The Overseas Investment Amendment Bill is currently before Parliament and seeks to amend the Overseas Investment Act 2005. The Bill is designed to ensure investments made in New Zealand by overseas persons have a benefit to New Zealand.
The “Benefit to New Zealand” as currently drafted states that the overseas investment will, or is likely to, benefit New Zealand (or any part of it or a group of New Zealanders).
The Bill introduces limitations on the types of property that can be purchased by overseas persons. For clarity, the Bill would not apply to all permanent residents and resident visa holders who spend the majority of their time in New Zealand. Such individuals would be able to purchase housing without the need to obtain consent.Further, Australian and Singapore citizens and residents will be treated the same as New Zealand citizens and permanent residents.
The impact that the Bill may have on our housing market is yet unknown and is causing some debate. Currently, New Zealand is experiencing a housing shortage. Some are of the view that the proposed amendments have the potential to impact negatively on the housing market, yet others are of the view that there could be a positive effect for all New Zealanders.
Property developments and business initiatives
Parliament’s Finance and Expenditure Select Committee have given some good feedback on the Bill and, through this feedback, provided some balance to the original drafting.
In particular, there’s support for developments and business initiatives. Broadly, the Bill provides that overseas persons could purchase residential land if it was used to increase the supply of housing. Properties built on land purchased under this pathway must not be lived in by the owner, and generally must be on-sold once they are completed.
The Finance and Expenditure Committee recognise that large developments often rely on the pre-sales of units to raise funds and satisfy financiers that a project is viable, which then ensures developers can access sufficient funding to develop and build.
They consider that requiring overseas persons to on-sell could reduce the attractiveness of some larger projects and negatively impact on viability. They advise that this is contrary to the intention of the Bill and therefore have recommended an amendment that developers of large multiple-storey apartment buildings of 20 or more units could apply for an exemption to sell a percentage of the units to overseas buyers in an “off the plans” format and further not have the need for consent or the requirement to on-sell them at completion.
The Finance and Expenditure Select Committee advise that an amendment would allow for a percentage of units per development that could be sold in this manner to overseas buyers and that this percentage could be changed by regulation to any level between 0 and 100 per cent. A proposal of 60 per cent has been made. The buyers would not be allowed to occupy the units themselves.