Tuesday 10 September 2019
It is well known that a Residence Visa holder who has continuously lived in New Zealand for more than 12 months is eligible to purchase a property without applying for consent from Overseas Investment Office (OIO).
A person with a residence class visa who has not lived here for the last 12 months may still buy a home to live in, provided that they meet certain requirements.
If the person wants to buy an urban residential property, the most likely pathway is the “commitment to NZ” pathway. This requires the person to apply for OIO consent. To do so, they must provide evidence of their NZ residency. In addition, they must be buying the property as their main home. They must also declare that they intend to be present in NZ for at least 183 days in every 12 month period and that they intend to become and will remain a tax resident in NZ.
If the person meets the above conditions, then they will be able to obtain consent from the OIA.
How much and how long does it take to apply
The consent for individuals to buy Residential land could take up to 10 working days to be granted. The fee for individuals is $2,040.
You can apply for pre-approval before you have a particular property to buy. Alternatively, you may sign an agreement to buy a property, but provide that the purchase is conditional on consent being granted.
If you require consent, but sign an unconditional agreement without it, you will not be able to settle if you are unable to obtain consent by settlement. If you make a false statement alleging that you have consent when you don’t, you could be fined up to $300,000.
What if I don’t apply, can I just wait till I become eligible for buying a house without OIO consent?
This is an option. However, you may lose financially, or you may lose the house you desire by waiting.
If you are a cash buyer, the interest return you receive by waiting may well be significantly less than the price increase you forgo by waiting. In Dunedin, property prices have been going up by around 9-11% per annum in the last few years. As current demand still seems to outstrip supply in Dunedin, this may well continue. The interest rate you will receive from a deposit will be around 2 to 3 % per annum. In addition, you will be paying for rental. The loss in return by waiting is significant.
Even if you are borrowing, with the low interest rate currently, it may still be worthwhile to enter the property market in Dunedin sooner rather than later.
You may also miss out on a desirable house by not looking sooner.
Getting a preapproval is also advantageous in the current very competitive sellers’ market in Dunedin. Good properties have gone very quickly. Buyers have to put in competitive offers in order to get a house. The more conditions you have, the less attractive your offer will be to a vendor. Any offer which is subject to an OIO consent is likely to be less attractive as compared to an unconditional offer of the same value.
It is therefore advisable to obtain OIO preapproval as soon as possible.
You need to be aware that you will be required to sell your property if a trigger event happens.
Trigger Events
Trigger events happen if you:
It will be a condition of the consent from the OIO that disposal must happen if a trigger event occurs.
The above applies for land that is residential and is not otherwise sensitive. This is the case for most urban residential properties.
The above article is for general information only. For specific advice, please contact Teresa Chan at Teresa Chan Law Limited.
KEYWORDS: OIO, consent, trigger event,
