Rules to change for overseas property investors… will this be a valid solution for 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.  

One of the key changes to the Act is grouping all properties currently categorised as ‘residential’ or ‘lifestyle’, to a ‘sensitive’ land category. The proposed changes will mean those who are not New Zealand citizens or residents will not be able to automatically buy residential properties, as they will fit under the more heavily restricted sensitive land category which requires consent from the Overseas Investment Office 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.

Overseas persons will be recognised as residents if they hold a permanent resident visa, have been residing in New Zealand for at least a year, and have been in New Zealand for at least 183 days of the past year.

New Zealand and Australian overseas persons will not be included in the regime.

Once the proposed Bill becomes law, the changes will impact on purchases by overseas investors, so it will be important to remain informed as the Bill progresses. We are likely to get further information about the Bill after 31 May 2018, once the Finance and Expenditure Committee report back to Parliament with their findings.  Watch this space for more details.