Uh oh, the IMF isn’t happy with the foreign buyers ban

Phil Twyford
Credit: Pixy

I’ll just bet that Phil Twyford will abuse the IMF after it signalled warnings about the government foreign-buyers ban.

He has already abused MBIE and treasury because he knows best, and so will likely take the view that the IMF, like MBIE and treasury, are wrong and only he is right: Quote:

The New Zealand economy is in a good place, but it should drop its plan to ban foreigners from buying houses.

Speaking to Radio New Zealand, the International Monetary Fund’s (IMF) Mission Chief for Australia and New Zealand Thomas Helbling said foreign buyer bans overseas had not worked.

Putting controls on capital flows into the country, which New Zealand depends on more heavily than most developed countries,?were only appropriate where there were very large, disruptive inflows of money.

When you look at the statistic for New Zealand as a whole, and even Auckland as a whole, the role of foreign buyers is much less prominent,” Helbling said.

Instead, New Zealand should focus on boosting housing supply, including by bringing more land into development, and densifying?cities like Auckland.

The IMF, which was founded in 1944 ?to foster?global growth and economic stability, praised the government eliminating tax breaks for property investors.

In its?report?on New Zealand, released on Tuesday, the IMF noted the risks to the government’s KiwiBuild programme, but appeared to praise the government’s efforts to restore housing affordability.

Directors concurred that the ambitious housing policy agenda centered on strengthening supply and lowering tax distortions will help to restore broad-based housing affordability,” it said.

“They emphasized that the success of the agenda will depend on well-coordinated progress of the?KiwiBuild?program and the?Urban Growth Agenda?across the public sector.”

But, the report said: “Many Directors noted the proposed ban of residential real estate purchases by non-residents, which is assessed as a capital flow management measure under the Fund’s Institutional View, and encouraged the authorities to reconsider the measure.

The primary reason for their opposition was that the IMF did not believe banning foreigners would work, based on its failure to bring down prices in other countries like Australia.

It could, the IMF implied, send a message to the rest of the world that New Zealand discriminated against foreign investors.

The report?concluded: “They considered that this measure would be unlikely to improve housing affordability, while the broad housing policy agenda, if fully implemented, would likely address most of the potential problems associated with foreign buyers on a non-discriminatory basis.” End quote.

It agreed regarding increasing supply, however, KiwiBuild isn’t doing that because there simply isn’t any capacity. All KiwiBuild is doing is buying already planned or built houses and relabelling them KiwiBuild. It hasn’t and won’t increase capacity.

All the things that the government are planning?? KiwiBuild, a capital gains tax and also the ban on foreigners ? haven’t worked anywhere in the world to lower housing affordability. You only have to look at Australia to see a failure of both a capital gains tax and a foreign-buyer ban in reducing house prices.

But hey, Phil Twyford knows best.