OPINION: Money and New Zealand residency hit the headlines this week.
If you are rich and your parents live in another country, you can bring them into New Zealand and sponsor their residency.
A joint income of $159,000 buys you one parent and $212,000 nabs both.
Adult children must be capable of meeting the costs of their parent's accommodation and healthcare for the first 10 years they live here. It's a fair argument but a blunt tool.
When it comes to residency, money has always been a method of gaining entry.
Contrary to popular belief, being rich and foreign means you can still buy a residential home in New Zealand very easily.
How can that be possible when the government put up the closed sign in August last year? Only Aussies and Singaporeans can buy our houses. Other foreigners are banned.
Well, it doesn't apply if you're very rich. Money buys residency and residency means you can buy a house here – or as many houses as you like.
You might be thinking "oh well, at least these wealthy people now have to live here, rather than ghosting in and out".
Yet that's not quite the case. They only need a few short stints to meet the requirements – 88 days spread over three years.
How does it work?
Under "'Investor Category One", the wealthy can gain New Zealand residency by investing $10 million. "Oh good", you exclaim, they need to do something innovative or start a business; it's going to help the economy.
Hmmm. Not quite the case again.
In fact all they have to do is deposit this lump sum in a managed fund for three years. These funds are just like KiwiSaver without so many rules.
It's a collection of shares and bonds with daily liquidity. They can also invest in residential developments and commercial property. If their risk appetite isn't very high the whole lot can go into government bonds or bonds issued by banks.
They'll end up taking currency risk, but the smart ones will have an external hedging overlay if they don't fancy our wobbly old Kiwi dollar.
The $10 million isn't a "cost", it's just shifting the location of some of their wealth for a short period. With what equates to $6.3 million US dollars or £5.2 million pounds, you, your spouse and dependent children under the age of 24, are in the door along with your car, boat and household items free of customs charges. You can also buy a home and largely come and go as you please.
Follow the rules, do your 88 days and in three years' time your residency visa will become permanent residency. During those three years, you can use the health and education system just like any other Kiwi.
That's a funny little quirk isn't it? New Zealanders bringing in a parent must pay for healthcare, but the rich investor doesn't need to dip into their portfolio. Money really is a blunt tool. We have a quota on the number of parents entering. It's 1000.
Any quota on the rich people? Nah, of course not.
Mind you, the numbers are small. Over the last ten years only 1303 people have come to New Zealand under an Investor Category One Residency Visa. Previously it was easy to buy a home and come and go as a visitor. Since the closed-sign was erected, there has been a 46 per cent increase in Category One Investors. The year to July 2019 attracted 243 people versus 166 in the year to July 2018.
With this now being the easiest way for wealthy foreigners to buy homes, it will be interesting to see if the numbers continue to rise.
The importance of migrants
Migrants are an important part of the economic growth recipe. Over the last 10 years 431,000 people have been approved for residency. Of those, 208,000 were approved in the skilled migrant category.
These people have always been eligible to buy homes due to their residency status.
Overseas born population in New Zealand
By birthplace (country/region), 2013 Census, %
Provider: Stats NZ
Overseas born population in New Zealand.
Unfortunately a lack of supply in the housing market, combined with 431,000 new residents since 2009, means house prices are very clearly driven from within, not the 4000 foreign buyers a year.
The economic activity created by migrants increases the tax-take and supports crucial areas like the affordability of the retirement age remaining at age 65.
Should we let foreign parents into New Zealand?
Yes we should. There needs to be a quota for those who don't meet the wealth requirements. Humanitarian cases where one parent remains overseas with no support should be recognised.
Their children have become economically valuable New Zealanders. They deserve to have an avenue that responds to family needs.
Should we let all foreigners buy our residential homes again?
Perhaps, in more restricted circumstances. We could restrict purchases to houses in the top quartile and we could charge non-resident stamp duty.
In some regards putting a closed-sign on the housing market hasn't been a bad thing. It dealt with public emotion and created a pause. It also allows a calm platform from which to reassess the drivers of housing affordability.
Foreigners create more liquidity for expensive properties and allow Kiwis to free up capital. There's job creation in the high-margin part of the construction industry, when they build pricey homes. Their spending supports local businesses and they bring visitors. Many are philanthropic and support local arts, theatre and charities.
While housing and house prices are highly emotional issues, it's important not to become too insular. Wealthy foreigners and highly skilled migrants help support growth and surpluses. Our retirement age, schools, hospitals and social care all benefit from that.
Janine Starks is a financial commentator with expertise in banking, personal finance and funds management. Opinions in this column represent her personal views. They are general in nature and are not a recommendation, opinion or guidance to any individuals in relation to acquiring or disposing of a financial product. Readers should not rely on these opinions and should always seek specific independent financial advice appropriate to their own individual circumstances.
