As of the 22nd of October, New Zealand's overseas investment rules will be tightened in an attempt to restrict foreign ownership of residential land.
The present Government has identified foreign speculators entering the New Zealand housing market as one of the key drivers of our rising property prices. The rule changes are aimed at restricting these foreign speculators from buying existing homes. The Government hopes that this will slow our rising property prices; making homes more accessible for Kiwis.
What you need to know
As of 22 October 2018 anyone that is not a New Zealand citizen or “ordinarily resident in New Zealand” will have to obtain the consent of the Overseas Investment Office to purchase residential land. There are exceptions for Australian and Singaporean citizens and permanent residents.
“Ordinarily Resident in New Zealand” means that you meet all of the following:
All land classed as ‘residential’ or ‘lifestyle’ under the District Valuation Roll will now be deemed ‘sensitive land’ for the purposes of the Overseas Investment Act (refer QV’s website under ‘Building Type’ to check property classifications). This will cover the vast majority of real estate sales and purchases in New Zealand. Previously only purchases of special types of land were deemed ‘sensitive’ such as the purchase of large non-urban properties, land near special land features such as lakes, and properties in historical or heritage areas.
These new rules apply only to contracts signed on or after 22 October 2018, regardless of the settlement date or conditions.
The Overseas Investment Office will grant consent to foreign purchasers of residential land if they are satisfied that several tests are met.
There are a number of different pathways that a foreign purchaser can use to obtain consent. Each pathway comprises a number of different tests. A summary of these pathways is outlined below as applies to residential (but not otherwise sensitive) land.
From 22 October 2018 onwards, all purchasers will have to complete an ‘eligibility statement’ setting out their eligibility to purchase residential land. This statement will form part of the pre-settlement paperwork completed with solicitors/conveyancers.
Given the short period of time since these changes were announced, there is some uncertainty surrounding exactly how the various stakeholders may be affected.
It will be important for purchasers who are not New Zealand citizens to carefully consider their eligibility to purchase residential land early on in the purchase process. Ideally this would be before signing the contract. Failure to do so could mean that there is not enough time to obtain consent, possibly leading to delays and/or default in settlement, and penalty fines.
There is scope for the changes to also be problematic from a vendor’s perspective. At this stage, we suggest that all vendors signing contracts on or after 22 October 2018 turn their mind to prospective purchasers’ eligibility to purchase residential land and raise any concerns.
If you have any questions or concerns about how the overseas investment changes will affect you, we strongly recommend that you seek legal advice. Our Property Team can assist you.
Disclaimer: this article is general in nature and not intended to be used as specific legal advice.