Why foreign buyer activity remains muted - for now

For months, speculation has swirled about how easing the rules for high–net-worth foreign buyers would reshape our luxury property market. The government’s Active Investor Plus visa pathway and new $5 million property threshold were widely expected to unlock a wave of international demand, particularly given the surge in early enquiries from the US, Hong Kong, Korea and Taiwan.

But so far, Bayleys Head of Insights and Data Chris Farhi says that activity remains steady rather than explosive.

“Around 2% of our residential and lifestyle sales are to overseas buyers. At higher price points though we see more, and at $5 million-plus around 7% of our successful buyers are overseas.”

“But in the vast majority of cases, while they might be overseas physically, they will already have residency status in New Zealand. As an example, they might be New Zealand citizens who are overseas at the time of purchase.”

That nuance is key and means most ‘overseas buyers’ in current data sets are New Zealanders living abroad, not wealthy newcomers parachuting in with fresh capital.

Farhi says that could be explained by the timing of the policy change.

“It actually isn’t live yet. While the direction may be clear, until the legal changes take effect, we won’t see transactions flowing through the data.”

WHY HAVEN’T ANY EARLY ENQUIRIES TRANSLATED INTO SALES?

Farhi says it’s not due to a lack of intent, but rather the natural pace of high-end decision-making.

“Foreign buyers can move just as quickly as local buyers if they want to, but ultimately it really comes down to finding the right property and buyers at this end of the market are highly selective.”

“With the Active Investor Plus visa process also still bedding in, some transactions are simply stuck in limbo, and those transactions will be held up until the legal changes take effect.”

Farhi says there’s still strong enquiry out of the US, Hong Kong, Korea, Taiwan and Germany. “But actual sales will be held up until the changes are fully implemented.”

According to Immigration New Zealand 452 applications under the new settings for 1,449 applicants were received by the end of November with a minimum total investment value of $2.68 billion.

50 applications were from applicants transitioning an existing application to the new settings, and 402 applications were new.

IS DUE DILIGENCE SLOWING THE PROCESS TOO?

Farhi says that high expectations and often occasionally unusual requirements are par for the course with luxury buyers, which can also slow the purchase process too.

“Top-end buyers are fussy, especially in a market with good supply. Our global partner Knight Frank’s agents in Europe have mentioned some wild requirements like access to a private-jet-capable airport and nearby berthing for large yachts.”

“Locally, privacy is also the standout theme.”

HAS PRICING BEHAVIOUR CHANGED AT THE $5M MARK?

Anecdotally, Farhi says that some vendors are contemplating holding firm on price in hopes of attracting foreign interest.

“This may play out in a few isolated cases, but vendors should be careful with over-focusing on the threshold.”

“We’ll see some interesting pricing issues around the $5m line, but for most properties it’s much more likely a local buyer will purchase them. Pushing a home up to hit the threshold could simply lead to an unsuccessful campaign.”

But he says Queenstown, with its significant number of properties that currently sit in the $5m+ market is one exception where tactics may matter and could work.

COULD THE $5 MILLION DOLLAR THRESHOLD BE LOWERED?

Farhi says even if there are any meaningful shifts in the data they'll be hard to spot in such a tiny segment of the market.

“The $5m+ market is very small compared with the wider market. Even if there’s a pick-up, it won’t show up in mainstream metrics except in places like Herne Bay, Remuera or Queenstown.”

“Regionally, many of the highest-value homes sit on waterfront or sensitive land, meaning even wealthy, visa-qualified overseas buyers may still be restricted from purchasing too.”

He believes a meaningful boost could come from lowering the threshold for foreign buyers to enter the market. “If the price point was lower, I suspect we would definitely see more demand. I feel it could be reduced to around $3 million and still achieve the policy goals without cutting hard working Kiwis out of the market.”

ARE AGENTS SEEING RENEWED ACTIVITY FROM EARLIER ENQUIRIES?

After the initial announcement, some agents reported the return of buyers who had enquired earlier in the year, but Farhi says things have been more muted.

“We’ve all seen media stories about foreign buyers circling listings, but the reality is that the foreign buyer pool will remain relatively small. For most properties, it’s far more likely a local will buy than an overseas buyer.”

WHEN WILL WE START TO SEE THE UPLIFT?

Farhi believes the first signals won’t come from data releases, but from conversations on the ground. “We’ll primarily be monitoring feedback from our luxury agents around the country to see what they’re seeing at the coal face.”

But he also believes the government has a role in providing transparency.

“It would be useful if the government provided clear statistics, for example, the number and region of homes purchased by Active Investor Plus visa holders. That would help directly track the activity.”

Ultimately, the story so far is one of alignment, strong offshore interest, a highly selective buyer pool, and legislation that simply hasn’t come into effect yet.

“Confidence is returning, but not rushing, but once the policy changes do go live, that’s when the real data, and real movement is expected to begin.”