New Changes to OIO rules around foreign purchases of Homes 20 Dec 2017
New legislation is proposed restricting non-resident foreign buyers from purchasing existing homes in New Zealand. Set to be enacted next year, the changes will mean that residential land will come under the category of “sensitive land” in the Overseas Investment Act (OIA). Any existing transactions and applications made before commencement are not affected.
Permanent residents and Australians will need to have resided in New Zealand for at least 183 days of the past year to be able to purchase property without scrutiny from the Overseas Investment Office (OIO). Those on temporary or student visas will be unable to purchase a house at all, but other-resident class visas will be screened.
These changes are significant as they represent quite a move in direction from the previous government. For those who are overseas and looking to buy a house in New Zealand or considering a move to New Zealand it may impact on their decision. However, some have pointed to statistics showing that there are not as many foreign buyers as people think so it will be interesting to see what impact it actually has on the housing market.
What are the exceptions to the general rule?
There are three exceptions. The first allows anyone to buy land and build a residential home on it, so long as they sell it on to add to the housing supply. Those planning to knock down an existing house to build several more will also come under this exception.
Secondly, overseas persons may buy sensitive land if they will convert the land to another use and are able to demonstrate this will have wider benefits to the country.
The third exception allows people buy a home if they intend to live in New Zealand. Housing Minister Phil Twyford has said:
“We do not want to deter people who have the genuine intent to make New Zealand their home and contribute to the country. We want to encourage foreign investment in the building of homes.”
What is residential land and how is it defined?
In the Explanatory Note, residential land consists of the following:
- Dwelling houses
- Land which is likely to be developed into dwelling house sites
- Where the dwelling house is the predominant use and there is an additional unit of use attached to, or associated with, the dwelling house which can be used to produce income
What about lifestyle land – is it covered?
Lifestyle land also comes under this category. It is defined in the Rating Valuations Rules 2008 as –
“Lifestyle land, generally in a rural area, where the predominant use is for a residence and, if vacant, there is a right to build a dwelling. The land can be of variable size but must be larger than an ordinary residential allotment. The principal use of the land is non-economic in the traditional farming sense, and the value exceeds the value of comparable farmland.”
This category includes:
- Bare or substantially unimproved land, which is likely to be subdivided into smaller lifestyle lots:
- Improved to the extent that there is some residential accommodation sited on the land:
- Vacant or substantially unimproved land without immediate subdivision potential.
Negotiations are currently under way with Singapore to make sure the change doesn’t breach the current free trade agreement with them. However Minister Twyford has said that if issues can’t be resolved, then Singaporeans may be granted an exemption, similar to the one for Australia.
This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. We have experience with OIO applications in New Zealand and have assisted our clients from overseas through the process., please contact Steven Moe at Parry Field Lawyers (348-8480) email@example.com