By Steven Lee - 14 Dec 2017
The government is to introduce a ban on foreign buyers from
buying existing dwellings. What could this mean for developers?
Phil Twyford, the Housing and Urban Development Minister, has
said that the government will help control house prices and make it
easier for first home buyers. The government's new Bill is expected
to become law early next year.
The government intends to make changes to the Overseas
Investment Act (OIA) which is the Act that
establishes the consenting regime.
Currently, the OIA requires an overseas person to obtain consent
from the Overseas Investment Office in three key types of
transactions. These transactions include direct or indirect
investment in:
- Sensitive land or an interest in sensitive land (for example
farm land over a particular size, small islands and historic
places);
- Significant business assets (over NZ$100 million); or
- Fishing quota or an interest in fishing quota.
The proposed changes are to bring residential land within the
category of sensitive land in the OIA.
The proposal is that overseas buyers will not be able to buy
existing residential property unless they are either increasing the
number of residences and then selling them or converting the land
to another use. Australian citizens will be exempt from the ban.
Whether Singaporean citizens will also be exempt is yet to be
determined because of an existing trade deal.
The process for obtaining OIA consent is costly. The common
reason is that the process can be difficult and time consuming. The
OIA applications fees can cost up to $49,000 for sensitive land
related applications and $32,000 for applications for relating to
significant business assets.
For property developers that rely on foreign investment, this
means that costs relating to the acquisition of a new project are
likely to increase but sales demand is also likely to also improve
as overseas people will be redirected from existing dwellings to
new developments. This could be good news for overseas based
property development businesses focusing on large New Zealand
residential property projects.
We assist owners of property with development potential and
property developers funded by overseas investors by navigating them
through the OIO consenting regime, all property development related
legal issues and maximising the value of their projects.
If you require any advice or further information on the matters
dealt with in this publication please contact a lawyer in our OIO
team at Martelli McKegg or Steven Lee.