelming influence anyway, the removal of this group of buyers will create purchasing opportunities for locals who might otherwise have missed out. Any impact on prices, however, is always going to be harder to detect – given that in theory the foreign purchaser may have effectively paid no more to buy a property than the failed domestic buyer would have paid.”