Tuesday 14 November 2017
The new Labour led coalition government has announced that it will make changes to the Overseas Investment Act to classify existing residential housing as “sensitive”. That would mean that anyone who is neither a New Zealand resident nor a New Zealand citizen will no longer be able to purchase existing residential dwellings, although Australians will be exempt.
Non-residents and non-citizens will still be able to buy residential land to build a house on for on-sale of that new dwelling.
It is suggested that foreigners will be still be able to buy houses off the plans, but the government is going to clarify the implications for apartments.
The legislation implementing this change will be introduced before Christmas and the changes are expected to take effect as soon as the legislation is passed. The government would like legislation to pass before the signing of the Trans Pacific Partnership (TPP). If done in that way, New Zealand will not be in breach of any of its free trade agreements including those with Korea, China, and the TPP.
The new Labour led coalition government is scathing about how the National government had misled the New Zealand public. National had said previously that it was impossible to impose a ban on foreign buyers without breaching New Zealand’s free trade agreements. The Ministry of Foreign Relations and Trade have advised the new government that this is incorrect.
The existing Overseas Investment Act requires any Overseas Person acquiring sensitive land to obtain the approval of the Overseas Investment Office. That is unless that person can demonstrate that his or her intention to reside in New Zealand indefinitely. If one can demonstrate such intention, the Overseas Person is not required to show that the investment is likely to benefit New Zealand. This concession has always been available to potential migrants to assist them in settling into New Zealand.
The new government has announced that they plan to introduce a new definition of residency which will either refine this point, or provide a new definition of Overseas Person.
If you are NOT a New Zealand resident/citizen, then it seems that soon you may acquire existing residential dwellings only if you obtain the approval of the Overseas Investment Office. That would require you to demonstrate the benefit of your investment in New Zealand.
Under the Overseas Investment Act, an assessment of benefits based on a “counterfactual analysis” is required. You will be required to show that as compared to a New Zealander buying the property, you will bring additional benefits to NZ.
In cases of farms and other properties, it may be possible to show that as an overseas investor you will bring in new skills, job opportunities, or significant protection of indigenous vegetation or habitats of indigenous fauna or other benefits to NZ.
If a similar analysis is required for existing residential dwellings, it may be difficult for overseas buyers to demonstrate the additional benefit they can bring to New Zealand as compared to a New Zealander.
We await with interest the introduction of a new residency test and whether any additional factors will be included to assess the benefits an overseas buyer of existing residential dwellings may bring.
KEYWORDS: Overseas Investment Act, dwellings, resident, citizen, Overseas Person
