The Overseas Investment Amendment Act 2018 came into force on 22 October 2018.
The changes prevent certain overseas people from buying residential property in New Zealand. With some exceptions for Australian and Singaporean citizens, anyone who is not a New Zealand citizen or is not ‘ordinarily resident’ in New Zealand, is an overseas person.
Ordinarily resident is a clear test of four parts – the person must have a Residence class visa, must have lived in New Zealand for the past 12 months, have been present in New Zealand for at least 183 days of the past 12 months, and be a tax resident.
Residence class visa holders as well as Australian and Singaporean permanent residents that are not ordinarily resident in NZ can apply to the OIO for consent to buy one home to live in.
The new regime applies to land that is categorised as ‘residential’ or ‘lifestyle’ under the District Valuation Roll and while this includes most houses, flats, and apartments, there are also fairly large lifestyle blocks that are considered residential.
One way to check is to use a property website, such as www.qv.co.nz and look for the ‘Building Type’. Properties with the Building Type ‘residential’ or ‘lifestyle’ are captured by the new regime. Some councils also provide this information.
Another important aspect of the regime is the Residential Land Statement that every purchaser is now required to make. The statement is completed by the purchaser and provided to the conveyancer, who must retain a copy for at least seven years. There are significant penalties for both conveyancers who do not comply, and for purchasers who make false statements.
It is important for purchasers to know whether Overseas Investment Office consent is required at the early stages of a transaction, and pre-approval is available.
In some cases, land is residential, but also sensitive for another reason, such as adjoining water or next to a lake or reserve. In those cases, the complexity and cost involved is greatly increased, along with tests requiring the knowledge of a specialist property lawyer (see Applying for consent to purchase New Zealand assets).
Other ways overseas people can buy residential land
There are opportunities for overseas people to buy residential land, but not live in it.
- If you are a property investor/developer who adds to New Zealand’s housing supply by developing the land and on selling new housing; or building and possibly operating long-term accommodation facilities.
- If you want to use residential land for non residential purposes. This could include industrial or commercial uses such as a motel, hotel or offices.
- If you need to use land for a residential purpose incidental to a core business purpose (eg: staff accommodation) and no reasonable alternative is available.
A Transitional Exemption Certificate for Large Residential Development is available for apartment developments of 20 units or more in a multi-storey building that were already underway when the new regime was passed in August 2018. This allows developers to sell up to 100% of those new units to overseas people off-the-plans without OIO consent. There are no restrictions on the apartment buyers, who can live in the units if they wish. Developers must apply to the OIO for a Transitional Exemption Certificate by 21 February 2019. The Certificate expires five years after Royal assent and only covers the sale from the developer – any future sales of the unit will be captured under the Act.
An Exemption Certificate is also available. Developers of large apartment developments with at least 20 units in a multi-storey building can apply for an Exemption Certificate to sell up to 60 percent of those units to overseas persons off-the-plans without OIO consent. The purchasers may keep the units as an investment, but cannot live in them.
Overseas investments in freehold or leasehold land which is in forest or to be converted to forest require consent. The changes extended this requirement to investments in more than 1,000 hectares of forestry rights in any year. Forestry rights are different to other investments as they do not involve the sale of the land, but the right to grow and harvest the crop. You can purchase up to 1,000 hectares of forestry rights per calendar year, or any forestry right of less than three years duration, without approval.
The changes introduced two new consent pathways for forestry investments (including freehold land and forestry rights). One of these is a modified version of the existing benefit test. They also extended the overseas investment regime to cover non forestry profits a prendre (rights to take).
This poster provides an overview of the changes.