The Overseas Investment Amendment Bill was introduced just before Christmas last year. The bill had passed through its first reading and was referred to the Finance and Expenditure Committee. The due date for reporting back from the Committee has been pushed back from February to May, and now end of June 2018.
The Bill will ensure overseas persons who are not resident in New Zealand will generally not be able to buy existing houses or other pieces of residential land. The Bill is designed to make homes more affordable for New Zealand buyers in the property market. While focusing on residential land, it also makes more general changes to the Act including enhancing information gathering and enforcement powers of the Overseas Investment Office.
Residential Land The Bill amends the definition of “sensitive land” to include land that is or includes “residential land”. For residential land purchases, those who are not “ordinarily resident in New Zealand” will have to apply to the Overseas Investment Office for consent.
The definition of “ordinarily resident in New Zealand” will be tightened. New Zealand citizens are considered as “ordinarily resident in New Zealand”. Other than that, a person with a permanent residence visa and has been residing in New Zealand for at least 183 days in the last 12 months will qualify as not being an “overseas person”. If you only hold a residence class visa or temporary visas, you must apply for consent if you wish to purchase residential land. However, this is not the end of the story for new residents to New Zealand. The Bill has created pathways for those residents to seek consent from the Overseas Investments Office. Those pathways are intended to either provide benefit to New Zealand and/or to secure commitment to New Zealand from the new residents. New Residents Under the current Overseas Investment Act, all applicants for consent must satisfy core criteria (“known as the Investor Test”). The tests relate to the investor’s business experience and acumen, financial commitment and good character and whether the investor will be ineligible for a visa.
Under the Bill, for residential land, the application will also have to meet one of the following requirements: 1. The transaction is or will be likely to benefit New Zealand. Such benefit is assessed by reference to 21 factors set out by law, or 2. The “qualifying individual” demonstrates their “commitment to New Zealand”, or 3. The overseas person must meet or is likely to meet increased residential use and on-sale outcomes. Commitment to New Zealand pathway under (2) above is the most accessible pathway for a new resident who has been granted a NZ residence class visa but not yet obtained permanent residence. Such resident will be a “qualifying individual”. In order to be granted consent, the visa holder must provide a declaration that they intend to be present in New Zealand for at least 183 days in each 12-month period from the date of consent. They must also be tax resident in New Zealand within 12 months from the date of consent, and will continue to be tax resident while they own the relevant land. Consent will be granted under this pathway only if the Ministers are satisfied that the qualifying individual will occupy their home as their main home or residence in New Zealand. Applicants under this pathway will not be subject to the “Investor Test” criteria if the residential land is not “sensitive land” for reasons other than it is residential land. The other two pathways, i.e. benefit to New Zealand and increased housing on residential land will be more difficult to meet. We are happy to explore those pathways with clients if, for some reason, they are unable to meet the commitment to New Zealand pathway. The Associate Minister of Finance, David Parker, has also indicated that further changes are coming and the Act will be redrafted in the next year. Those changes would restrict the number of people who will qualify for consent. However, it is expected that for those who qualify, approval will be granted faster. In summary, once the changes come in, it will be much more difficult for foreigners to buy residential land in NZ. However, for those who have been granted residency in NZ, it is still possible to obtain consent to do so if they intend to move to NZ and set up a permanent home here.