The Overseas Investment Amendment Act 2018 (“Act”) will take effect on 22 October 2018. The Act will prevent overseas people from buying residential property in New Zealand without Government consent by bringing “residential land” into the definition of “sensitive land” in the Overseas Investment Act 2005.
Overseas people who buy residential property in New Zealand (which includes land that is categorised as “residential” or “lifestyle” under the District Valuation Roll such as urban houses, apartments, flats and lifestyle blocks) will require consent from the Overseas Investment Office (“OIO”) unless certain exemptions apply such as being “ordinarily resident” in New Zealand.
“Ordinarily resident” means that a person must hold a residence-class visa, have been living in New Zealand for at least a year, be a tax resident in New Zealand and have been present in New Zealand for at least 6 months within the previous 12 months. The test is carried out at the time a person enters into an unconditional contract to purchase property.
Other exemptions include partners and spouses of New Zealand citizens and residents who are ordinarily resident in New Zealand. They will be exempt from needing consent if the residential property will be treated at law as ‘relationship property’ held together with the NZ citizen or resident partner. Australian and Singaporean citizens will also be exempt and treated the same as NZ Citizens and permanent residents. There are other exemptions such as a transitional exemption for current apartment developments over 20 units for more.
These changes now mean that:
- all purchasers of residential land (whether exempt or not) will have to complete a Residential Land Statement. This statement will be held by the lawyers involved in the transaction for seven years. This statement is not required for land transactions entered into before 22 October 2018, even if settlement is after that date. There are significant penalties for purchasers who make false statements.
- overseas people will only be able to purchase residential property if they get OIO consent. To get consent they will need to show a commitment to reside in, and become tax resident in, New Zealand; or that they will increase the housing supply through their investment; that they will be purchasing residential land for conversion to a non-residential use, or a residential use incidental to a relevant-business use; or the development will be beneficial to New Zealand.
Overall, the Act expands New Zealand’s overseas investment regime and these changes highlight the importance for overseas people to seek proper advice before they attempt to purchase residential property in New Zealand.