Oz law could work here despite Government claims

John Key's claim contradicts the evidence. Photo / NZME.

Whenever they are asked - with increasing frequency - why they do not follow Australia's example and ban foreigners from buying existing homes, John Key and Nick Smith, his Building and Housing Minister, have a stock response: it has not worked across the Tasman. Therefore, ipso facto, it would not work on this side of the Ditch.

The Australian law - they say - has not stopped foreign nationals from purchasing "established" houses. Neither has the policy stopped the surge in house prices in the overheated Sydney and Melbourne real estate markets.

"Spectacularly unsuccessful" was the Prime Minister's dismissive verdict at his weekly press conference yesterday when questioned on something which also happens to be New Zealand Labour Party policy.

Key and Smith are technically correct when it comes to existing homes. But they are not really telling the whole story.

Blame for foreigners flouting the law regarding the purchase of such homes - New Zealanders are exempt from its provisions - has been firmly sheeted home to the Australian Treasury and its adjunct, Australia's Foreign Investment Review Board.

A parliamentary inquiry commissioned by Australian Treasurer Joe Hockey produced a stinging report late last year which declared it was "less than impressed" with several aspects of the board's monitoring of compliance with Australia's foreign investment regime. It noted the board had not taken anyone to court for an alleged breach of the law since 2006.

Australia's regime is designed to channel foreign investors into building new homes - thereby increasing the country's overall housing stock. The inquiry concluded that rather than causing "price pressures", the evidence suggested foreign investment might actually be helping to keep prices lower by increasing supply.

That contradicts Key's claim the Australian law had not stopped prices soaring. It is of some comfort to Labour that its policy might just work.

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