(Aug. 29, 2018) On August 15, 2018, the New Zealand Parliament passed the Overseas Investment Amendment Bill (the Bill), which includes provisions that will generally prohibit foreign residents from purchasing existing residential land in New Zealand by categorizing it as “sensitive land.” (Overseas Investment Amendment Bill, PARLIAMENT OF NEW ZEALAND (last visited Aug. 23, 2018); Overseas Investment Amendment Bill 5-4, New Zealand Legislation website.)
The Overseas Investment Act 2005, which was amended by the Bill, requires that overseas people “get consent through the Overseas Investment Office (OIO) before they can invest in New Zealand’s sensitive land, significant business assets and fishing quota.” (Overseas Investment, LAND INFORMATION NEW ZEALAND (last updated Mar. 14, 2017). See also Overseas Investment Act 2005, s 10, New Zealand Legislation website.) Proposed investments must meet certain criteria in the Act. (Overseas Investment Act 2005, s 16.) Overseas persons can currently purchase residential land provided they satisfy certain criteria related to the benefits to New Zealand arising from the purchase. (Id. s 17.) An overseas person is “an individual who is neither a New Zealand citizen nor ordinarily resident in New Zealand” or a corporate entity that is 25% or more owned by an overseas person or persons. (Overseas Investment Act 2005, s 7.)
The Bill will add “residential land” to schedule 1 of the Act, which lists property that is considered to be “sensitive land.” (Overseas Investment Amendment Bill 5-4, cl 5.) According to the Finance and Expenditure Committee’s report on the Bill, the Bill
provides that overseas investors could only obtain consent to buy residential land (that is not otherwise sensitive) in certain situations. They are, broadly:
if they would be developing the land and adding to New Zealand’s housing supply
if they would use the land for non-residential purposes or a residential purpose relating to a core business purpose (for example, accommodating pilots at a remote airport)
if they held an appropriate visa and could show they had committed to reside in New Zealand. (Overseas Investment Amendment Bill 5-3, as reported from the Finance and Expenditure Committee, Commentary.)
The changes will apply to persons who are not “ordinarily resident” in New Zealand, or are not New Zealand citizens. The definition of “ordinarily resident in New Zealand” in the Bill includes persons who hold a residence class visa and who have been residing in New Zealand for at least the previous twelve months. They must also be a tax resident and have been present in New Zealand for at least 183 days during the previous twelve months. Alternatively, a person can hold a residence visa and either be domiciled in the country or be residing there and have the intention of doing so indefinitely. (Overseas Investment Amendment Bill 5-4, cl 7(4).)
According to the government’s explanatory note that accompanied the original version of the Bill, the changes
will lead to a housing market with prices shaped by New Zealand-based buyers. The Bill will therefore make homes more affordable for New Zealand buyers at some times in the property market cycle, including for first home buyers, while also supporting our efforts to build a more productive economy, by helping redirect capital to productive uses. (Overseas Investment Amendment Bill 5-1, Explanatory Note.)
The Minister in charge of the Bill, David Parker, stated that ”[t]his Government believes that New Zealanders should not be outbid by wealthier foreign buyers. Whether it’s a beautiful lakeside or ocean-front estate, or a modest suburban house, this law ensures that the market for our homes is set in New Zealand not on the international market.” (Jessica Long, Labour’s Bill to Curb Foreigners Buying New Zealand Homes Becomes Law, STUFF.CO.NZ (Aug. 15, 2018).)
Critics have argued, however, that foreign buyers only make up a small percentage of the market and banning foreigners from purchasing homes will not have an impact on house prices. (Id.)
The Bill will come into effect two months after it receives royal assent, or earlier by an Order in Council. (Overseas Investment Amendment Bill 5-4, cl 2.)
