Rules to change for overseas property investors… will this be a valid solution to the housing crisis?

A Bill containing amendments to the Overseas Investment Act 2005 (“the Act”) is currently being considered by Parliament. The Bill endeavours to provide “a solution to the current housing crisis in New Zealand”.

The objective is to make residential properties more affordable for New Zealanders by preventing overseas investors from buying residential properties, and thereby redirecting overseas investment into other avenues.

When passed, one of the key changes to the Act will be the grouping of all properties currently categorised as ‘residential’ or ‘lifestyle’, into the ‘sensitive’ land category.

The Bill currently allows a person who is “ordinarily resident in New Zealand” to purchase residential land in New Zealand without Overseas Investment Office (“OIO”) consent.  One of the requirements to be "ordinarily resident in New Zealand" is to hold a “permanent resident visa”, to have been residing in New Zealand for at least a year, and to have been in New Zealand for at least 183 days of the year prior to purchase.

The Select Committee has recommended that this be amended so that those who hold a “resident visa” can also purchase residential land without OIO consent.

The Bill also currently provides that Australian and Singapore citizens and residents will be treated the same as New Zealand citizens and permanent residents.

The proposed changes will mean anyone who does not fall within the criteria outlined above will not be able to automatically buy residential properties.  They will fit under the more heavily restricted sensitive land category which requires consent from the OIO before purchase.

However, overseas persons will be able to purchase residential land in the following circumstances:

• If they intend to develop the land (as they will therefore be contributing towards the housing market);
• If they can show the land is being converted for another use, for example if the land is being used for a business; or
• If they hold an appropriate visa and can show they are committed to residing in New Zealand.

The Bill is currently with the Committee of the Whole House. At this stage it is expected that there will be a grace period (no greater than two months) for the amended provisions of the Act to come into force. It is important to note however, that there is a section in the Bill which allows for provisions to come into force earlier if specifically provided for.

Also important to note tis that it is expected that the Act will only affect contracts signed after the date the Bill comes into force.

We will keep you informed as to the Bill’s progress and the date on which it receives Royal Assent (which is usually within one week of the third reading in Parliament).