Trade Minister David Parker says although he has no idea what effect on house prices the foreign buyer ban will have, implementing it is a "point of principle".
"You know it will have a price effect, you just can't quantify how much the price effect will be," he told The AM Show on Thursday morning.
"But there's an important point of principle here: when you've got wealth accumulating into this top fraction around the world, and it's worse overseas than it is in New Zealand - it's bad enough here - you don't want that sort of coming to influence your own local housing market."
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Mr Parker was behind the Government's Overseas Investment Amendment Bill, which was passed into law on Wednesday night 63-57. It stops non-residents (except for Australians and Singaporeans, due to existing free trade agreements) from purchasing most existing homes.
"It's a birthright of New Zealanders to buy homes in New Zealand, not the birthright of overseas people - for them it's a privilege," said Mr Parker.
"For me it's not just about first-home buyers - I don't think it's right that a very wealthy person from overseas can out-bid our most successful people for the most beautiful bay in the Bay of Islands or a beautiful bit of land around Queenstown. "But it also goes right down the socio-economic tree to the most modest house in south Auckland, which is nonetheless someone's dream."
Since the Government began collecting data on buyers' citizenship and residency status, it's emerged few homes are actually sold to foreigners. Only 3.3 percent went to foreign individuals in the first quarter of 2018. Another 10 percent went to businesses and corporate entities, for which ownership data was not available. The rest were bought by New Zealand citizens or residents. Only 1.5 percent of homes were sold by foreigners.
Mr Parker said in July, when the statistics were released this showed even though the number of homes in foreign ownership was small, it is increasing.
He told The AM Show when Labour made its infamous 'Chinese-sounding names' claims a few years ago, "things were running hotter".
"But even in the recent quarter, 20 percent of the homes in central Auckland were sold to overseas buyers, and 10 percent of homes in the Queenstown Lakes District council were. Those are two of our most expensive housing areas in New Zealand, and we don't believe it's a coincidence."
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The actual figures are 18.7 percent in the Waitemata Local Board area, which covers pricey suburbs like Herne Bay and Parnell, and 9.7 percent in Queenstown, the country's overall most expensive city.
Mr Parker said the Government wasn't trying to make house prices go down, just stop going up. He had no sympathy for investors who might lose out.
"They might not make as much money... that's right. New Zealand's got the lowest rate of home ownership since the 1950s. If you want to restore that birthright for New Zealanders you've got to change a few things out. You've got to build a few more affordable homes, but you've also got to take some of the demand pressure off from foreign buyers."
ASB chief economist Nick Tuffley, appearing earlier on the show, said immigration was the biggest driver of housing demand. Before the election Labour promised to slash immigration by 30,000. Immigration peaked in early 2017 at more than 70,000 net arrivals in 12 months. It's since fallen, but only to 66,000.
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"It is already going down gently. Again, you don't want to cause shocks," said Mr Parker.
"We've tightened up some of the rules relating to work rights for people who are from overseas studying in New Zealand, and that's having an effect.
"We've also been open to the fact that if you're going to build some new houses, until you've trained your New Zealand workforce - and we're trying to do that - you are reliant on some work-permitted people."
He says "over time" immigration will come down as a result of the Government's policies.
House price growth has stalled in Auckland, over the past few months, but is still strong in the regions.