Foreign buyer housing policy grabs attention of offshore billionaires

Real estate agency Paterson Luxury is reporting a surge of enquiries from Europe, the US and Asia following the National Party’s announcement that it would allow overseas buyers to purchase properties upwards of $2 million and tax those transactions at 15% tax, and it is possible that taxation for this segment could be scaled so that these buyers pay 20% or even 25%.

Paterson believes an influx of these buyers will also help arrest the decline in the construction sector.

“We know that with all of the new legislative changes and new building code coming out in September it is going to be even more costly for Kiwis to build. However, the introduction of foreign buyers could stimulate the construction as foreign buyers seek to build more luxury properties, or domestic buyers downsize and build something smaller of their own.

“Greater access for foreign buyers could also pave the way for international developers to come back into New Zealand, purchase larger land lots and create more housing stock for the general market,” he says.

He says if the policy were to be introduced before Christmas, they would expect a flood of activity in January.

Paterson says demand for property is already high in Auckland, Queenstown and Northland.

“There is huge interest from some of the billionaires we are dealing with for property in the Bay of Islands. They are looking for acres of land on the water so they can park their launch, but also have room to land their helicopter. These buyers want to fly in with their friends easily and also need room to build additional amenities,” he says.

Paterson’s advice for local buyers and vendors now is relative to their personal circumstances.

“Buyer activity is really strong at the moment. I have $50m worth of listings coming on the market in the next six weeks and I have had a call from every single homeowner waiting to know if they should wait.

“For buyers, they should be trying to grab stock right now but from a vendor’s perspective, they might be better off waiting – depending on what their needs are and whether they plan to reinvest in the market once they sell.

“For those looking to move sideways, it is irrelevant. But if you are looking to downsize, there could be significant potential upside to holding off.

“Regardless of this, this policy would bring a flood of money into New Zealand,” he says.

The growing influence of offshore buyers in recent years is seeing our topend properties become more extravagant, says Caleb Paterson of Paterson Luxury, which specialises in multi-million dollar residential estate sales

New Zealand’s most expensive residential homes are increasingly becoming more opulent as buyers install internationally inspired ‘showpiece’ features and technology, ranging from solid gold bath taps to state-of-the-art wardrobe security systems for million-dollar-plus designer handbag collections.

Buyers in this part of the market are well travelled and expect their property to be elevated beyond a tennis court, pool and view, which may have previously set a standard. These buyers have their own tastes and do not simply rely on the expertise of architects and interior designers, but rather take inspiration from a variety of sources from around the world.

They are global citizens and are often inspired by what they’ve seen overseas in luxury properties, lodges and hotels such as the Four Seasons, they will even add design elements from commercial buildings and want these incorporated into their homes.

Both internal and exterior concept features are added with the intention of elevating the property and enhancing the lives of its occupants. Often these are at a scale that most would be staggered to experience in a residential setting.

As an example, one of the largest outdoor pools I have seen covered approximately 250 sqm and came complete with a terraced waterfall and fountain, volleyball nets, waterslides and a function that produces a cooling mist at the touch of the button.

Technology and home automation are key areas where high-net-worth individuals invest a considerable amount of money. This goes beyond the hidden TVs that many properties have these days. In one residence the kitchen was transformed into a high-end cocktail bar which emerged from the floor on demand.

It is also becoming common for homeowners to create lavish bathrooms. One couple had installed his and her baths for the ultimate wind down experience, complete with champagne fridge and flat screen TV so they could relax in front of their favourite show.

I have also been through a home with solid gold taps worth hundreds of thousands of dollars fitted over a claw bath.

Another home had a full-length 25m commercial-grade pool with four lanes because the owner’s child was a competitive swimmer, it was set indoors alongside a sauna, plunge pool, and fully equipped gym.

It is these curated design elements which heighten the perceived value of these multi-million dollar properties to the most discerning segment of the market.

Potential buyers will approach Patterson Luxury to find homes fitting their personalised criteria.

I am currently looking for a property for a car enthusiast who wants a place where he can store his collection of 20 luxury vehicles in a purpose-built facility he will construct on site.

For this buyer, it is less about the quality of the home and more about having enough space to accommodate his interests.

The maintenance of these luxurious residences is often a full-time job with many property owners having additional quarters for live-in help who assist with; landscaping, building, property maintenance, cooking, cleaning and nannying services.

There are also separate kitchens so when entertaining staff can perform culinary duties without guests seeing them come and go.

One property owner was fastidious and liked to keep the grounds immaculate, they paid more than $5000 a month for this service. Others who want their lawns continuously groomed and maintained at a specific height are investing in robotic lawnmowers with GPS technology allowing them to navigate the section.

Outside technology and sports and leisure facilities, high-net-worth clients also invest heavily in the arts. Sometimes the properties are even sold with valuable works and collections included in the list of chattels.

Despite perceptions, these homes are not always in the pristine condition that one would expert of a high-end property. Outside appearances can also be deceiving. Often the homes may have little street appeal but when you walk inside the interior you will see a number of grandiose items that take you by surprise.

It’s important to start with the primary outcome of a National-led government implementing this plan – the ability for Councils to opt-out of the MDRS. Instead, National plans to introduce ‘Land for Housing Growth Targets’ for Tier One and Two urban areas in New Zealand. This gives Councils the ability to opt out if they provide “30 years’ worth of developable housing capacity” in the short term, elsewhere through higher density in centres and walking catchments, or in greenfield developments.

This doesn’t go far enough. Many councils will not have to do much to meet 30 years of theoretical capacity in their district plan. It does not mean we will actually get the capacity where we need it, which is in the most central locations close to jobs, education and services. National’s plan provides an opportunity for councils to opt out of this if they face challenges from the existing residents. Furthermore, full implementation of the MDRS in district plans, would almost deliver more than 30 years theoretical capacity.

For the development market to function effectively, there is a need for significantly more theoretical capacity, to ensure that enough financially feasible sites can be purchased and developed. As a headline, 30 years can seem to be enough but a majority of the supply will likely not be realised. Therefore, it needs to go further. To meet the 10-to-30-year demand will require significantly more capacity again. I think we should be going much further now and the MDRS, ideally with some improvements, would be a step in the right direction.