David Parker: Nats bet house on trade deals

New Zealanders are suffering because the wealthy 1 per cent from other countries buying our houses are driving up prices to levels our locals can't afford. Photo / Chris Loufte

Opinion

The NZ-China free trade agreement doesn't stop new restrictions on house sales to overseas buyers, but National's subsequent deals try to.

New Zealanders are suffering because the wealthy 1 per cent from other countries buying our houses are driving up prices to levels our locals can't afford. This is also destabilising our economy. Because 1 per cent of China is over 10 million people, it's the most obvious example.

Labour's policy is to ban overseas buyers of residential houses, other than our closest neighbours like Australia where we have a close relationship and reciprocal rights.

The recent column by Beijing-based Rodney Jones described the need to control the sale of New Zealand houses to overseas buyers. He was spot-on when saying we must carefully consider the effect of free trade agreements. This means the China FTA, the recent South Korean FTA, and the impending TPP.

Under the China FTA negotiated by Labour in 2008, any New Zealand government can further restrict or ban the sale of farmland or residential land to Chinese investors, or introduce a stamp duty on foreign buyers. This is consistent with what China has itself done since the FTA was signed. China has introduced bans on non-residents, including NZ investors, buying houses in their main cities. Hong Kong has introduced high stamp duties.

The China FTA does require NZ to treat China no less favourably than other countries, excepting those like Australia where our existing relationships prevail. The recent South Korean FTA does cause problems, and these should be fixed.

The relevant clauses in the China FTA are articles 138 and 139.

Article 138 applies only once an investment is made. It does not confer any right to make an investment.

Once made, Chinese investors should not be treated differently in a way that prejudices them compared to a New Zealand investor. This is fair and stops taxes or other rules being imposed just on Chinese or New Zealand investors.

The most favoured nation provision in article 139 does apply to existing investments and controls on new investments. If we want to further restrict the sale of farmland or houses to Chinese investors, we can. Article 139 simply requires NZ to treat China no less favourably than other countries. Clause 3 of article 139 means earlier agreements with our Australian and Pacific Island neighbours are not affected, and do not flow into the China FTA. Later agreements do flow through.

National does not believe there should be more restrictions on foreign buyers, and so the South Korean FTA does not contain the protections found in the China FTA. This creates risks if New Zealand moves to restrict or ban South Korean investment in residential property. Screening or bans are allowed for existing categories but not new categories, that is farms but not houses.

Article 139 of the China FTA means NZ can't properly ban sales to Chinese investors but allow them to South Korean investors. Even the South Korean FTA does not limit the sovereignty of a future New Zealand government to restrict house sales to foreigners, but it does create a risk of South Korean claims.

While the difficulty of proving substantial loss means an actual suit is unlikely, this is very poor practice by National, which Labour rejects. We have called on the Government to fix this aspect of the South Korean FTA. This should be possible given that Australia's FTA with Korea allows control of residential sales to foreigners.

Labour believes if you have the right to live here you have the right to buy here, but not otherwise. That means all citizens and residents can. This will apply to all ethnicities.

Residency applies whether you're a recent arrival or born here. Investment in new housing adds to supply and will be allowed.

This issue is especially important right now because we have been told National are making the same mistake with the TPP.

National shouldn't try to curb future governments introducing more controls on overseas sales of farms and houses. National may wish its dynasty to last forever, but democracy requires that future governments not be shackled by National's ideology.

David Parker is Labour's export growth and trade spokesman.

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