Brian Fallow looks at the breakdown of bipartisan consensus on trade policy and what this means, or might mean, for the sale of residential properties to overseas buyers

Photo: Auckland Council.

By Brian Fallow*

The days of bipartisan consensus on trade policy, when it was thought politics should end at the water’s edge, are gone.

The crucial issue, says Labour’s trade spokesman David Parker, is to secure the right of a future Government to ban the sale of existing residential properties to overseas buyers, “other than our closest neighbours like Australia where we have a close relationship and reciprocal rights.”

It is part of its suite of policies to address the housing crisis.

“We say if you have the right to live here, you have the right to buy here, but not otherwise. In this world of rapidly increasing wealth inequality we do not want 1 percenters from overseas to be able to outbid New Zealanders for our homes or farms,” Parker says.

National’s trade spokesman Todd McClay, the current minister, says such a ban would force New Zealand to renegotiate many hard-won trade agreements. “We would be likely to lose some trade access as a result of renegotiations, which would harm New Zealand companies and Kiwi jobs.”

Underpinning the arcane arguments about national treatment and most favoured nation clauses in trade agreements lies a fundamental ideological difference.

The neoliberal view is that trade and access to international capital are essential national interests for New Zealand. We have limited negotiating coin when it comes to combating entrenched agricultural protectionism and if conceding the right for foreign investors to buy residential property or farm land is what that takes, so be it.

The opposing view is that the land beneath our feet is not just another asset class. It is where we live. Governments need to preserve the ability to regulate the housing market. We are at risk of becoming, in John Key’s phrase, tenants in our own country. And at a pace determined by such external factors as whether Beijing is minded to tighten or loosen capital controls.

A most favoured nation clause

Parker says that under the free trade agreement negotiated by the last Labour Government any future New Zealand Government could ban the sale of houses or farm land to Chinese investors, and China had reciprocal rights.

But the China FTA also has a most favoured nation clause which requires New Zealand to treat China no less favourably than it does other countries in any subsequent agreements.

Both the Korean FTA and the Trans Pacific Partnership (TPP) agreement do that, in effect ratcheting up Chinese rights too.

South Korea’s FTA with Australia, concluded a year before ours, allows Australia to ban the sale of their homes to Koreans, Parker says. “Even more absurd is the fact that South Korea can ban house sales to New Zealanders under that FTA, though New Zealand can’t do the reverse.”

Nevertheless McClay describes the idea that Korea will be interested in reopening what is quite a recent agreement as fanciful, especially as the Trump Administration wants to renegotiate the US-Korea FTA.

Parker says the most pressing issue is to “fix” the TPP.

Officials meet again in Japan on Thursday and Friday to try to hammer out a deal to put to ministers of the remaining 11 TPP countries on the sidelines of an Apec ministerial meeting Vietnam in November.

The existing text does have a carveout of sorts for New Zealand attached to the investment chapter: “New Zealand reserves the right to adopt or maintain any taxation measure with respect to the sale, purchase or transfer of residential property.”

But the possibility of imposing a stamp duty on foreign buyers does not afford enough protection, Parker believes. Many would simply pay it.

“It is our last chance to stand up for New Zealanders’ right to decide who can buy a house here.”

Several TPP countries want to suspend or freeze provisions in the agreement which the United States insisted on, given that the US has pulled out of the agreement, until and unless it relents. That is likely to include provisions fostering the interests of Big Pharma, which public health advocates have long opposed.

Auckland University law professor Jane Kelsey says New Zealand, Australia and Japan have been strongly pushing that none of the market access schedules in the agreement can be reopened.  “For Labour it is the schedule to the investment chapter that is the issue.”

'Constitutionally improper'

The Government, in a departure from past practice during pre-election caretaker government periods, has taken an “it’s none of your business” approach to opposition parties’ concerns about the TPP talks even though there is at least a non-trivial chance of a change of government.

It has not make its mandate to the trade officials public but it is a fair bet that it does not seek to insert a right to ban foreign purchases of residential property, of the kind that Australia has preserved.

National’s refusal to even consult with opposition parties is constitutionally improper, Parker says. Kelsey and Greens trade spokesman Barry Coates agree.

They might have a point, McClay says, if anything was going to be decided before the election.

But there will likely need to be another round of officials’ talks next month. In any case it is for ministers to conclude an agreement and then for their governments to decide whether to ratify it.

Labour leader Jacinda Ardern in a video interview with The New Zealand Herald said she was prepared to be bloody-minded over TPP.

But Kelsey says Labour’s only firm position is an objection to a single, very specific provision in the entire 30-chapter deal – forgoing the right to discriminate against foreign purchasers of residential property.

“Does Labour really intend to agree to the TPPA-11 if that minor matter is changed, as it has been in a leaked copy I have of New Zealand’s proposed schedule to the now-suspended Trade in Services Agreement negotiations?”

The Greens have more fundamental problems with the TPP agreement, in particular the investor state dispute settlement (ISDS) provisions which allow foreign investors to sue a government in an international tribunal, seeking compensation if they have suffered expropriation, direct or indirect. The fact that something a government does has an adverse effect on the economic value of the investment does not of itself establish that indirect expropriation has occurred.

The Greens say that so long as the ISDS provisions remain in place, TPP-11 undermines New Zealand’s ability to protect the environment and national sovereignty. The provisions were included largely at the insistence of the United States, and now that it has withdrawn from the pact, they should be dropped.

Coates says exporters can buy political risk insurance, if they consider they need it. “It’s not expensive.”

Parker says, “We had an ISDS provision in the China FTA. We don’t see ISDS as necessary when dealing with countries with a decent legal system. And we are uncomfortable with the idea that foreign investors have more rights than New Zealand ones. But the most important issue for us is land.”

'Risk of throwing out the trade baby with the sovereignty bathwater'

That issue of land regulation is preventing Labour from supporting the broader trade-enhancing aspects of TPP, says NZIER trade economist John Ballingall.

“We can’t go back and change history and there is little value in lamenting a decision by New Zealand negotiators or politicians that was made presumably as part of an overall negotiating package,” Ballingall says.

“There is a very real risk of throwing out the trade baby with the sovereignty bathwater here.”

McClay was asked by Radio NZ’s Guyon Espiner last week what is the good bit about allowing people who don’t live in New Zealand to buy houses here.

All he could come up with was that New Zealand is an open economy.

The reality is that openness to foreign money in the property market is good for people who currently own some and are potential sellers, and correspondingly bad for local people who aspire to ownership and are potential buyers.

In the end the politics of it is as simple, and as vexing, as that.


*Brian Fallow is a former long serving economics editor at The NZ Herald. This is the last article in an election year issues-based analytical series on economic policies he has written for

His first article is here. 
His second article is here. 
His third article is here.
His fourth article is here.
His fifth article is here.
His sixth article is here.

His seventh article is here.
His eighth article is here.
His ninth article is here.
His tenth article is here.
His eleventh is here.
His twelfth is here.
His thirteenth is here.





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I am sure the ppl sitting at the other end of FTA negotiation would NOT mind if NZ government bans non-residents purchasing (speculating) existing NZ residential properties.

A rational government would not use residential property speculation as its economic growth strategy.

Also, not aware of any fund would include investing/speculating in existing residential properties as its part of portfolio.

To sum up: Just Ban It (JBI).

And if they do object, you have to be very suspicious of what their real motives are. Owning houses or property in a trading parters country, has absolutely nothing to do with their freedom to trade with us but an awful lot to do with economic colonisation. What do we want, trade or to be colonised out of our homes. You have to question what the motivation was for the National MPs in allowing this contrary to what most other nations have allowed. I am very suspicious that they are smiling traitors.

Didn't National inherit the free trade agreements with China and Korea from the previous Labour govnt?

Here is how that went, Labour signed the fta with China, it did not prevent us from changing our laws around foreign ownership of land/houses in this country. NATIONAL signed the fta with Sth Korea, however this agreement DID tie our hands where law changes around property ownership went. We then had to offer the same terms to China.
It would be nice if I did not have to keep explaining this, but I will, because the misinformation is concerning.
The other one you might not be aware of was when Labour introduced the investor category for prospective immigrants. That excluded residential property investment. In 2011 NATIONAL changed that law to include it, and I reckon that is around when the market went truly ballistic. PS I despise the notion of people being able to buy their way into this country, Peter Thiel is probably the absolute worst of that.

Thanks for explanation pocket aces. I did read it after I wrote my post as I scrolled through. So in effect labours initial trade deal was OK except it had an ambush clause in it that got activated when National did a free trade agreement with S Korea.
We are about the only country on the planet that sells our land and productivity. Incredibly short sighted in my opinion.

Does it really matter where and when the free trade agreement come from. The government and RB watched house prices skyrocket for 3 or 4 years and from the beginning ridiculous rises and done nothing with the normal lifting of interest rates. Taxing overseas investors. Or banning the buying of existing houses like many other countries. People can try moving the blame but when you see a problem you fix it and now the country crashes. Ask the people soon with high mortgages for years why'll there houses are under water or haven't any fat in the property. People stressed out. People who lost a lot of money . Bankrupt . Let alone jobs and the economy. BLAME NATIONAL and their housing economy bubble that they made happen . This was a idea of half a dozen city all involving mostly china and all ending badly. Stupid and for what. Ps I'm not blaming china it's only that china and there size and access to money threw poor regulation made this happen because national LET IT


Clearly demonstrates the arrogance of the signing government to these deals that remove the rights of future governments to do what they deem necessary. I hope people take notice of this and wonder at how it erodes democracy. Trade is fine, buying up houses is not trade.


To me international trade is the import & export of goods and services - land does not come into it.

Be fair, you forget to mention investments, education and people exchange.


I am surprised this issue does not carry more importance in this election. The negotiation of these FTA's appears to be a corrupt corporate grab in the guise of free trade. Anyone who questions it is labelled anti trade. I am all for free trade, but not at such a high price. This should be the main topic of conversation during this election and the treasonous actions of National over the last few years. We will not see the full effect of the damage until the next generation perhaps, but the impact will be significant.

Their favourite response is to attack you for being xenophobic. Pure bollocks

I am pretty sure you are blaming National for Helenn Clarks free trade deals. Nationals controversial TPPA was torpedoed by Trump and hasn't been rescued yet.
But the point is these trade deals are treason! Lucky we don't have oil. It would have been cheaper for USA to purchase NZ than invade Iraq.

Please read my reply to a similar comment by you, just a few comments up from here. I am tiring of the misinformation about this.

So why did your Government agree to this clause in the first place Mr Parker?


The problem arose when National signed the fta with South Korea which absolutely did not allow future governments to ban foreign ownership so that once that deal was done, the same conditions had to go to China, then the TPPA and any other agreements we might sign with anybody else.

That's right.

Give us the land in return for flat screen TVs for you an your children. Kind of has that feel.

It is not just Chinese investors we need to be worried about
USA, UK, India, Canada, Russia ...............and so on

Of course, but the Chinese are different though, because of the way their country is run, and in this, it is the fact that there is no freehold land in China but they value property, so they have, in droves, sought to buy real estate in other countries as it is truly theirs, not just leased.

Also the banks and rules in china are so slack at the moment there people have up to now been able to get mountain loads of money out. That been changing and will only get harder you would think. Nzs rules a slack to so we've had it from both ends. In the long run I can't see overseas investment into housing being a problem. That couldn't happen twice in such big numbers to upset the housing market. On a smaller scale it wouldn't matter like all those other countries. We're only talking today about the Chinese because of the share volume of buying at one time. After the Chinese see how they pushed the same market up themselves in all these cities and now are losing their capital gains you would think they'll think twice . Remember the Chinese people themselves are new at this


How many freehold houses, and/or land do NZers or NZ businesses own in Korea or China?



Well zero in China and 5/8 of you know what in Sth Korea, I expect.

I would have thought the Chinese government wouldn't have had a problem with us restricting Chinese (non NZ residents) purchasing NZ property. Haven't they been trying to stem currency outflows anyway. Don't they want their citizens keeping their money in China?


Assuming that the govt of the day has the motivation, surely it can just demand that the clauses be amended so that foreigners cannot buy existing houses. Or to impose a huge levy. To worry about what the response may be, without even making the approach is not logical.
I wonder if there is some behind the scenes corruption going on which makes this such a problem for the govt.

it wouldn't surprise me if China didn't have a secret agenda to purchase NZ. A little bit here and a bit more there. Insert an operative into the parliment over here. Purchase a processing plant and the supporting farmland over there. Purchase a forest up there and a Triboard mill
. Invasion by stealth, so much smarter than the USA who just go in with guns blazing after making some hair brained accusations. And probably cheaper. We won't need a free trade agreement soon as we have allready sold off much of our productive forests, farmland and electricity generation. We even sold the railways once and then bought them back for twice as much totally gutted.
We seem to elect politicians who know nothing about running a business and yet a country is a rather large business. Think back to Rogernomics which still effect us to this day and Roger was a failed pig farmer. But at least he had had a business. How many of our PM and ministers of finance are successful business people? If they were successful they probably wouldn't want to be a politician.

The wars in the Middle East seem to make more sense when you see the rise of China. China's support of Iran and Syria has the long term view of opening up trade routes and exerting control over a major crossroads. Commodities and energy supplies will be transported through these regions. Also Africa has huge resources that can be exploited to feed and build the growing Chinese mega cities.

There probably isn't any "secret agenda" regarding NZ and things are likely just following a natural evolutionary course that looks like intelligent design however the outcome could be the same. Think of the Red/Grey squirrel outcome in the UK.

I don't know anything about Squirrels Zachary. I am sure you're correct that China just takes the opportunities as they are presented to them and don't we love to present them with opportunities.
China seems to be better at capitalism than the capitalists. I suspect they are deliberately collapsing the petro dollar. If the Petro Dollar does get rejected as the reserve currency of trade the US economy will collapse. I am not sure how that will effect NZ. Not too bad I hope. Perhaps our governments have deliberately switched to China as our biggest growth trade partner because they can see whats coming.

China's capitalism has the might of the state behind it, commanding and controlling it, makes it easy for them to overwhelm smaller countries/companies/people when you have that power behind you. My understanding is that the Chinese govt still has interests in just about every company/corporation there, so they definitely do not believe in a even playing field.

No brainer. We can't buy in Chinese. nz is the only country behind the 8 ball over overseas investment into housing and we shouldn't be. And china is against it now anyway. And if it can't be controlled because of the damage it does to a country's affordability and the damage that it has caused like the position we are in now you would think it wise to make sure it can't happen again. Its quite disgusting the way some people spin things that overseas investment in housing is a good thing for greed. But owell that's life I guess. I bet in 3 or 4 years from now with this downturn they'll think differently

The block last night. When the hammer goes down and you are on live tv for a hour and at the end you are to have a winner the auction should be over completely when the hammer goes down. That is when you have a winner. If sold later thats unfair . Someone out the back made a bad decision and should of let that other house sell out of camera and the girls win. I can't imagine many being happy with that. All Iv heard is the girl should have win over and over. BAD CALL. You could even see it in the girls faces and specially the boys that it was wrong. You would hope the boys offer $50000 to the girls in protest. The gentleman thing to do. Also the guy who offered a bit more to get the boys house should have just got it out the back, why should he have to go through the auction again. You don't normally. You get the offer behind closed doors later to buy the house. Sometimes the 2 highest offers but that's hardly a auction that needs a decision in 20 minutes. Not a new auction with the hole public. I hope something is done about this . I wonder how clear there rules are considered the shows on a time limit

And I noticed all the purchasers and most of the bidders were Chinese !!!

Apparently Northcote is Auckland's China Town so no surprises there.

I see on Stuff the Block neighbours are saying the places went for too little although not by very much. I have noticed that these modern looking terraced type houses usually take ages to sell. Ones around the corner from me took over a year to sell in the DGZ. They were a poor choice for the show as they have a small land area which is where the bulk of the price is. The neighbours saying the properties sold too low probably have detached houses on decent size sections so we are not comparing apples with apples.

They are the style of property that Chinese buyers like being modern and new but then they have many stair cases which aren't so great for little kids and the elderly parents. It was always going to be a bit of a struggle to sell these places so a 100% sales rate was very good. I think we could have predicted the players were unlikely to get a great return for their efforts and that they should only do it for a bit of fun. They should be advised of that from the beginning.

I'm interested to know exactly how the reserves were set as that impacts on the theoretical profit. What proportion of professional labour was involved? A standard margin is ~17% above cost. If the contestants' labour component was large and free, then the sale prices would be a disappointment.

Ha! I hope they haven't used's estimate to set the reserves! Feel sorry for Ling & Zing who happened to earn just $0.48/hr over 12 weeks with their $1k profit ouch!

I'd like to know if they lowered the reserve during the proceedings. A buyer might determine that a bargain could be had as the show would be keen to sell on the night. The houses could get more if you had six months to sell them.
I just did a virtual walk around Potter Ave and I'd have to say it looks a bit "average".

I think what happened is that an under-bidder(s) in one of the subsequent auctions approached management and said they would put in a reserve bid on the one that had been passed in. So, they re-opened that bidding at the reserve price. The person who won that auction was the under-bidder in auction #4, I think.

I agree- the show's management made a mistake - the property was passed in with respect to the show competition and that was that. It could have been sold in an off camera negotiation - perhaps by sealed tender on the night. Then all the under-bidders could put their best foot forward.

Yeah I agree that having to share walls with your neighbours and climb a 4-storey house to get to the roof top is a huge turn-off for many people. Also very limited outdoor space for the kids and definitely a hazard to kick a ball or two on your roof top!

They're just expensive appartments In not that great a area. But those girls should have won. In a situation where you have 1 hour to sell and come up with a winner and live by way of a auction when the hammer goes down that has to be it. Those boys had had there turn. Everyone had a quarter of the aloud show. Stupid decision

It really surprises me that we even have to debate a form of deterant to ward off foreign buyers (Non resident Investors), this shouldn't even be an issue.
We all know and can see the damage results of what this type of investment can do.

Of course we need to drastically limit foreign investors in our property market. Even if it's just through heavily taxing them as other countries have.
As for farm land this should be fully restricted to the leasing only and heavily taxed.

Totally agree