On 22 October 2018, the changes to the Overseas Investment Act (OIA) Amendment Bill came into effect which restricts certain overseas people from buying residential land in New Zealand.
Historically, the Act only required overseas purchasers to apply for consent from the Overseas Investment Office (OIO) to acquire ‘sensitive’ New Zealand assets over $100 million in value. Typically, there has been on average 150 such transactions scrutinised by the OIO each year.
The changes are some of the more controversial changes to legislation this Government has made to date. They mean any overseas buyer wanting to purchase any form of residential property will need OIO approval. It is now predicted the OIO will need to process over 2000 applications each year. There is much concern in the industry that the OIO will not be able to cope with this increase, meaning large delays are expected in the consent process.
All individuals are considered to be an overseas person except New Zealand citizens or those who ordinarily reside in NZ (this means those on NZ residency visas, those who have lived here for the past 12 months or more and those who are a NZ tax resident). All of these individuals must have been in the country for at least 183 days of the year.
The OIO will be conducting beneficial owner tests. This means offshore buyers will not be able to set up a company with a NZ director and expect to be able to buy property here without OIO approval. Any company with an offshore person(s) who own(s) more than 25% are deemed to have effective control. It will be difficult to circumvent these new rules. Exemptions will, however, continue for Australian and Singapore citizens.
What will the changes mean for New Zealanders trying to sell their properties?
It will mean there are less purchasers in the market for New Zealand residential properties. It will be most notable in the Auckland central residential market and in farming where overseas buyers have been very prominent in the past.
Given this, it is likely we would see prices plateauing for some time and, because of the time an OIO approval will take to process, it may make buyers reluctant to apply and we would, therefore, see a reduction in overseas transactions.
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