EARLIER this month (Nov 3), the New Zealand government announced that it would soon implement a new policy prohibiting foreigners from buying houses in the country.
Newly-appointed Labour prime minister, Jacinda Ardern, told the media that she wanted the ban on foreign house buyers to come into effect before the Trans-Pacific Partnership (TPP) trade agreement is ratified in February next year. She is confident that this new law and the country’s new policy of cutting back on immigration numbers will effectively reduce demand on houses and drive down prices in the “heated housing market”.
She explained that amendments would be made to the Overseas Investment Act by classifying residential housing as “sensitive”, thus effectively shutting the door on foreign buyers who are not residents in the country.
Foreign ownership and a housing shortage in New Zealand’s larger cities had been among the most pressing issues dominating the period leading to the recent Sept 23 election, which ended the nine-year administration of the conservative National Party and allowing the Labour Party to seize power, making Arden the country’s new prime minister.
Apart from the ban, the new administration would also be introducing a “rent-to-own” housing scheme to help more New Zealanders acquire their own homes. Ardern said a new Housing Commission would be established, whose mission is to ensure that more affordable houses will be available for first-time buyers.
Within a short period of being appointed as the new head of government, Ardern was thus able to do three things to resolve the housing problem in the country — formulate a new policy, pass a new law to enforce the policy and set up a Housing Commission to pursue the new agenda through to its completion. Will these new initiatives work? While I am not sure of the answer, I am, nevertheless, fascinated by her resolve. Perhaps, something along those lines could be considered by our government in the near future.
In recent times, New Zealand has become a popular destination for foreigners to “park their money” by buying up properties in the country. In Auckland (the nation’s largest city), average house prices have hit the NZ$1 million (RM2.83 million) mark — a price beyond the affordability of most of the country’s urban population. To address the problem, the earlier administration had imposed a tax on foreign buyers, but that did not seem to have any effect on reducing home prices.
Malaysia is no different from New Zealand, as it is also a popular destination for foreign property buyers. In cities like Kuala Lumpur, Johor Baru and Penang, house prices hit the RM1 million mark a long time ago. We have not, however, imposed a tax on foreign buyers.
Apart from New Zealand, what other countries impose a ban on foreign house buyers? In Australia, non-resident investors are barred from buying resale homes unless they plan to occupy them. In Singapore, restrictions are also imposed on foreigners; they can buy condominium units, but are prohibited from buying landed properties, and properties built by Singapore’s Housing Development Board, which are exclusively for Singaporeans.
There is no blanket ban on foreigners buying homes in Malaysia. They cannot buy low-cost houses and those built on Malay reserve land, but the million-dollar homes are available for them. In 2014, Selangor came up with its guideline. Effective Sept 1 that year, foreigners were allowed to buy residential properties priced at least RM2 million in areas categorised as Zone 1 and 2, and at least RM1 million in Zone 3. Foreigners are not allowed to purchase landed properties (unless they are in a gated community with Landed Strata title), or those sold by public auction.
It is this rule — that foreigners can purchase houses in the million-ringgit bracket — that has prompted property developers in the Klang Valley, Penang and Johor Baru to build houses in that price range.
According to a recent Bank Negara Malaysia (BNM) report, the number of unsold houses is at a decade-high, with a majority of them (83 per cent) priced RM250,000 and above, clearly unaffordable to most Malaysians. The report said supply-demand imbalances in the property market had increased since 2015 because of the mismatch between the prices of new housing launches and what the average Malaysian household could afford to pay. Johor has the largest share of unsold residential units (27 per cent of total unsold properties in Malaysia), followed by Selangor (21 per cent), Kuala Lumpur (14 per cent) and Penang (eight per cent).
The BNM report raises the question whether it is time for us to cap the price of houses that a housing developer can sell.
Since the majority of our population can afford to buy a house of not more than RM150,000 each, shouldn’t we have a policy requiring a private sector housing developer to build at least 30 per cent of their new project as “affordable houses” (say, not more than RM200,000 in category A areas and not more than RM150,000 in category B areas)? Beyond that, a developer should be required to build at least 20 per cent medium-priced houses (say, not more than RM300,000 in category A areas and not more than RM200,000 in category B areas). Locations in category A include Klang Valley, Johor Baru and Penang, while locations in category B include Ipoh, Alor Star, Melaka, Kuantan, Kuala Terengganu and Kota Baru). Only housing developers who are prepared to build these two categories of houses (totalling 50 per cent of their project) will be allowed to build the remaining 50 per cent at higher prices (RM400,000 and above), of which not more than 10 per cent can be sold at RM1 million and above.
Foreigners should only be allowed to buy the higher-priced units.
Salleh Buang formerly served the Attorney-General’s Chambers before he left for practice, the corporate sector and, then, the academia.