House policy 'reeks of xenophobia'

Labour's new plan to bar foreigners from buying homes is "sloppy" policy with little to back it up, according to an economist.

And a property investor says first-home buyers with KiwiSaver cash are more likely than overseas buyers to be driving prices up.

There are no official figures on how many home buyers are foreigners, though both Labour and NZ First have blamed them for rapid house-price rises, especially in Auckland.

Labour announced during the weekend plans to bar non-residents, aside from Australians, from buying existing homes to try to curb the impact of foreign buyers on house prices.

But New Zealand Institute of Economic Research principal economist Shamubeel Eaqub said yesterday that Labour's policy was a "solution in search of a problem".

"It's very easy to try and point the finger at ‘other people' . . . It reeks of xenophobia," he said.

Labour was trying to create policy without any fundamental basis that foreign buyers were actually the cause of rising house prices.

"It reeks of poor policy making," and was sloppy.

The bar on foreign house buyers would not have much of an impact on the market anyway. The real question was whether foreigners were really driving up house prices.

"Until you have established that, having a policy is silly, because you don't know what problem you are solving," he said.

"House prices for the past 15 years have trended up relative to incomes and rents for that entire period. To suggest that's because of foreign interest in the property market seems ludicrous."

The influence of overseas buyers was "very much at the margin".

He also pointed out that housing as "shelter" was different from housing as an investment.

Labour's suggestion to bar foreign buyers was a "populist knee-jerk reaction", Eaqub said.

Property Investors' Federation president Andrew King said Labour's policy to restrict foreign ownership would reduce demand for property, but it was unlikely to have a big impact.

Rather than foreign investors pushing up prices, King said, first-home buyers using tens of thousands of dollars from KiwiSaver to help raise a deposit may have had the biggest effect on property prices recently.

In 2007, the KiwiSaver first-home buyer's grant was brought in. The maximum benefit came after five years, and King had long expected property prices to start rising again last year.

After five years, a couple could get $10,000 to go towards a home deposit from KiwiSaver. They could also take out their own and their employer's KiwiSaver contributions for those five years, too, but not the government money.

In total that could be worth "tens of thousands", on top of their own savings, he said.

Fairfax Media